CFOs face many challenges in managing the bottom line. Not only do they have to manage technology and deal with regulatory compliance issues, but they must also ensure that their department performs its accounting and reporting duties as effectively and efficiently as possible. To achieve this end, experts point to the increasing use of business process management (BPM) tools by CFOs to ensure their departments are efficient, transparent and compliant.
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"BPM comes out of the operations area, so when we look at what CFOs want when it comes to processes, they want visibility into how the operation is running and the impact on the finance department or on the finances," said Clay Richardson, senior analyst at Cambridge, Mass.-based Forrester Research.
For that reason, Richardson said CFOs are trying to get better control, "auditability" and visibility into the processes that feed the financials, like reviewing invoices and getting them out on time. But the work experience is also a factor.
"CFOs aren't so much concerned about the back-end modeling -- [that is] reducing cycle times. That's still important, but what they're really fixated on is how they can have a better experience when they're trying to get work done." And this is where BPM vendors are focusing their efforts, Richardson explained.
With BPM tools, CFOs can significantly cut down on errors and late payments, automate processes to guarantee compliance with federal regulations, enhance the accuracy of reporting and forecasting and analyze data so they can make the best financial decisions for their companies, according to experts.
Two types of BPM vendors
For instance, some vendors provide interfaces to systems of record, such as SAP enterprise resource planning (ERP) and Siebel, that contain the data, he said. "Those systems are designed more for record entry, much like a database. They're not designed for human engagement," Richardson said.
But Richardson added that other vendors of BPM tools are focusing more on systems of engagement where the aim is to deliver favorable work experiences while allowing people to get tasks done more quickly. With these vendors, "it's more about the user interface design and task design than the process model," Richardson said.
Enrique Medina, an independent BPM consultant in the UK, pointed out that there is not really one BPM tool that does everything from start to finish.
"You have to combine different tools: one that inputs the data, another one that captures the data and allocates it in a structured manner and another engine in the background that will run the analysis," he said. "Then there will be other tools to present information back to the users."
Medina said the challenge for companies is to implement the right BPM tools that have the right connections to other systems so they will be able to mine, extract and process the data accurately. This information can then be structured and presented as specific reports or as dashboards for finance managers to consult as needed.
Is speed king in BPM?
Many BPM vendors are trying to accelerate workflow and flow-through velocity, said Hyoun Park, principal analyst at Boston-based Nucleus Research. But should speed be the primary objective in BPM?
"It's very easy to get caught up in those speeds and simply try to be faster," Park said. "[But] while speed is important in the business, what is missing in this approach is a more intelligent understanding of the business process, because it's very difficult to also conduct real governance as well as pattern recognition [at] the speed that the vendors are trying to push."
He explained that BPM itself only makes sure that information goes through a specific path in the business. "But if you don't have the right data to start with and don't get to the right systems at the end of the day that can make actually make a decision, you won't get the outcomes that you're looking for," Park added. "All BPM can do is provide the correct path for you to go down."
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Park said for BPM tools to be effective, they have to be integrated with analytics and data management. So companies looking to implement BPM tools should think not just about business processes, but also about data integration and quality.
"From a finance perspective, one of the most relevant challenges is trying to close the books on a monthly or quarterly basis," Park said. "Typically this will require input from every single office, cost center [and] general ledger in the company. Because of that geographic and departmental variety of sources, you're going to potentially have a number of different ways of calculating the numbers correctly and a lot of different inputs."
According to Park, the problem is that BPM has gotten so fast and so powerful that a finance manager can end up having a product at the end of the process that's only 90% complete. But because the process is so complex and it's done so quickly, there's no visibility to go back and see what information might have been left out. "So to make it all work, you need good systems programmers, as well as good business analysts who have an understanding of the business," he said.
BPM tools boost predictive analytics
"For instance, when finance departments are trying to decide on a rate to charge a client on his overdraft, the process can do predictive analytics that work out the likelihood that it's actually going to get the money back and what the reliability of the customer is and come up with the most appropriate offer," Craggs said.
He added that BPM tools can also help finance departments make better decisions. "Finance departments are attracted to the decision management [piece] of BPM because it's something that gives them a quick return," Craggs said.
"Suppose your credit check and risk assessment software -- your processes -- are not getting you the best answers. You could actually go in and use decision management to go in and rework those decisions to take into account analytics and to make them more flexible and more repeatable," he continued. "You haven't had to tackle the whole loan or whole credit process; you've only had to tackle the decision that's sort of saying, 'Give me a reliability figure for this customer.'"
But one CFO said it's not solely about the technology. It's also about training the people to use the technology.
"Technology unto itself is useless without people who know how to use it and how to make it become part of the business," said Peter Derrick, a CFO and partner at B2B CFO Partners, a Phoenix, Arizona-based firm that provides CFO services to emerging growth and mid-market companies. "If that doesn’t happen, it's useless. Getting people to use it and making it a decision tool in the business is really what matters."
About the author:
Linda Rosencrance has written about technology for more than 10 years and has been a reporter for more than 20. A former Computerworld reporter, she is a freelance writer in Massachusetts and also an author of several true crime books.