Know When It’s the Right Time to Upgrade or Replace Your Financial System
More than 80% of IT and finance executives are on record as saying that they are either considering changing their financial management system or have already changed it. One of the next important questions is: How do you know when it’s time to make the move?
Nearly 50% of CFOs cite lack of flexibility as the biggest problem in their financial management systems. Here's why.Start Here
Based on recent research, the trigger points are either a major event that requires change and/or a clear, compelling, and implacable frustration with the severe limitations of most of today’s legacy systems.
There are certain times where it will be obvious a change is needed. According to research from Saugatuck Technology, it is important to “look for the right time and opportunities to make your move.” Saugatuck research shows that certain events will not only signify a need for system change, but also will require and drive changes. These include:
- A new CFO/CEO looking for a dramatic increase in finance performance.
- Significant business growth and expansion -- including global.
- Facing end-of-life or end-of-support for existing systems.
- Facing major upgrade, maintenance and/or support costs.
Those are the easy ones. As Saugatuck says: “A situation involving any of these will indicate a good time to prepare and present a case for financial management improvement via cloud; situations involving more than one of the above triggers are likely to accelerate the cloud case and execution.”
But what do you consider when there’s no obvious trigger? To some level, there is a strong argument to be made that evaluating the need for change in those environments is even more important. Why? Because those organizations that continue to accept the limitations of their existing financial systems run the risk of falling behind their competition in their ability to maximize revenues, profitability, and productivity.
At what trigger point does the frustration level become so acute that the call for change must be heeded? Here are the results of research that included in-depth interviews with senior-level finance executives in the United States. The survey, conducted by CFO Research, reveals four major themes:
- Lack of flexibility is the primary shortcoming of current financial management systems. Only 5% of respondents said their systems can be easily adapted to changes in business priorities or processes, while 46% said it takes too long to adapt their systems. A plurality of senior finance executives (44%) said inflexibility was one of the systems-related issues that most interferes with finance’s ability to meet the demands of its role.
- Frustrations that finance teams are too bogged down in accounting and reporting tasks and are unable to spend more time on business planning and decision support. According to 76% of the respondents, finance teams are spending most of their time on general accounting, financial reconciliation, and reporting—while 86% said the finance function would ideally spend the most time on business planning, analysis, and decision support. The finance executives said access to better business analytics can directly improve finance’s ability to contribute to high-value activities.
- The belief among finance executives that favors a long-term view when planning to replace their financial management systems. A solid majority of the financial executives said that taking a long-term view of maintaining systems is more appropriate than a short-term view because the cost of implementing fixes adds up over time. CFOs consider this to be the most convincing reason to replace legacy financial management systems.
- A growing interest among CFOs in cloud-based systems for financial management. Finance executives identified greater IT flexibility as the most valuable benefit offered by cloud-based systems. Cloud technology can help them address their biggest systems-related pain point, they said.
In addition to these four themes, the CFO Research report makes three other recommendations that are appropriate to companies considering upgrading their financial management systems:
- To avoid falling into a backslide, companies need to combine long-standing best practices with fresh, innovative solutions.
- One of the most valuable exercises any company can do when developing a strategy for financial management systems is to define the purpose of the systems and determine whether the systems meet the long-term needs of the people who use them.
- Identify the purpose of financial-management technology and continually work to ensure that current systems are well suited to achieving that purpose.