These market conditions fall into three main areas: Money, Energy and Supply. The cost of capital, energy cost volatility, regulation, and geopolitical disruption have all impacted on business and will continue to change the cost base of a business on short notice. Modern, high performing finance functions recognise that the speed of change has radically increased requiring much higher precision and speed in forecasting and decision-making, to ensure that relying on yesterday’s information won’t sink today’s business.

Finance must be in the driving seat for designing new organisations which can cope with these changes, because no one else has a complete view across the landscape and making decisions in isolation leads to local failure. Only finance has visibility covering everything from input and overhead costs, to consumer preference, to the impact on margin.

We see this review reflected in the priorities of FTSE 40 controllers, who highlight the need for:

• (Affordable) Beneficial technology, getting the most return on investment
• Value from their data assets, to respond to shocks quickly
• Staying ahead of new controls regulations and requirements
• Responding to changes in ESG reporting and compliance

Getting these decisions right will give the business confidence to continue investing in growth platforms like new sales channels, new business models, store modernisation, marketing and developing their people, providing the right platform for the future.

Technology to beat the business trap – What are the ‘pivot’ options?

Businesses are faced right now with either pushing up their prices and hurting customers or cutting their margins and swallowing supplier price increases, neither of which is palatable; technology can offer a third option; using the capabilities we will describe in this article, the CFO can direct resources to help sustainably grow the revenues, margin, and remain competitive. How does this modern technological alchemy work?

The CFO supports the top line and bottom line of the enterprise, traditionally in a relatively passive manner delivering visibility and controls over profitability, liquidity, auditability, and compliance. Technology is giving the CFO the opportunity to become active in the health and growth of their businesses. To make the CFO a ‘star’ contributor to the business, at a time of severe challenge, we would encourage exploring the innovative finance capabilities described in this article.

Reimagine Finance Operations

The CFO has the opportunity to leverage technology, data and insights to model future business options indeed, to critically analyse prior decisions, what worked well and what didn’t. According to Gartner, decisions governing everyday operations often lack financial rigor, which can result in a loss of 3% or more of profits for organisations. This is primarily due to fragmented systems with siloed operations and an inability to access financial information in real time to make proactive decisions. As a result, CFOs recognise the need to modernise finance operations to reduce manual effort and enable their employees to focus on more value-added activities. A case in point is , which faced rapid growth after COVID-19, resulting in high volumes of data and an accelerated need for the company’s digital transformation. The e-commerce and fintech leader in Latin America achieved an 85% automation rate in treasury and cash management by streamlining their finance operations on a unified platform.

Delivering Assurance

It is expected that over the next 6 months the UK will be transferring from the Financial Reporting Council (FRC) to the Audit Reporting and Governance Authority (ARGA). Although recently the government have stepped back from their plans to introduce UK Corporate Governance Code led improvements around Financial Controls and CFO attestation statement on Fraud, the change in regulator is expected to deliver sharper teeth and greater pressure on external auditors to report more accurately. The upcoming changes to the Economic Crime and Transparency Bill, relating to Fraud, will include a new ‘failure to prevent’ offence and is currently moving through parliament, due in the firstquarter of 2024. A recent University of Portsmouth report outlined that Fraud may have cost the UK private sector in the region of £158Billion in 2022. Fraud still represents a 5% revenue loss for many organisations, money which if protected could be reinvested to promote growth. Business resilience is a key area where an integrated controls, risks management and machine learning/AI technologies have proven to deliver significant loss avoidance whilst also enabling businesses to remain on the correct side of regulatory requirements.

Optimise Cash Management

The CFO and the finance team need to have great visibility, effective control and collaborative execution for that finite, and most valuable business resource, cash! The poor understanding of cash flow is the key reason why many businesses fail. Businesses need integrated, intuitive tools that give them instant insights on the complete value chain, including receivables, payables, and associated supply chains. They need actionable information about cash, liquidity, and working capital, and their treasury platform should allow them to predict liquidity, make proactive decisions and mitigate financial risk. Zalando achieved 100% visibility into cash and accounts through redesigning their treasury and risk management and Zalando Payment system built their unique computing and monitoring model to provide deep insights into its factoring related cash flow movements and became compliant for regulatory requirements as a multinational .

Manage Profitability

Finance teams need to be active participants in managing profitability for the business, they may not be responsible solely, but they can best support the business by providing finance data and models in a timely, reliable and enabling fashion. The typical challenges that prevent retailers from proactive steering is the poor visibility to the real economic costs of products, customers and channels. According to Ventana Research, the most commonly mentioned challenge for companies in managing customer profitability is analytics. Using the right technology retailers can understand the real cost dimensions of their business and better control the margin challenges. Brakes – leading food service supplier in UK – achieved 2% improvement in margins through remodelling and digitizing their pricing and .

The CFO and his team have the opportunity to play an even bigger part in the future success of their business. Not only are the Finance team the keepers for financial data, they have the opportunity to proactively consult with the business teams; partnering in agile decision-making, providing business insights, actively supporting investment choices, helping identify success or failure in a rapid manner. Transforming the finance function provides the opportunity for businesses to escape the business trap of higher prices or lower margins, it can help you to pivot to increased competitiveness, revenue growth and success with customers, these are definitely the numbers worth pursuing.

If your organisation would like to know more about how these solutions can support your success, then please contact the authors:

• Shaid Latif, Industry Advisor Expert – Retail & Life Sciences at SAP
• Elif Kuralay, Industry Advisor at SAP
• Blair Robinson, Partner, Business Consulting at EY
• Matt Smith, Alliances Director at EY

The post Using Finance To Manage The Bottom Line And Pivot To Growth” appeared first on 51ˇçÁ÷UK News Center.

In collaboration with key partner SAP, as well as a consortium of industry leading enterprises, such as Transport for London (TfL), East West Rail Company, HS2 and Network Rail, called the ‘Transport Infrastructure Efficiency Strategy Living Lab’ (TIES Living Lab)  the Intelligent Infrastructure Control Centre (IICC) will harmonise the vast quantities of intelligence that UK infrastructure projects generate and help drive greater productivity and resilience through the capture of efficiency and innovation. This will contribute to a radical culture change in how the industry designs and delivers projects and will offer a completely different way of managing operations that will save money and time.

The IICC takes comprehensive operational data from an infrastructure project portfolio and then synthesises this onto one digital platform. At a project level this data is essential to effectively manage operations, while at an enterprise level it informs numerous processes including budgeting, and external reporting. For organisations with responsibility for national infrastructure across the UK, complete visibility of enterprise performance is a fundamental capability the IICC system can deliver.

One of the first initiatives to come out of the TIES Living Lab, a partnership between UK Government and leading infrastructure companies with funding from the Industrial Strategy Challenge Fund, delivered by UK Research and Innovation, the IICC can be used across all sectors and industries.

“Many of our clients across all the sectors we work in, whether it be energy, defence, water or transportation, face challenges with having consistent and accurate data on critical factors such as commercial, carbon, safety, as well as complete cost transparency,” said Tim Embley, director research, innovation and development at smart infrastructure solutions company Costain. “But of course optimising the design, delivery and operation of infrastructure schemes requires access to the right data at the right time to help inform decision making and look for opportunities to increase the whole life value of any programme or asset, including things like social value which can sometimes remain hidden.

“Within the system you can bring different data sets to life – what gets collated and tracked is decided collaboratively with the client. It brings full data transparency to empower the key decision makers and significantly reduces risk, thereby cutting costs and increasing efficiency. With its built-in analytics functionality it can also literally predict the future. “Where data isn’t easily available, it uses artificial intelligence to deep mine the existing data to manufacture data that means you can start to predict the outcomes and look at scenarios and decisions that are going to be made. This helps reduce the unknowns and significantly reduces risk, thereby cutting costs, increasing efficiency and giving greater delivery certainty.”

“The IICC will provide organisations with a real-time view of what’s happening with their data, enabling them to make fast, effective and targeted decisions,” said Francesco De Toma, Head of Construction and Real Estate Advisory at SAP. “Costain was looking for ways to bring added value to its customers. Thanks to the latest business technology platform they can implement new business models, enjoy faster time to innovate and scale applications quickly from project to enterprise level through a system agnostic approach.”

Another issue faced at both a company and industry level is that of ‘innovation siloes’, where great ideas can become buried and are not shared. This represents a huge loss of potential value. Using the IICC, innovations can be identified and transferred on a live basis. For example, there could be an innovation on a road project where the use of 3D machine control has achieved 30% savings on the earthworks. Network Rail might be looking for some efficiency savings on a big new railway project, something like HS2, and could achieve 30% efficiency savings through the earthworks with the same innovation.

“The data collated on the Costain-led IICC makes it easier for organisations like us to understand and shape the business case for investing in and adopting that innovation elsewhere,” adds Tim Embley. “This means it can be transferred quickly from one chain or sector to another, helping to drive those savings at scale a lot more quickly than ever before. This leads to more success for owners and operators of infrastructure and ultimately better results for our communities who need the critical infrastructure.”

Costain’s Chief Digital Officer, Nathan Marsh, believes rapid industry transformation is now on the cards: “The IICC brings together our deep domain experience and technology integration expertise with the unbelievable firepower in the sort of things that infrastructure needs like data visualisation, predictive analytics, machine learning, coding and customer intimacy from partners like SAP. They are working in other industries so they not only bring a fresh perspective and challenge ways of doing things, they bring insights from those industries so we can benefit from lessons learned and innovate faster.

“What we’ll see in the infrastructure sector, as this technology becomes embedded, is very rapid transformation: better data ensuring better, faster and greener delivery of infrastructure that will improve productivity and build resilience across the sector.”

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Enexis modernizes and simplifies the environment with 51ˇçÁ÷S/4HANA. The grid operator is laying the foundation for a simpler, more agile IT infrastructure required for the energy transition. 51ˇçÁ÷partner Accenture assisted during the implementation.

Enexis is one of the 7 grid operators responsible for the transmission of gas and electricity in the Netherlands. The energy transition has consequences for the organization. The company must be able to respond quickly to changing needs. This requires an IT environment and associated processes that can facilitate this. To achieve this, Enexis launched the company-wide ‘EneXt’ program.

EneXt

“In the energy transition, the volume of work for us as grid operators is increasing rapidly. At the same time, you see that technical staff to carry out all this work is scarce. That calls for extra efficiency. In addition, the energy transition requires flexibility on the part of the grid operator in fulfilling its role,” outlines Jan Willem Janse, EneXt program manager at Enexis.

“With EneXt we therefore want to simplify and standardize processes and make the IT landscape more agile. Replacing the ERP environment is an important first step in this,” continues Janse. “At the moment we have a complex landscape in which implementing changes is complex and time consuming. This is undesirable in the changing environment in the middle of the energy transition”.

Rapid Implementation

In 2017, this changed significantly. The grid operator opted for 51ˇçÁ÷S/4HANA as an ERP solution to replace the current R/3 landscape. After a tender round, Enexis chose Accenture as its implementation partner. After a period of framing and creating an overall integrated blueprint, the implementation was completed within a year.

Within that period, not only were the ERP system and the other applications and integrations realized, but the processes were also adapted to the standard environment. According to Laurens Snoeren, programme and project manager at Accenture, the secret was to work closely with Enexis’ business and project organization according to a customized SAFe methodology.

Haico Hangx, program manager S/4HANA at Enexis, agrees. “For such a radical operation, a one year delivery time line is unprecedented. We succeeded thanks to the good cooperation between Accenture and Enexis, in which we kept the business closely involved. What’s more, we consciously took the implementation one step at a time. A phased roll-out turned out to be wiser for such a large-scale implementation,” says Hangx.

Finance

Although the environment has only just become ‘live’ for part of the organization, Enexis is already experiencing the benefits of 51ˇçÁ÷S/4HANA. The finance department in particular, is now able to run reports much faster and easier. “This is important, because we have to report regularly to our stakeholders. They also now have much quicker insights,” says Hangx.

Foot On The Ground

In the coming months, the new ERP platform will continue to gain a foothold within Enexis. For example, the company is using 51ˇçÁ÷Central Finance architecture. This is a ‘bridge solution’ so that the financial data of the local branches that have not yet made the switch are consolidated in the central S/4HANA system. This temporary architecture will be phased out in the coming years as the local branches gradually switch to the central S/4HANA system. “The most important thing is that we now have an agile basis for the future,” concludes Snoeren.

More information about this project? Click to watch a movie about Enexis and SAP.

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