The Singaporean business culture portrays the country as a global financial hub, with finance being the most important industry that drives innovation and business expansion. Could this be the reason why corporate transformation has become so crucial in recent years? Finance transformation has been a significant part of business strategy for a decade now. Firms have centralised more investment functions in their finance department, with the justification that it is more efficient and should focus on the core competencies of finance. This article seeks to explore the various finance function transformation, and how their influence has changed over the years.
1. Investment Decision Making
Firms have centralised their planning, budgeting, and control activities in their finance department. This can be attributed to the increase in transparency with computational tools as well as awareness of financial data and control systems. Thus, firms can delegate some investment decision-making authority to their finance function, which was traditionally the domain of line managers.
To maintain strong and sustainable growth rates, organisations are looking to gain an advantage over their competitors through financial transformation. In turn, companies are leveraging new technology such as algorithms, artificial intelligence (AI), big data analytics, cloud computing, and mobile solutions such as smartphones to drive productivity in their business operations.
2. Strategic Partner
Finance transformation can also be seen as a means to align the finance function with the business strategy. This is done by formulating policies and processes that are in line with the business goals, as well as by providing timely and accurate information that can support decision-making. In this way, the finance function can act as a strategic partner to the business, and not just be relegated to a support role. Companies adapt their finance transformation strategies to achieve cost efficiencies, process improvements, and customer-centricity.
3. Organisational Change Agent
In the industry, there is a strong notion that the finance function should be at the forefront of financial change management. This is because many companies have found it extremely challenging to implement their change management strategy concerning aligning the finance function with their business strategy.
It usually takes much time and effort, which in turn drains valuable resources that could be allocated to other areas of strategic importance. Finance transformation aims to address many of these challenges by reducing waste, and improving processes to optimise the financial performance of a company. Finance transformation is thus considered to be a catalytic change agent that can help companies adopt new practices more efficiently.
4. Shared Services in Finance
Since finance transformation is essentially about integrating the core business and finance, it provides many opportunities for companies to adopt shared services in their finance function. Shared services are often seen as vital to achieving efficiency in an organisation’s operations. Marketing and accounting firms have set up shared service centres in Singapore, which provide a range of semi-automated IT-enabled services like order processing, accounting, and payroll-related activities.
5. Digital Solutions
The risk and control functions of finance are undergoing a transformation that is even more radical than the organisational change. One of these radical changes is the increasing need for management to have a better understanding of big data analytics, as well as provide them with commercial insights using data science methods. It should also be noted that finance departments now focus on processes that involve monitoring, detection, and prevention of frauds, instead of merely detecting and reporting frauds when they occur.
The business transformation process that finance transformation can embark on is bound to have a dramatic impact on the way they perform their functions. Finance transformation embraces the idea that finance is a business function, and should not be removed from it. Therefore, the finance function must be strong enough to see the right opportunity and seize it.