SINCE the financial crisis, the role of the finance director has undergone an evolution. Today, as well as balancing the books, FDs are increasingly involved in their companies’ most important decisions – in a 2013 study by Consero, 81% of Fortune 1000 CFOs said they felt their companies viewed them as “strategic business partners”.
It means that FDs are asking more of their existing accounting or enterprise resource planning (ERP) systems. They need solutions that allow them greater visibility of their business operations, and that offer the best possible analytical capabilities.
There’s been a lot of noise made about the cloud and its potential to unlock unrivalled insight from business data by integrating it with accounting systems, but according to a recent Financial Director survey conducted with Sage, while 77.8% of cloud users found that the cloud gave them the flexibility to deal with their business pains, just 17.7% of everyone surveyed had committed to the cloud.
Furthermore, nearly three-quarters (71.2%) said they had no immediate plans to adopt a cloud-based ERP solution. If integrating the cloud with accounting systems has in fact proven an effective solution for CFOs, why aren’t more financial professionals trying it?
“In many organisations the CFO is the ultimate owner of the core transactional data and the forecasts as they have responsibility for the IT function,” says David Tilston, former interim finance director of Innovia Group.
Tilston, who took part in a Financial Director and Sage roundtable in April, continued: “You could begin to argue that the next generation of CFOs are going to need to be highly IT literate, understand the latest IT trends and know how to make use of AI and other emerging technology.”
One of the greatest concerns we identified in our survey is the issue of security. Cloud storage has – perhaps undeservedly – got something of a bad reputation, as stories of hackers accessing sensitive information from the cloud make their way into the news with a frequency that must worry FDs weighing up options for their next ERP system upgrade. Storing data remotely, rather than within the walls of your office, feels like an unnecessary risk.
However, David Rawling, global product marketing director for Sage, says that to choose the cloud is to subcontract risk. “The cloud provider is sharing the risk because their reputation is on the line,” he says.
Neil Morling, CFO at law firm Olswang, agrees. His firm determined that storing their data in the cloud would be a far smaller risk than keeping it on-premise. “At the end of the day, the cloud vendors we’re working with are experts, it’s what they do, so they should be far better than us trying to do it ourselves,” he says.
“We’ve taken the view that there’s far greater security from a resilience perspective in the cloud – it keeps the crown jewels of the business ticking over.”
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However, Morling accepts that no solution could ever be 100% secure. You can have an absolutely watertight IT system, but if someone’s minded to leak company documents, it’s going to happen, he says.
David Tilston, former interim CFO for business technology company Innovia, observes some “illogical thought” in this regard, of which he admits he is also guilty. Most understand that if their data is compromised, it will have a negative impact on their business, so when they think about storing it all on the cloud, they worry, he says.
However, the same people aren’t asking to the same extent about the risk of somebody hacking into their business and deleting the records that sit on their computers, he says. “They don’t think about the issue from that perspective.”
Gaining a competitive edge
In some respects, cloud-based accounting systems may be capable of more than their on-premise counterparts, like real-time reporting and forecasting, which can give companies a competitive edge. For Morling, however, how you use the cloud is more important than what you use it for. “We’re thinking about agile working,” he says. “Being able to wander out of the office, go into an airport terminal and sign into your desktop – seamless, minimal effort, work as if you were at your desk.”
George Kasparian, FD at marketing agency dotDigital, explains why his company decided to commit to the cloud: “Within our industry, we have to be agile, and very quick to change with what’s going on, what’s being demanded out there. If we don’t, one of our competitors will, and we’ll start losing customers.
“We as a business are growing, and our customers are growing. We have to grow with them.”
Migrating systems to the cloud may offer growth without the pain of a hardware system upgrade, Tilston says: “If you run your core ERP system in-house, upgrading to a new version is a long process, which you don’t undertake lightly.” Consequently, the business might only upgrade their systems when absolutely necessary – which might be every five or six years.
“Your competitor using a cloud-based ERP system might have upgraded a number of times over that period and got all the social media add-ons, the latest technology the benefit of a lot of ongoing R&D by the system vendor,” Tilston continues. “They will have a much more up-to-date technology than you, and therefore might be far more competitive as a result.”
And it’s not just about winning customers, he says. Potential recruits may be taking account of how up-to-date the company’s IT systems are. “If you’re operating on old systems, you might find that not only do your competitors have better systems than you, but they’re also attracting better talent.”
Morling says that this competitive environment is “forcing businesses to take a longer, harder look at themselves”.
“The work isn’t just coming through the door now – you’ve got US firms wandering in from over the pond, you’ve got far more technical, technological solutions available for the more commodity-based legal work, so that the whole landscape is shifting,” he adds.
Multitudes of data
The cloud’s potential for collecting and storing data is virtually limitless, but as Rawlings says, while great having lots of data, what’s it telling you? As we saw before, a cloud-based accounting system can allow certain insight via real-time reporting, though future developments in tech, such as artificial intelligence (AI), could revolutionise analytics.
“The next generation of cloud is coming which is all about machine learning and artificial intelligence. AI will fix the problem of how to bring all of this data together, and give some understanding of what it means to the business,” Rawlings explains.
Kasparian agrees: “AI is crucial. When you’re looking at your clients, what they’re acquiring, what their transaction history is, the emails they’re opening, and the sites they’re visiting, AI provides a way of knowing what this all means.”
The cloud by no means offers a magic pill, however. While it has much to offer the right kind of business, simply slotting it into the company’s infrastructure isn’t a guarantee of getting all its benefits. Committing to going off-premise will require an overhaul not just of business systems, but of company attitudes. Kasparian says that it’s important to train teams so they understand how it works, and how to make the most of it: “It’s a mind-set change,” he says.