Why Adopt a Post Modern ERP Strategy for Finance?
Some financial systems need more agility while others need more stability – hence a one-size-fits-all approach does not work. An on-premise solution for Corporate Performance Management causes this very problem. It cannot serve different purposes with the same level of security, robustness and efficiency. An on-cloud solution deploys two modes of delivery – one for better agility, and the other for better stability.
Mode 1 includes financial applications with need more stability, robustness and control. These typically include critical financial modules where business requirements remain stable over a period of time. The transition of such systems from on-premise to on-cloud can be planned at slower pace and more in-depth planning by a mature solutions provider.
Mode 2 includes financial applications that augment the core and critical ones by adding incremental value. This means less critical, more operational and tactical applications with business requirements changing rapidly, such as AP invoicing automation, purchase management, expense management, etc.
Relevance of a Postmodern ERP Strategy to Finance
Finance functions across a majority of organizations have bracketed all their financial applications under Mode 1. This has led to a restriction in innovation in both critical and support applications with the negative impact borne more by the support applications. An obvious strategy of breaking up the 2 modes ensures CFOs and senior Finance professionals can improve their finance processes by minimizing risk. In this revised approach, the tactical applications in Mode 2 are made more efficient via processes like Accounts Payable invoicing automation, global tax compliance automation and expenses visibility and management. This Finance strategy is an innovative extension of the postmodern ERP strategy.
In a more procurement-heavy organization such as ones in the manufacturing, retail or consumer products industry, Finance would need to collaborate more with their respective Procurement departments. The efficiencies brought in by automating electronic invoices for example, should connect seamlessly with the entire Procure-to-Pay systems.
Adopting the postmodern Finance strategy improves overall business value by optimizing the financial processes. But this in itself is an inadequate descriptor of the benefits of focusing on adopting incremental applications. Here are some benefits that these applications provide when integrated seamlessly with your existing finance systems:
1) A Single Source of Truth
A single window of visibility into an organization’s spends not just brings decision makers from every department on the same page, it also ensures faster decision making against the most important data points. It provides opportunities for strategic savings, improved working capital and increased accountability for Procurement and Administration departments.
2) Faster Adoption to Changing Market Dynamics
In on-cloud applications, updates released are much easier to adopt than in on-premise applications, widening the room for continuous process improvements. Fast responses to changing market dynamics also means staying on top of compliance and regulatory requirements in various internal and external business processes.
3) Process Improvements
Moving a non-critical application such as Accounts Payable automation to Mode 2 ensures several process improvements such as reduced time spent per invoice, automatic updates to vendors on invoice statuses, reduced processing costs per invoice – all leading to increased potential savings and better working capital.
4) Faster Business Scaling
As business grow vertically in terms of business size and horizontally in terms of geographic or category expansion, it is essential that the non-critical processes in Mode 2 have the ability to scale with minimum effort input.
The deconstruction of Finance modules that constitutes a Postmodern ERP Strategy is the first step towards a digital transformation in Finance.
Read our White Paper titled ‘Finance System Strategy as Part of Post Modern ERP Strategy’ for a more detailed discussion on how a bimodal approach can provide the right framework for a digital disruption in Finance.