Main content

2022 - the year in Finance

Brian Sommer Profile picture for user brianssommer December 19, 2022
Summary:
I haven't been to Las Vegas for over two weeks now and that’s caused my travel fog to finally lift. Here are my picks for the better articles and topics affecting financial accounting technology in 2022 – plus – some thoughts on what’s to come.

stuff

2022 was definitely a year where Finance technology was transitioning from the frenetic needs of a pandemic business world to a world where more data must get melded with financial data. It’s been clumsy, awkward and a bit sloppy.

But, this is where things start to get clearer. The ESG, IIoT and operational data needs will trigger a new closeness/integration between operational people and systems with those from Finance. It has to do this as this deep integration is critical to future business success. And, finance will lead this as understanding data is what Finance people do.

There should also be more clarity around the future of financial processes. Firms will need to drop some serious time into re-imagination and reinvention of their financial processes. We should expect businesses to automate 99.999% of every invoice, receivable and payment process via AI/ML, bot, exception handling and other means. What the most expert and knowledgeable Finance team members will then be doing is poring over machine-discovered anomalous transactions, exceptions and variations.

It’s an ironic twist that functions that used to have scores of clerks processing large volumes of transactions will soon have a small cadre of savvy experts looking at the outlier business events.  The processes, like the times, are a changing.

Here are my top themes of 2022. 

Continuous planning

Planning tools, including CPM/EPM products, had a huge run during the pandemic. Why? Lockdowns, supply chain problems, product shortages, labor shortages and other factors were wreaking havoc on businesses. This unplanned variability forced firms to go from annual plans and forecasts to weekly or daily plans. Unfortunately, their old toolsets (i.e., mostly spreadsheets) weren’t up to the task. There was just too much change, uncertainty, interrelated factors and data that had to be considered.

While some of that uncertainty has lifted, we can now add inflation, quiet quitting, etc. to the planning, budgeting and forecasting challenges impacting businesses today. That’s why CPM/EPM tools are still hot in 2022 (and going forward). Businesses can’t very well operate let alone optimize their operations without current, data-driven plans.

As a result, we heard a lot of discussion in 2022 re: ‘continuous planning’. Jon Reed penned this piece on the subject and even showed how some Planful customers are addressing the matter. Jon also established some of the problems organizations will have to moving to a continuous planning world:

Finance leaders also think about "continuous planning," not as something that's immediately achievable, but as a bar that captures our imagination – and corporate resolve. Such a goal also brings into bold relief all the obstacles in our path. An incomplete challenge list:

  • Siloed data, and the general problem of data cleansing and accuracy.
  • "Dark data" that's not in our FPM tool, or planning process. This data hurts our planning accuracy by its absence. 
  • Overworked finance teams, too preoccupied with admin to hash out planning scenarios. 
  • Spreadsheet hell – another place where dark data may live, and hinder our goal for a single source of finance planning truth. 
  • Poor collaboration between finance and the constituent groups finance purports to serve.
  • The inevitable distractions of mergers, acquisitions, and leadership team shuffles - and the pressure such changes put on our FPM systems (we find out pretty darn quickly how agile those systems are when our budgets must be redone "ASAP" due to M/A). 
  • Staff turnover, talent shortages, skills gaps, and resistance to new tools and approaches.

For 2023, Finance teams will continue to deal with more change, more disruptions, etc. Planning and forecasting activity will remain intense and we’ve certainly not heard the last on these topics.

Data that originated outside of the General Ledger!?

If Jon’s discussion of dark data and other data is true, then shouldn’t financial systems be opening up their platforms to accommodate and incorporate financial, operational, external, machine and other data into their reports and analysis? Of course, they should.

One example of this was apparent at Oracle NetSuite. I noted this phenomenon in this conference piece:

NetSuite customers will be able to probe externally sourced or internally generated datasets for all kinds of insights, many of which will be displayed via graphical means. This is important as mid-sized firms I’ve visited often possess mountains of ‘dark’ data: the data that they or their machines generate but no person or system looks at this information. The insights within this data are ignored as mid-sized firms often lack the tools, skills, computing power, integrations, visualization tools or ML tools to make sense of this.

Clients are definitely clamoring for this capability especially those that are undertaking IIoT, Factory of the Future and ESG initiatives. Those initiatives will collect, generate and process scores of new kinds of data that don’t necessarily fit handily in a general ledger. Businesses want something else – something software vendor Zoho calls a business operating system:

To be a business operating system, a solution has to be more than a bunch of accounting modules. It must:

  • Be cosmopolitan – To be cosmopolitan, one must be acutely aware of one’s environs. Businesses don’t need more navel gazing, inwardly focused, back-office technology. They need systems that connect with other internal systems/users as well as all manner of external data and non-accounting data. The insights one can get from strictly internal transaction data is just too limited.
  • Serve more than the back office and front office – While many corporate accountants may have never met a journal entry they didn’t like, fewer of them really understand what’s going on in the markets where their firm competes, on the shop floor where their products are made or in social media where the fate of their firm’s products and its customer service capabilities are being discussed at length. In fact, a business operating system should support all manner of suppliers, customers, jobseekers, alumni, retirees, local governments, tax authorities, shareholders and more. The day when a functional solution (e.g., accounts payable) only served the personnel within that department is over.
  • Quickly serve insights to all manner of constituents inside and outside of the firm – While ERP vendors have been quite chatty over the last decade re: analytics or insights, their track record in producing analytics, dashboards and insights has been slow and spotty. Some vendors have pushed the responsibility for developing these to their implementation partners. But kicking the can down the road doesn’t absolve them of their hard to use tools.
  • Be boundary-less – To be boundary-less, a business operating system should have capabilities that go beyond the four walls of the enterprise.  Some ERP solutions stop at the edges of Finance and HR. Some go a bit further into CRM or manufacturing. But, regardless of the vendor, few ERP systems are designed to consume external data and service both internal and external users well. To be boundaryless, a solution must have dedicated apps/applets/portals that serve other constituents. Better still these applications are not only self-service but also possess the smarts that pre-fill fields, suggest next actions, work in real-time, are tied to knowledge bases, etc. Done right, these applications take a lot of the workload off of existing internal employees thus allowing them to focus on higher value-added tasks.

For 2023, Finance/ERP vendors will continue to push the power of their ‘platforms’ while actual, in-production proof points of their customers using these powers on new kinds of data will remain somewhat scarce. However, directionally, this is a trend that will be growing and delivering competitive advantage for early adopters.

Analysis, not transaction processing

There was also a big push this year away from transaction processing as a focus point for new financial solutions.  Let’s face it – the ROI for re-automating a function, likes accounts payable, is pretty dismal especially if your firm automated that function three or more decades ago and is on its third or fourth automated application.

No, buyers want something more valuable than faster speeds and feeds with regard to inputting and validating transaction data. They want the software to tell them which transactions contain anomalies, are outside certain thresholds, or, warrant further investigation. In other words, buyers want smarter applications that analyze the transaction data and trigger accounting staff personnel to focus on the events that matter.

One example of that growing need was highlighted in another piece by Jon Reed in his meeting with Workday’s Terrance Wampler, Group General Manager Office of the CFO Product. Wampler stated that:

Our vision is to enable every CFO to unlock the potential of their people, their processes, and their data. The way we think about that is: everybody wants to have higher-skilled folks; they want them to work on more advanced capabilities. In the case of finance, it's no different. They don't want people being like transaction operators, having to do so in their software. They want them to be elevated so that they can be doing analysis and be advisors to the business.

For 2023, two factors will drive more focus of analysis over transaction processing. First, better, smarter analytic tools will do more of the identification of anomalous data. Second, Finance teams will remain short-staffed. If CFOs want to retain their best and brightest talent, they need to get them out of transaction processing and spreadsheet-hell (see below) and move them into real value creating roles. These are roles where Finance personnel identify great business opportunities for the company and not just correct reconciliation errors.

Process Automation, not old processes re-automated

As mentioned above, financial application software needs a new value proposition. One important avenue customers should be exploring involves process automation or robotic process automation (RPA). And, this year, we saw lots of proof points that RPA isn’t just for large enterprises exclusively. RPA technology is now coming from vendors like Sage Intacct, Oracle NetSuite and others. This Fall, I noted:

One example of this focus on highly efficient processes is the new Accounts Payable Automation functionality. These enhancements are part of Oracle/NetSuite’s broader strategy of “Optimizing Cash & Profits” for customers. It uses a number of technologies (e.g., process automation, exception handling, etc.) to make Accounts Payable processes extremely automated and efficient. NetSuite can support automated 2 or 3-way matching of vendor invoices. NetSuite partnered with financial services firm HSBC for some payment service options should a customer want to avail themselves of this.

One NetSuite customer using this new AP Automation capability reported going from having 45% of invoices being automatically processed to having 95% of invoice processing automated.

Process automation and process mining for financial applications are hot spaces now.  Here are diginomica, we have  covered firms like Esker and MineralTree for AP automation, and also done recent pieces on RPA firms, such as Automation Anywhere. Companies like Celonis have also been covered for their process mining technologies.

For 2023, we should see large scale adoption of automated processes in Finance. The time is ripe for this now and the technology has matured markedly.

The hell that bad Payroll-to-Financial Application integration creates

Late last year I did a very, very deep dive into one messed up integration that’s rarely right or complete at many firms I meet with: the integration between financial applications and payroll.  And, now my penance is that I get to help two new clients experience this pain some more. What’s the issue? As I said: 

While lots of HR vendors have ‘fast’ implementation methodologies, there’s still one area that takes a lot of work and often gets shortchanged in the implementation: payroll’s interface/integration with the financial applications (mostly G/L but also cost accounting). Payroll’s integration with financial apps is only one sore spot and all of these product failings are still major work generators for HR, Finance and Operations personnel.

Thankfully, I heard two different vendors suggest that AI-powered tools could help with this and these are somewhere in their product roadmaps. For 2023, though, we’ll have to make do with less elegant, less automated and more error-prone methods. (I feel a spreadsheet coming on!)

Phil defends the spreadsheet

Now, I like Phil Wainewright and he and I are usually simpatico on most things ERP/Finance/HR but his piece in defense of spreadsheets had me questioning that opinion of Phil. His piece is an interesting read, if only to remind us of the long, long history of this technology – a technology that Finance personnel are taught to use in college and continue to use it in the practice of their art today.

I cringe, and that’s the politest way to describe the convulsive spasms I feel, when I see clients using spreadsheets as some sort of ‘system’, an integration tool, or, a data manipulation tool. If you believe we’ll never have the paperless office, then please read Phil’s piece and luxuriate in all the wonder that is a spreadsheet. According to Phil:

Spreadsheets have taken some hard knocks in the nine or so years that diginomica has been writing about enterprise technology. Hardly a week goes by without some vendor or other decrying the fragility of spreadsheet-based processes and proclaiming the superior merits of their own HR, FP&A or data transformation offering. The pejorative term 'spreadsheet hell' crops up in no less than seven separate headlines over those years — one of them mine. But I've since come round to the view that the humble spreadsheet still has a role to play and shouldn't be erased from anybody's digital toolbox, despite its evident shortcomings.

Phil could well be right and given all the spreadsheet-using accountants in my family, I suspect he is. For 2023, I’ll reluctantly concede that Phil’s point of view will prevail for at least another year.

What the data says

This year, Three big studies dropped in about the same time all of which focused on the finance function and related technologies. We looked at all three in detail and saw some compelling commonality in the results. We also offered this cautionary comment:

Chances are, if you’re not radically reimagining what Finance can do (and acting on it), you’re either: undercapitalized, cheap, unimaginative, unwilling to get help or in a struggling firm. Delaying important and competitively necessary changes won’t make your firm stronger, more agile, etc. It makes you weaker, actually.  Change may be uncomfortable but it has to happen.

I don’t know if or when Fluence, Sapient and Esker will re-survey the finance world next but I bet we’ll still be seeing a lot of the same problems in effect this time next year.

If we’re talking finance, can we ignore crypto-currency?

Readers of Jon Reed’s weekly Hits and Misses column know that nothing gets Jon super worked up (and using his strikethrough liner) like the mention of blockchain and its technological cousin cryptocurrency. I’ve learned never to mention these with Jon in mixed company as it could result in a tumultuous flaring of technology indignation.

Nonetheless, in one of those weekly columns in early 2022, Jon opined on the works of other diginomica authors and their crypto-content. For example:

MyPOV: Crypto's true believers would have us believe traditional finance institutions are set to crumble, no match for the momentum of decentralized commerce.”

That didn’t happen and Jon was indeed quite the prescient prognosticator.  In fact, it looks like the crumbling is going to consume crypto firms not old school banks. The big stories for 2022 in crypto are happening now as massive thefts of cryptocurrency, poor controls in a major crypto firm, unexpected deaths of crypto founders and failures of these firms are the real discussion items now.

For 2023, I honestly don’t know what will happen with cryptocurrencies. I’m with Jon when it comes to this technology.

ESG, meet Finance and CPM

I took a trip to San Antonio this summer to catch CPM/EPM vendor OneStream’s event. The surprise technology I saw was their ESG tool. After I wrote that piece, a couple of other finance/ERP vendors reached out to tell me that they’re developing similar (or better) tools, too. I noted:

ESG, and in particular sustainability, is to 2022 what multi-tenancy was to cloud software in 2007. It’s hot and will likely remain an important component of new ERP and CPM/EPM software selections for many years to come.

OneStream showed their new reporting tool for ESG. It’s actually a multi-faceted and detailed tool that’s designed to replace the mostly manual and annual process many firms complete via spreadsheets. For an initial offering, it looked good.

But, it won’t be the final word on ESG as OneStream’s customers will have a lot of work to do to their old ERP, operational and other systems to incorporate better, more granular, more timely and informed data into these tools.

For 2023, businesses are going to want to do more from an ESG perspective and be underwhelmed with what technology providers can do. This could be a great market for software and consulting firms alike. (note to self: polish up that ESG business plan!)

Loading
A grey colored placeholder image