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        Ventana Research Analyst Perspectives

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        Office of Finance 2024 Market Agenda: AI Begins Boosting Productivity

        Ventana Research recently announced its 2024 Market Agenda for the Office of Finance, continuing the guidance we have provided since 2004 on the practical use of technology for the finance and accounting department. Our insights and best practices aim to enable enterprises to operate with agility and resiliency, improving performance and delivering greater value as a strategic partner.

        We craft our annual Market Agenda using our firm’s expertise in business requirements — especially the complexities of accounting, tax and capital markets — combined with our 2024_VR_Market_Agenda_Logoknowledge of software providers and products. Our Finance practice has six focus areas for 2024: Business Planning, Enterprise Resource Planning and Continuous Accounting, Close and Consolidate, Order-to-Cash, Procure-to-Pay and Digital Finance. As a result of our market research, we can offer insights and best practices to both lines of business and IT as well as across industry verticals, providing guidance that will help every enterprise reach its maximum potential.

        Historical eras almost always do not align perfectly with calendars, and the strands defining them begin years before they coalesce. For example, what delineated the 20th century as a distinct period began in 1914 with the “Great War,” and it’s likely that the pandemic will define the 21st century. More prosaically, the events of the pandemic caused an acceleration in the long-awaited adoption of digital technology by the office of finance as enterprises were forced to adapt to remote working environments. “Virtual” is now the adjective of choice describing almost all core finance and accounting processes that, in many enterprises, take place in a complex cloud and on-premises computing architecture supporting hybrid, in-office/at-home working environments.

        Moreover, the purpose of applying technology will be to build productivity rather than efficiency. In the past, the need to do more with less could be addressed simply by performing processes or steps more efficiently, using benchmarks to identify where time savings were possible. This approach is insufficient to address the need to boost productivity while attracting and retaining the best talent. Rather than just trying to do the same things more efficiently, finance executives must employ technology to automate operations that computers can do better than humans. Digital technology can eliminate workloads by having software perform tasks and by redesigning processes to eliminate the need to do the work in the first place. Technology is the key to having accurate, reliable and auditable financial statements sooner with less effort.           

        Yet, despite recent encouraging signs of faster technology adoption, transformation of departmental processes and practices is likely to evolve slowly because the key impedimentVentana_Research_2024_Assertion_OfficeOfFinance_CFO_DX_Benefit_4_S remains the difficulty of changing organizational behavior, commonly referred to as “change management.” For that reason, by 2027, only one-third of finance departments will have achieved a level of technology competence to be described as “digitally transformed,” while the CFOs of those that do will have greater influence in their organization’s management.

        To cope with this brave new world of digital transformation and adapt to rapidly changing markets and economic environments, enterprises have accelerated conversion from manual processes to applications that enable finance and accounting professionals to eliminate rote, repetitive work and reallocate their time to projects requiring their knowledge and experience. In the coming decade, technology will transform how the finance and accounting department operates more than over the past 50 years. Artificial intelligence using machine learning, generative AI, natural language processing, bots, enterprise data management and restructured architecture — these technologies will bring us closer to that longed-for state where computers adapt to the individual rather than requiring the individual to adapt to the shortcomings of computers. Technology will finally be able to transform all aspects of the office of finance, including accounting, planning and analytics, budgeting and closing.

        Business Planning

        Ventana Research coined the term “integrated business planning” decades ago to describe a process that supports enterprise-wide, high-participation, rapid-planning cycles. These cycles provide detailed answers to “what-if” questions in seconds or minutes, not hours or days. Budgeting and planning are simplified for business unit managers, and finance departments gain a detailed, forward-looking view of the income statement, balance sheet and cash flow. IBP employs technology such as in-memory computing, advanced analytics and interactive planning to make planning and budgeting processes easier and more agile. Our Business Planning Buyers Guide and Benchmark Research for 2024 will focus on how financial planning and analysis groups can finally make planning and budgeting more of a business tool — one that is easier for budget owners to use — significantly enhancing the business value of these processes. However, Ventana Research asserts that by 2027, just one in four FP&A organizations will have redefined their mission to make planning easier for business unit leaders. Those that do will be a strategic asset.

        ERP and Continuous Accounting

        Our 2024 research will highlight the transformational role of today’s enterprise resource planning systems and other maturing technologies. Continuous accounting is a technology-driven approach to managing transaction recording and accounting that takes advantage of current technology to streamline and restructure workloads. Continuous accounting provides enterprises with more real-time information and insight. It also helps chief financial officers address two key challenges: cutting administrative overhead and attracting and retaining the best talent by eliminating unproductive and soul-deadening accounting chores. We will also examine how enterprises are adopting a “virtual audit,” a transformation of the now-accepted remote audit that provides external auditors with limited, read-only access to key systems, significantly reducing staff workloads. We assert that by 2027, two-thirds of organizations will have applied continuous accounting principles to close the books within one business week, up from 50% today.

        Close and Consolidate

        Close and consolidate software uses technology to streamline processes in the final stages of the accounting cycle, including close-management systems and dedicated consolidation software as well as applications for intercompany financial management, automated reconciliations and disclosure management. Our research will spotlight the increasing importance of using automation to enable enterprises to speed the close while promoting accuracy and control, freeing up finance and accounting staff for more strategic tasks. Dedicated consolidation software has evolved, requiring less effort to implement and maintain, making it affordable and practical for many enterprises that use standalone spreadsheets to manage statutory consolidations. In 2021, we introduced the term intercompany financial management, a discipline for structuring and handling transactions within a corporation and between its legal entities, designed to maximize staff efficiency and accounting accuracy while optimizing tax exposure, minimizing tax leakage and ensuring consistent tax and regulatory compliance. IFM addresses a significant (if often unrecognized) problem for many companies because performing IFM well requires the ability to execute the minutiae of statutory and tax accounting details effectively to support the achievement of high-level corporate objectives.

        Order-to-Cash

        We’ve added two end-to-end processes to our 2024 agenda to highlight the importance of applying continuous accounting principles to cross-functional processes. Order-to-cash (O2C)Ventana_Research_2024_Assertion_OrderToCash_Digital_B2B_Payments_62_S includes all business activities that begin with receiving and processing an order all the way through revenue recognition and cash receipt. In some cases, it may be defined as beginning at the opportunity stage of a sales process. Selling has become more complex, even in business-to-transactions, requiring enterprises to have systems that manage the process across multiple channels. Accounting must be able to deal with this growing complexity with existing resources. Technology makes it possible to ensure data quality from start to finish, eliminating the need for time-consuming checks and reconciliations to ensure that customer invoices are always accurate. Software is also necessary to support a more complex payments environment and streamline the cash application process to eliminate a potential barrier to customer sales. The department must manage accounts receivable more completely and efficiently to minimize working capital while promoting customer satisfaction. Technology is also essential for enterprises that offer today's more complex subscription-based services to ensure that systems accurately reflect changing billing and consumption parameters. Ventana Research asserts that through 2027, at least three-fourths of B2B payments will be handled digitally to lower transactions costs, reduce back office workloads and enhance control.

        Procure-to-Pay

        Procure-to-pay (P2P) is the second end-to-end process we’ve added. Applying technology to P2P provides new and important opportunities to gain effectiveness through greater efficiency. Purchasing ought to be a priority for digital transformation because, in most enterprises, the function continues to operate primarily as it did in the middle of the 20th century. Purchasing should ensure that it is serving the organization’s needs in at least two vital respects: For its direct or strategic purchasing (goods and services that are an integral part of its offerings), it should be the informed buyer whose knowledge enables an enterprise to improve the quality, performance and cost of its products and services. Purchasing should also use technology to simplify the acquisition of so-called indirect goods and services (such as computers, office supplies and graphic design) while minimizing their cost and controlling outlays. Increasingly, enterprises are adopting digital payment technologies to facilitate sales, reduce transaction costs, speed cash flow and achieve greater control. Ventana Research asserts that by 2027, almost all organizations will adopt a digital-payments-first approach to differentiate their customer experience and to increase revenues and market share.

        Digital Finance

        Our 2024 research on this topic will explore how digital finance can shift the balance of the department’s work from transaction processing and reporting to forward-looking operationalVentana_Research_2024_Assertion_OfficeOfFinance_Vendor_AI_Accuracy_2_S and financial analyses. Digital finance utilizes technology to eliminate rote, repetitive work while improving the quality of financial processes and financial statements. Artificial intelligence will play a significant role. Ventana Research asserts that by 2027, all providers of software aimed at the office of finance will differentiate their offerings by the capabilities and accuracy of their AI functionality.

        Finance and accounting departments turned a corner in 2020 and will continue to accelerate adoption of technology in 2024, increasingly embracing digitization. Subscribe to our Ventana Research community to stay up to date on our 2024 research efforts. Visit the Office of Finance page and focus areas for more research facts and best practices.

        Regards,

        Robert Kugel

        Authors:

        Robert Kugel
        Executive Director, Business Research

        Robert Kugel leads business software research for Ventana Research, now part of ISG. His team covers technology and applications spanning front- and back-office enterprise functions, and he personally runs the Office of Finance area of expertise. Rob is a CFA charter holder and a published author and thought leader on integrated business planning (IBP).

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