In this interview with Matt Lescault from Lescault and Walderman we talk about the three pillars of digital transformation for the financial function: people, processes, and systems. We explore how automation, digitization, and data analytics can help improve financial processes and decision-making. 

We discuss the key performance indicators (KPIs) for measuring digital transformation success and the reasons why he feels companies should choose to outsource their digital transformation to third-party providers.

What are the three pillars of digital transformation for the financial function, and why are they important for businesses?

Everybody talks about people, processes and systems. These elements are essential for any type of transformation, whether it’s digital, operational, or organizational. To achieve a successful digital transformation, it’s important to have the right personnel to carry out tasks, a well-defined process for effective task execution, and the necessary systems or technology to support these efforts.

While this sounds like a straightforward answer, the reality is that the success of digitial transformation is understanding your goal. It involves comprehending the various components and phases required to reach that goal and then outlining the project accordingly. Your business needs to set clear and achievable goals and establish realistic timelines for your projects.

How can automation and digitization improve financial processes within a company, and what are some key areas where this transformation is most beneficial?

We talk about automation and digital digitization. When we mention automation, we are referring to the process of reducing manual tasks. It might sound simplistic, but the idea is to transform repetitive and mundane processes into more efficient ones that benefit the organization. How do we achieve this? By implementing workflows and using technology. Digitization allows us to do this. 

Both when we talk about automation, we’re talking about how we take processes that are manual and make them less manual. I know that’s the most simple way to put it. But how do we take mundane routine processes and make them work for for the organization? Through workflows, through the technology, and digitization allows us to do that. 

When we talk about automation, we’re talking about the transformation of manual processes into more streamlined ones.  I know this sounds simple, the real question is: How can we optimize and adapt routine, mundane tasks to benefit our organization? Through implementing workflows, using technology, and applying digitization. 

Within a company, some of the most straightforward aspects to consider during transformation are areas like AP (Accounts Payable) management and expense management processes. In my view, this is where our transformation journey began, as it presented the simplest and most readily achievable improvements. We had individuals throughout the organization spending money, and the challenge was to streamline and automate the flow of this financial information into the finance department through efficient workflows and processes. It’s a topic that’s frequently discussed across the organization—everyone’s talking about AP.

So let’s talk about one other key area that really automation and digitization can affect great change throughout the organization. What I love about Sage intacct is a feature known as dynamic allocations. A lot of organizations with multiple entities, locations or international operations, often have to allocate or disperse expenses across these entities. Whether that expense originates in one it is utilised by another. 

Historically it has been very time consuming process to allocate correctly as it relies on variable information such as the number of hours, gross profit percentages, square footage utilization, or utilization rates.. When we talk about dynamic allocations, we’re talking about a system that can automatically processes and optimize the allocation. That’s automation utilising digitization.

What role does data analytics play in the digital transformation of the financial function, and how can it help businesses make better financial decisions?

Data analytics allows us to start talking about the future, it is giving us information about the past that can help us or it gives us indication of what the future may bring based on trends and based on where the organization is going. 

Your data analytics plays an important role in a digital transformation by helping you pinpoint where your organization is currently inefficient. When you’re looking at a digital transformation in a specific area of your business, often due to identifying a gap or an opportunity, data analytics can provide evidence to support your decision. It could involve metrics, like the time it takes to complete a task, the time it takes to close a sale, or the duration of a sales deal. These metrics exist in different parts of your organization, and through analytics, you can recognize areas where you have the potential to improve by 5% to 10% or more. Analytics should help you identify these opportunities for improvement.

To sum it all up, it’s important not to overlook the aspect of making better financial decisions. When we consistently analyze and use analytics to identify ways to improve efficiency within our organization, the ultimate result is increased profitability. In essence, we are making better financial decisions that benefit us in the long run.

To learn more about Predictive Analytics and the insights they can offer click here.

Could you share LWI’s digital transformation journey and highlight key milestones or transformations within the financial function?

Our company has been around for 17 years, and has has many transformations, especially digital ones. Sharing that journey, could be an hour long conversation. and It’s not just from a financial function. 

Let’s talk about some specific and noteworthy moments from our transformation journey. I’ll begin with the instance in 2010 when we transitioned to a fully remote organization. By “remote,” I mean that no one was working from the office; instead, we were all working from home. We essentially connected and remotely managed the 14 computers we had in our office by installing LogMeIn, effectively labeling ourselves a virtual company.

Now, this wasn’t exactly the most ideal situation. While we did have our virus protection and security measures in place, it didn’t constitute a fully functional virtual environment that allowed us to manage things effectively.

Our situation heavily relied on people sharing access to documents, which had its limitations. In the early stages of our journey, we decided to migrate to a server environment, specifically what’s known as RDS (Remote Desktop Services) or Terminal Services. We took this on as an internal project rather than hiring an external team, and we encountered significant challenges along the way. There were aspects of this transition that were unknown to us, and we didn’t know what to expect. 

The transition from our initial desktop setup, where computers were interconnected, to a hosted virtual server, ended up taking twice as long as it should have and more than likely cost us twice as much money.

We made a move to Azure and started a whole migration. Initially, we tired to handle this internally, and we made some errors along the way. Eventually, we realized our mistakes and hired the help of a professional firm to rectify them. Now, we’re successfully operating in Azure, and it works really well.. However, looking back, we acknowledge that this transition could have been accomplished much faster, at a lower cost, and with greater efficiency.

My last example that I want to use is more more relevant to today. We utilize HubSpot internally for our CRM, marketing automation and sales automation. Internally, many team members have had a hand in shaping how we utilize various workflows, structure our data, and manage our processes.

What we’re realising right now is that we had a bunch of people that understood different parts of the system, but no one truly grasped the whole picture. —how everything connects from the service hub to the CRM, marketing automation, and sales automation. It’s not just about knowing the right order; it’s about understanding how all these components interact with one another.

We’ve hired a firm to help us through this and help us and really understand. Now we have to deconstruct what we did to reconstruct it in a better way. You know, these all tie into the financial function. 

I’m not talking about our accounting systems right now, but I’m talking about things that that greatly impact our day to day lives. From this perspective, it has a major impact on the financial function in our cost of overhead. 

We have learned a lot on our journeys of our internal process.

What were the strategic considerations that led LWI to choose cloud computing as a pivotal element of their digital transformation strategy?

The strategic considerations that led us to embrace cloud computing as a pivotal element of our digital transformation strategy can be summarized as follows:

In 2010, it became clear to me that cloud technology would be the long-term direction for organizations. Surprisingly, the transition timeline to the cloud was shorter than expected. In our world, financial considerations hold significant sway. What drives revenue tends to dictate overall business decisions. My introduction to this concept was quite impactful when we migrated from QuickBooks Desktop to QuickBooks Online.

Initially, I questioned this move. QuickBooks Desktop was a great product with widespread usage, while QuickBooks Online, at that time, was inferior. Then I realized: “Ah, it’s all about the recurring monthly subscriptions for the cloud product.” With the desktop version, I could make a one-time purchase, use it for three years, and host up to 30 clients without incurring additional costs.

It boiled down to a financial perspective. This was the moment when I first contemplated the broader business implications of such transitions. QuickBooks Online also offered enhanced stability compared to its desktop offering, which frequently encountered errors, data reconstruction, and crashes, particularly with larger datasets. This underscored the importance of data integrity.

We recognized the significance of data integrity and stability. One of the reasons we chose Intacct was because it was one of the first organizations to develop natively in the cloud—unlike QuickBooks, which initially operated on desktops before transitioning to the cloud. Intacct’s name itself stands for “Internet accounting,” reflecting its cloud-native roots.

In summary, our decision to adopt cloud computing was driven by the need to stay ahead in the digital transformation game. It was clear that this shift was necessary for us to remain competitive. By investing in cloud technology, we aimed to gain an edge. When the COVID-19 pandemic struck, we were already 100% virtual, utilizing Teams on Azure and VoIP. Our primary concern then was how to continue differentiating ourselves, as we had already found a unique position. However, the pandemic accelerated others’ adoption of similar technologies, prompting us to explore new ways to differentiate ourselves. 

To learn more about Sage Intacct and Cloud Computing services offered by Lescault and Walderman click here.

What specific challenges did LWI encounter when integrating cloud computing and data analytics into their financial processes, and how were these challenges addressed?

We ran into several specific challenges when integrating cloud computing and data analytics into their financial processes, and they addressed these challenges as follows:

One significant issue was their tendency to adopt a do-it-yourself (DIY) approach, even within their introductory Academy. They recognized the common analogy of “the cobbler’s kids having no shoes,” meaning they were often so focused on their clients’ needs that they neglected their internal financial processes. This dual challenge was twofold: attempting to handle non-financial or non-accounting systems themselves and not giving these internal processes the attention they deserved. To address these challenges, they saw the value in bringing in external experts to support their organizational goals.

For instance, in the realm of marketing strategy, they realized the limitations of handling it entirely on their own and sought external assistance. To tackle these issues:

They shifted their approach by not redeploying their client staff, who were focused on client needs, into internal process development for financial processes. Instead, they utilized non-client staff who had received training, particularly related to their systems.

For non-financial areas of their business, such as CRM, marketing automation, and technology components that were not part of their core business operations, they chose to invest in third-party organizations for support. This strategic decision allowed their internal staff to concentrate on their core competencies, enabling them to drive revenue effectively.

What opportunities have arisen for LWI as a result of embracing new technologies like cloud computing and data analytics in their financial operations?

Embracing new technologies such as cloud computing and data analytics in our financial operations has opened up several significant opportunities. One of the most biggest advantage is that with data analytics, we can make faster decisions.

For instance, during a recent meeting with my marketing team, their presentation was heavily data-driven, with approximately 50% of their insights based on data. They provided both positive and negative aspects of our current situation, supported by data. I had some questions about the data, and I suggested looking at it from a different perspective. By doing so, we could quickly determine necessary shifts in our approach based on what the data was telling us.

Let me illustrate with an example: We were examining the average time visitors spent on our site. Initially, it appeared to be a uniform metric. However, I asked if we could break down this metric into two categories—average time on site for visitors landing on our homepage and those landing on subpages. This distinction was crucial because our marketing efforts primarily targeted subpage landings to provide visitors with the most relevant information.

If we found a significant change in the average time spent on subpages, I would be less concerned. This ability to swiftly analyze and act on data is what I mean by being nimble. It allows us to make informed decisions promptly, especially considering our finite budget. We must maximize our resources effectively, and cloud computing plays a pivotal role in this process. Cloud computing enables seamless data integration, making data analytics not only possible but also more efficient and less time-consuming compared to non-cloud solutions.

What measures were taken to ensure data security and compliance with industry regulations during a business’s transition to the cloud?

Ensuring data security and compliance with industry regulations during a business’s transition to the cloud involves several key measures.

Firstly, when you’re using cloud services, you’re typically partnering with organizations that have established data security and compliance measures in place. They may undergo audits like Sox audits or hold ISO certifications, which provide a certain level of data security and compliance assurance. This is in contrast to traditional server-based systems where you have more vulnerabilities and a higher risk of data breaches because you don’t have the same level of security expertise and infrastructure.

In our case, during these transitions, we prioritize storing non-sensitive data in the cloud. Our processes are designed to ensure that sensitive client data doesn’t reside on physical servers and is instead handled through secure protocols, data transfer, and migration procedures managed by third-party experts.

In essence, the key to addressing data security and compliance concerns during a cloud transition is to collaborate with reputable cloud-based third-party providers that have a strong commitment to integrity and investment in security measures. This approach helps us ensure that our clients enjoy the same high level of security as we do.

What are the best key performance indicators (KPIs) or success metrics that should be used to measure the impact and progress of a companies digital transformation in the financial function?

So let me give one of my favorite answers to your question here is it depends. 

Measuring the impact and progress of a company’s digital transformation in the financial function depends on the specific goals set for that transformation. In our experience implementing Sage Intacct across various industries, we’ve found that these goals can vary even within a micro-vertical industry, making the choice of key performance indicators (KPIs) or success metrics contingent on the client’s objectives.

For example, in one client’s case, their primary KPI might be the time it takes to go live with the digital transformation. They might have a pressing issue or a subscription expiration deadline within 60 days, making a speedy implementation their top priority.

In contrast, other organizations may have more time flexibility but face significant challenges in their financial processes, particularly in the time it takes to close their books (e.g., 30 to 45 days). For them, the critical KPI could revolve around reducing the time it takes to close their financials. If, for instance, they can shorten their average days to close by 30 days, going from 45 to 15 days, that reduction in close time becomes their major performance indicator.

These examples illustrate that the choice of KPIs varies according to the client’s specific pain points and objectives. The most effective KPIs are those that directly align with and measure progress towards addressing the client’s unique challenges and goals in their digital transformation journey.

Why would companies choose to outsource their digital transformation to a third party provider?

Firstly, specialized third-party providers are experts in this field, dealing with digital transformation daily. They possess invaluable experience, having encountered various challenges, pitfalls, and hurdles. This knowledge enables them to effectively guide companies through the process, ensuring a smoother and more successful transformation.

Secondly, a reputable third-party provider can offer cost-effective solutions that provide a significant return on investment. When aligning their expertise with key performance indicators (KPIs), the value can be enormous.. For instance, if an outsourced provider can meet KPIs like reducing implementation time or shortening the time required for financial close, the resulting benefits far exceed the costs. This means businesses gain not only time but also the potential to reduce internal expenses significantly.

Lastly, modern businesses are increasingly focusing on their core competencies. They recognize the importance of concentrating on what they do best while relying on external experts for specialized tasks. Outsourcing digital transformation allows organizations to allocate resources more efficiently, harnessing the expertise of dedicated providers in areas that are strategically vital.

In summary, outsourcing digital transformation to third-party providers streamlines the process, delivers cost-effective solutions, and enables businesses to focus on their core strengths while benefiting from external expertise in critical areas of transformation.

To learn more about Lescault and Walderman’s Accounting Outsourcing Services click here.

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