Challenges and benefits of cloud for the finance department
Moving the finance function to the cloud can help companies. Learn about some of the benefits that can result from doing so, as well as potential challenges.
Moving operations to the cloud can potentially benefit various company departments, including the finance department.
CFOs who are interested in moving the finance function to the cloud should learn how to build a business case for doing so, including the benefits the move can bring, as well as potential challenges. A cloud migration of the software used by a company's finance function -- usually core applications, like accounting, tax planning and CRM -- may simply involve migrating these finance apps from existing enterprise servers to VMs running on cloud IaaS. Doing so could help reduce maintenance overhead and lay the foundation for further migration. However, migrating finance to SaaS instead can result in greater cost savings in the long run and increased automation, among other benefits. However, SaaS can come with challenges as well, including potential security problems.
Learn more about the benefits that potentially come with moving the finance function to the cloud, as well as the process's associated challenges.
The benefits of moving the finance function to the cloud
Here are some benefits of moving to the cloud that CFOs can include when building a business case with other company leaders.
Cloud applications often possess more sophisticated analytics capabilities than on-premises software, and those analytics can help the finance function improve operations.
Swastik Technopack, a company based in Mumbai, India, that makes machinery for industries such as the cosmetics industry, previously used a legacy accounting app before moving its finance function to the cloud.
The organization now has a much wider range of reports and analytics, said Hiral Pancholi, project director at Swastik Technopack. Swastik Technopack's new cloud service also makes it easier to customize reports and explore data with other analytics tools.
Cloud applications also enable the automation of processes like sending customers messages, which can save employees time.
Swastik Technopack's finance team can automatically audit purchase orders and send out shipment status updates to customers, among other uses, Pancholi said.
Automating customer shipment updates could improve customer service because customers receive information about their purchases more quickly than if a finance team member or customer service representative has to manually send an email.
Decreased operating costs
Companies may experience lower operating costs after moving the finance function to the cloud because the cloud software demands less employee labor.
Integrated cloud platforms typically require less IT management of the underlying technology stack, said Shafqat Azim, partner of digital strategy and solutions at ISG. Employees can also use cloud platforms to configure and manage specialized reports, reducing the burden on IT teams. In addition, organizations with a well-designed cloud environment often save money on platform maintenance costs.
All this can potentially result in savings for organizations that make the move.
A modern cloud finance system can give the finance function more granular insight into company sales performance.
Retail companies with modern tools can pursue the cost method of accounting, which gives them more insight into their sales data, said Kurtis Babczenko, U.S. finance transformation leader at PwC. A company using the cost method of accounting can examine sales data by stock-keeping unit, or SKU, and learn exactly which items are selling well -- for example, a woman's blue polka-dot shirt. Older methods of accounting only report sales data by category, like shirts.
More granular sales data can help retail companies make better purchasing decisions.
The challenges of moving finance to the cloud
CFOs and IT leaders must also navigate various challenges when migrating the finance function to the cloud. Here are a few to plan for when building a business case.
CFOs should account for the fact that employees will need to receive training on the new cloud system.
Finance and IT should work together to develop a plan for upskilling employees who work on existing systems as part of the transition to the cloud, said Cenk Ozdemir, cloud and digital lead at PwC.
CFOs and those working with them on the cloud business case must consider the expenditure of time and money from the new software training and plan accordingly.
Even when legacy finance apps are old and clunky, accountants and other finance professionals may be reluctant to adopt newer technology that changes their workflow.
Swastik Technopack's team of accountants and financial professionals were not happy with the move to the cloud, Pancholi said.
"There was a huge resistance internally from everyone using our previous legacy system," Pancholi said.
He found it easier to replace the core accounting team with a completely new group that was willing to learn the new software, he said. However, the new team of six accountants was able to process a much higher transaction volume than the previous team of eight because of the cloud software's increased automation and efficiency, as well as its improved analytics capabilities.
Questionable company savings
CFOs should also consider whether cost savings will truly result from a move to the cloud.
Enterprises often focus on perceived cloud cost savings, but costs could skyrocket if an enterprise isn't prepared to manage cloud operations with extensive demand management, data management and security practices, Azim said. He believes companies will experience more significant long-term gains by using AI and machine learning to improve predictive analytics and business performance modeling.
CFOs should work with IT to evaluate the reality of potential savings from moving finance to the cloud.
Who should build the business case for cloud?
The CFO will need to work with other executives, like the CIO and CEO, to create a business case for moving finance to the cloud. Accounting leaders and technology executives should work together to choose the best cloud service.
The finance team should drive the business case for moving finance to the cloud, but they will benefit from learning from IT about considerations like retiring existing systems, Babczenko said. The two departments can also work together to identify opportunities for automating processes and controls and develop metrics for measuring financial operations' progress.
Finance and IT working together may help win over other company leaders to the cloud migration plan because each team will bring expertise that the other department lacks.