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Finance transformation efforts soar with cloud ERP

Although some CFOs resist moving financials to the cloud, the process can help streamline processes and save money. Here's a look at what's involved.

Using cloud ERP to unite disparate finance systems can yield powerful rewards, as some CFOs are learning firsthand.

Organizations' leaders have been skeptical of cloud ERP for finance, said John Harrison, managing director at Protiviti, a global consulting firm, based in Menlo Park, Calif. Areas of concern include functional maturity, OpEx vs. CapEx treatment of subscriptions and implementation costs, privacy and security regulations, and direct control, to name a few.

However, as offerings improve and regulations evolve, companies are more open to considering cloud ERP for finance, Harrison said.

"The concerns are slowly receding," he said.

Receptivity to the cloud is also growing in part as CFOs, CIOs and other leaders see organizations successfully migrate, he said.

The need for streamlined financials

In 2017, the Muscular Dystrophy Association's financial data was scattered across 64 different systems in 80 different offices, said Michael Kennedy, of his arrival to the organization as CFO. It was a herculean task to manage the business processes the nonprofit used to solicit and manage donations, and finance its various research and care initiatives.

"The systems I had were very antiquated and were not cloud based," Kennedy said.

Transformation is inherently complex, particularly for organizations running multiple legacy systems.

The Muscular Dystrophy Association is celebrating its 70th anniversary. It has evolved from its early days of Jerry Lewis Telethons to funding over $1 billion research to help improve treatment. The CFO office is tasked with managing disbursements over 150+ different care centers. It has also been involved in improving the process of organizing fundraising events.

 "As much as I did not like what I had, it was raising money and running numbers," Kennedy said.

A close look at cloud ERP for finance transformation

Moving to the cloud required uncovering and addressing many shadow processes created by people who'd long ago moved on from the organization.

"When you start ripping the old systems apart that have not been touched in many years, you get unusual complicated issues where no one remembers why you did it that way," Kennedy said.

When you start ripping the old systems apart that have not been touched in many years, you get unusual complicated issues where no one remembers why you did it that way.
Michael KennedyCFO, Muscular Dystrophy Association

It also required addressing current systems, such as tracking campaigns via yellow pads and Excel spreadsheets. Instead, Kennedy's team implemented a consolidated CRM running on Salesforce, which helped shape other strategic decisions around adopting tools that could build on the Salesforce implementation such as FinancialForce for ERP, and DonorDrive and OneCause for campaign management.

Kennedy created a separate finance and technical team to build out the cloud ERP to work side-by-side with the existing Microsoft Dynamics GP ERP team during the transition period. The systems went partially live in December 2018 after about seven months. An audit team helped identify and sort out any inconsistencies in the numbers between the two systems. Auditors did an IT audit on the systems to make sure the systems had proper access controls and data security processes.

The new cloud ERP system project began in 2018 and started producing aggregated data in 2019.

"Now we have a treasure trove of data," Kennedy said.

The organization can use this consolidated data to influence decisions, anticipate the future and measure the impact of actions using AI and analytics.

Change management, then finance transformation

It's human nature to resist change -- even when they want it -- so building in concrete change management processes is always critical, especially for something as complex as finance transformation.

The Muscular Dystrophy Association's IT team faced challenges around getting staff to learn how to use the new system, Kennedy said. Even though everyone agreed that the old system was problematic, moving to a new system was unfamiliar.

"You have to anticipate the anxiety around culture change when someone comes in Monday morning and something is different, no matter how much better that is," Kennedy said.

He budgeted for additional training and support over the six- to nine-month period to help ensure success.

After the transition, the new system is providing some powerful cost savings, some of which will be reinvested for further improvements, Kennedy said. The biggest savings came through consolidation of all back-office functions to a centralized service center in Chicago.

"I could run events, capture information and do procurement in one place even those these events were held in 80 offices," Kennedy said.

This helped save over $5 million a year in labor and processing, which helped pay off the cost of moving to a cloud ERP in the first year, he said.

Required: Time, money and support

Finance transformation through cloud ERP migration requires solid planning skills and project management.

The initial estimate for how much time is required to migrate to cloud ERP is always over-optimistic, said Sten Vesterli, principal at More than Code, an IT consultancy based in Denmark. Planners may not realize the key players who should integral to the project, and implementations stall without senior management support, Vesterli said.

"It quickly turns out that the implementation needs the senior, expert people whose absence is most acutely felt in the business," he said.

After implementation, it takes the organization many months to get up to speed with the new system, Vesterli said. The biggest culprits include a web of undocumented home-brew solutions involving downloads, cut-and-paste and Excel spreadsheets. Those go out the window when you replace the old system.

Despite these hiccups, replacing an ERP system makes sense where there are significant new requirements such as with mergers or expansions or in the case of new regulations, Vesterli said.

"And when you replace, you definitely need to go to a cloud system in order to be able to integrate with your suppliers and customers," he said.

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