Finance Transformation challenges are real — but with a central subledger philosophy at the core, change can be focused and strategic.
One of the terms we hear quite a bit is finance transformation. Though it’s very vague, it denotes the complete overhaul of an organization’s financial operations. If your company’s core business is financial services, you know how overwhelmingly daunting that sounds. Aside from limited budgets and impossible timelines, the biggest challenge is undertaking the transformation without disrupting day-to-day business. But why is this so difficult? And what can organizations do to prepare for it? Here are some of my thoughts on that matter.
Theory and Practice 
Albert Einstein once said, “In theory, theory and practice are the same. In practice, they’re different.” That notion applies in most financial-services companies that have successfully operated for decades with the data and technology available at the time. In theory, the new technology should only help them conduct those operations faster and easier, right? But in practice, two major obstacles stand between the as-is state and the desired to-be state.
The first obstacle is the best practices developed by several generations of finance professionals over many years. They are so deeply embedded in daily operations and the corporate culture that even a slight change can trigger a chain reaction and pose a risk to business as usual — especially as different regulatory bodies scrutinize and standardize many business processes.
The second obstacle is data. Since financial analytics has become a top priority for financial executives, the need to integrate and modernize existing data platforms becomes a pressing issue.
Beyond Technology?
To address these practical challenges, financial institutions – insurance companies in particular – are forced to undertake significant transformation initiatives. They rely on technology to be adaptable yet standardized enough to efficiently support their many concurrent business goals. This sounds reasonable, but can the existing software solutions actually do that? Or do you need something different? I firmly believe that a financial subledger like the SAP Financial Products Subledger (FPSL) is an excellent example of such technology. It’s a unique solution that can:
- Provide a central accounting rules repository
- Provide centralized accessibility to the details of all financial events
- Ensure all events are fully traceable behind the general ledger financial statements.
Most insurance companies find the above three points are crucial to the success of their finance transformation programs. Before they develop a plan and a roadmap, they might find it helpful to answer a short series of questions:
- Is a financial subledger a nice-to-have?
- Is it an operational necessity?
- Or is it a prerequisite to enabling and driving transformation?
These questions aren’t rhetorical, especially for large insurers that have a pressing need to enable analytical insights and ensure regulatory compliance. Discussing them early on will help lay the foundation for change – an “art of the possible” mindset across the organization.
One of the highest-ranking U.S insurers already tackled these questions, and I had the opportunity to help them implement a central financial subledger as part of their finance transformation program. It was an inspiring experience, and if you would like to read more about the key takeaways, click the image at right to download my Experience Study: Creating a Central Subledger for Finance Transformation.
