Finance Function Systems overview (based on the ancient concept)

Finance leaders often need a clearer picture of all finance systems, applications, and tools that are part of the company's Finance Function. Many companies are inventorying the finance systems in their Excel or workspace wiki/docs tools (e.g., Confluence, Notion).

Many companies and startups are developing new tools for finance teams to cover even small workflows of the finance function; this results in many various applications/tools that are utilized by finance teams. There are also technical tools that help to integrate different applications, and from the first look at the inventory of the finance systems, it is not always clear where and how they are used. Do we need all of them? Are there any duplications? Many questions can come to the finance leaders, so the finance systems landscape should be described so that it would be easy for everyone to understand when, why, and who is using them.

This is very important because all finance teams rely on systems and applications, and many finance leaders prioritize systems because they influence how finance functions. It is clear that if you are not paying attention to your finance systems landscape, your finance function wouldn't be less effective than the companies where this is priority no.1.

Methodoology

I have combined ancient wisdom with finance and technology expertise to design a “five-stage” methodology to help businesses become self-aware in the finance function.

The “Five Stages” methodology for analyzing the finance functions was designed based on Wu Xing's concept. Wu Xing is an ancient Chinese concept that describes a process of the five that always moves. It includes all areas of human existence. Wu Xing arose from the observation that five basic phases/stages can characterize all phenomena. The five phases/stages are fire, earth, metal, water, and wood. Traditionally, the five phases/moves are connected in two cycles of interactions: a generating or creation (enabling) cycle and a controlling cycle. Cycles and connections between phases/moves are the key to understanding the concept.

High-Level Finance Systems Overview

This overview presents a structured snapshot of the finance systems, highlighting the integrative nature of these tools across various business processes. The categorization into phases allows for a clearer understanding of each system's purpose in the company's broader financial framework. It also sets the stage for a detailed audit, where each phase will be analyzed for potential improvements, efficiency gains, and optimization opportunities.

The finance systems are grouped into the following phases and can be described in real life like following:

• Goals & Financial Models: This phase determines the company's planning, forecasting, budgeting, and financial model design. The company uses System 1 to perform all the activities in that phase.
• Expenses: This phase encompasses systems that generate company expenses. It ranges from managing accounts payables and employee expenses to vendor payments and payroll processing tools. In that phase, the company uses various tools: System 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12.
• Central Operations: Typically managed through ERP or accounting solutions, this phase includes processes like asset management, tax management, journal entries, allocations, consolidation, inter-company transactions, and more. Additionally, solutions like Material Requirements Planning (MRP) and other industry-specific tools may be integrated in this phase. The company uses System 6 as the central finance system across all locations except COUNTRY3.
• Revenue: Dedicated to tracking customer interactions, sales processes, and cash inflow from customers and partners. Because of the specifics of the business, the sales process is managed outside of finance systems and tools.
• BI & Controlling: The final phase includes Business Intelligence tools, reporting systems, and data processing tools for management reports and analytics.

Finance systems purpose and ownership

When you describe the finance systems prupose and usage you also can include the roles/accesses, contract management, and many other aspects of the systems so that finance leaders can get a full picture.

Example of the description and table to represent the data:

The company's nature and market environment influence how it implements and manages different systems, tools, and applications.

TEAM1 team manages the majority of these systems. However, specific systems, particularly those related to sales processing and Data Warehousing (DW), are under the control of the TEAM2 and TEAM3 teams. TEAM6 manages company-wide systems, such as System 1 and System 5; this team also manages System 12.

The company also engages third-party services for specific functions such as payroll calculation in COUNTRY1, COUNTRY2, and COUNTRY3 and accounting in COUNTRY3 and COUNTRY5.

Finance systems technical architecture

Technical architecture aims to visualize the finance data flows and connections between finance systems.

Connections and data synchronization between systems are critical aspects that determine the transparency, accuracy, and accessibility of financial data. They also influence the company's internal control and the finance team's manual work. If there is no connection between systems, the finance team should manually move the data using Excel, reducing the team's efficiency and accuracy.

The scheme below outlines how systems are connected, where initial data is entered, and how the data goes between systems, whether it is a manual effort for TEAM1 or done automatically.

When the volume of financial data is low, it generates little effort for teams to sync data manually. Still, high volume creates many challenges, including time, effort, accuracy, transparency, and security.

You can use different ways of the represnetaion of the finance systems landscape, but there are three very important dimentions to look at them:

• Business function / business purpose
• Workflows / processes
• Technical overview / integrations

Thank you!

What do you think about such concept?