Build a financial foundation that can flex for HCM

For many Chief Financial Officers (CFO) across the financial services sector, prioritizing cloud transformation through successful Enterprise Resource Planning (ERP) implementations can unlock limitless potential. This means streamlining processes, enhancing reporting and positioning your company for success in a competitive landscape. However, if ERP deployment is done in isolation and Human Capital Management (HCM) follows separately, it could lead to significant challenges.

The secret that can help achieve long-term success? Think ahead.

Traditional Enterprise Resource Planning (ERP) systems were adequate for providing retrospective snapshots of an organization’s financial performance from the previous month, quarter or year. Reporting functions provided summaries that worked well for a time.

But now, by incorporating accounting data with other integral growth information — from a human capital management (HCM) system, operational functions or other source — an organization can truly establish a forward-looking, future-ready presence.

Flying higher with the cloud

As organizations such as Mohegan have found, a cloud-based ERP system provides a high degree of visibility over data that powers the business while also enabling leaders to generate value.

With an industry-leading platform, CXOs can manage both their finances and their people in a single system. They can also adapt to operational and procedural changes and make data-driven decisions with greater speed, agility and efficiency. In short, a modern ERP system helps to elevate finance, accounting and HR teams.

Beginning ‘finance first’

Many companies start their transformation journey with finance to build a strong financial foundation. But what does that mean for future initiatives? At PwC, we’ve seen businesses run into problems when they neglect to think about step two — that is, everything not owned by finance that still impacts finance. A rigorous approach to forward planning helps confirm that future bumps in the road don’t become costly.  

What are the challenges of a siloed ERP approach?

Because finance, payroll and HCM share several data elements — including cost centers, locations and chart of accounts — these back-office functions are inextricably linked. What happens if these data elements are set up by finance without considering how HR and payroll might use them? There’s a high chance that this carefully constructed setup may need to change – which could lead to an unplanned, and potentially expensive redo of the original implementation. You might think this will only impact a few shared components, but bear in mind that these have elements that are deeply embedded in finance.

This could also have far-reaching implications that may only become apparent during the second implementation phase, when other departments are affected. You may end up needing to retrain your organization. And accepting an on-the-fly redesign, rather than a holistic strategy, could result in unanticipated system errors and less efficient processes. Ultimately, this could translate to significant costs.

What should you consider?

When designing a future state, there are key considerations you shouldn’t ignore. First, aligning business processes can be essential for functional area operations. Carefully planning the financial areas that overlap with HCM, such as employee-level costing allocations, can avoid challenges including misrouted approvals, unconstrained security policy access and inconsistent notifications.

Second, to help facilitate smooth data migration and boost future compatibility, convert current ledgers into historic ledgers and enable custom work tags to capture holistic reporting and analysis. Don’t forget to configure account posting rules if payroll is implemented later. Consider configuring an ‘HCM lite’ implementation, defining any organization types that are beneficial to finance.

When it comes to security and control, having a plan for areas of overlap between finance and HCM can help you create a firm strategy. Make sure that data security is accounted for, and segregation of duties is designed and implemented within the tenant. Existing security groups and policies should also be reviewed and secured appropriately.

Why integration matters

If your organization prioritizes innovation, ERP systems require the ability — and agility — to “play nice” with other platforms. That means easily providing, securing and appropriating data access to third-party applications, and planning out ways to extend the platform’s capabilities.

You probably already know that ERP personalization can speak to unique needs. The same goes for integration, which can connect various systems and help champion seamless data exchange, especially when it comes to payroll. Making sure new and legacy systems are aligned and synchronized can prevent compromising overall performance and productivity.

It often comes down to communication

In our experience, collaboration among key stakeholders in finance, HR and payroll is considered to be the core to a smooth process. A tried-and-tested approach is to assign key people from each organization to take part in joint design sessions. They should each agree on a clear future-forward goal and system design. Then, pair the finance program manager with a designated HR representative, and commit to regular meetings during design and testing phases.

A unified approach

The more successful ERP implementations are typically rooted in teamwork and coordination, where finance and HR agree on solutions to core data elements and the processes that can connect them. The implementation team also coordinates with other departments at key moments throughout the process, and the agreed-upon design swings into action seamlessly, without the need for revisions.

Take the long view

By addressing these questions early in the transformation process — even if certain parts of the organization won't be affected for years — you can establish a clear vision. With this vision in place, you can execute strategies for long-term success, prevent costly future changes and reap the benefits of seamless integration.

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Planning large-scale transformation might seem daunting, but PwC and Workday can help smooth the process.