Introduction

Most organizations have been using on-premise financial systems until recently, when pressure has mounted to migrate to the cloud platform. The need is due to the speed, automation, financial visibility, and real-time insights that are missed by operating on-premises, while being enjoyed by those who are on the cloud.

What is a Cloud-Native Financial System?

This is a system that is hosted in a data center outside and or far from the client’s premises/building. Traditionally, organizations required infrastructure that could hold the computer servers. The infrastructure comprises a secure server room, server racks, and numerous network cables for connectivity. After this setup is ready, the business can install any application they would want to use in their organization into these servers that are on their premises. Hence the name On-Premise. Unlike the traditional practice where the client could install the systems into their servers in their build by building the hardware infrastructures, Cloud-Native systems are accessed without the need to install the physical infrastructures. The application systems are accessed remotely from their stored datacenters. Examples of such systems areOracle Fusion Financial Cloud,SAP Cloud,Microsoft D365,NetSuite, etc.

The Top Challenges CFOs Face Today

There are various challenges CFOs face in their daily operations. One of these challenges is the escalating cost of operations. This is due to the high initial cost of installation, the cost of maintaining the physical infrastructure, the cost of purchasing server hardware and other datacenter items, and the cost of paying staff, among others. The second is the compliance risks. Since the organization takes full control of its data center, it is expected to meet all the compliance requirements. Compliance requirements are security, audit, dedicated internal expertise, and more. Next is the delay in the reporting cycle. This is commonly because data sits in different data sources in on-premise environments, which requires a lot of effort and cost to build ready-to-consume reports. The fourth challenge is manual processing. This can subject operations to human errors, result in incorrect data presentation. The last one is poor visibility between departments. Most on-premise systems are not designed to consolidate data in a way that gives users quick visibility of the business operations state. This makes it hard for respective users to take quick action when needed, which may lead to losses, a bad reputation, or even loss of opportunities.

4. Benefits of Cloud-Native Financial Systems for CFOs

4.1 Real-Time Visibility & Decision-Making

Cloud systems come with modern dashboards that give instant insights into the business position. These dashboards are linked to the main transaction record, where users drill down to fetch the specific transaction and take the necessary action. With these high-level dashboard insights,  users take the necessary actions for the business.

4.2 Stronger Security & Compliance

Cloud service providers have invested heavily in different security and data management frameworks. These include technologies such as System Organization Controls (SOC) reports. SOC 1 is for financial reports, and SOC 2 is for data management. The system vendors have ensured that there are adequate Automated Control Frameworks and Audit trails as well. This is to ensure that the data security is not compromised or weakened.

4.3 Reduced Costs (OPEX vs CAPEX)

OPEX stands for Operating Expenditure. These are expenses formed by various recurring expenditures in an organization. These expenses can be reduced when the business doesn’t hire heavily to maintain the Cloud-Native services, as is the case with the on-premise. CAPEX stands for Capital Expenditure. These are the costs involved in acquiring and installing capitalised items in an organization. In this case, the cost of constructing physical infrastructure, such as a secure server room, server installation, and application upgrades, is not required on the cloud. With predictable subscription models, organizations can estimate their costs of cloud application systems.

4.4 Automation of Manual Tasks

There is more manual work in the on-premises systems than in cloud systems. With high integration possibilities of various application modules, most tasks have been automated in the cloud. For instance, a user does not need to capture every transaction document in the cloud system. One document can be used to create another document of a different nature by converting the data of the initial document to a new document of a different nature. For example, the creation of a PO can be auto-created from a purchase requisition. This saves time, eradicating errors and fraud. Another example is bank reconciliation. It used to take days, if not weeks, to do bank statement reconciliation. With cloud automation capabilities, it takes a fraction of an hour to reconcile and flag out the reconciliation items.

4.5 Faster Month-End & Year-End Close

Cloud systems data is centralized to enhance the process of crossing the accounting periods. It makes it easier for the year-end procedures to be conducted quickly and with fewer errors. There are also standardized processes that make every operation easy due to similarities across the departments. The workflow approvals have been optimized to enable the approvers to access the system from anywhere globally, even with mobile phones, and approve transactions.

4.6 Scalability & Flexibility for Growth

More regional data centers are being built to optimize cloud services. Consumers of cloud services will have more flexibility when it comes to the data center they prefer to work with. Some vendors have heavily invested in availability domains. A technological concept of ensuring that services are highly available even if one region’s availability domain has a fault. In case one availability domain is not available, the cloud system automatically switches to the next availability domain, hence maintaining service availability.

5. How Cloud-Native Systems Support Modern Finance Trends

1. AI-driven forecasting: A concept of employing AI technology to predict revenue, expenses, data models, and cash flow, among other financial performance metrics. From the analysis, the CFOs can foresee the estimates for expenditures and revenue possibilities that can trigger action while maintaining accuracy and compliance. This is possible through real-time data, functional automation, and API integrations. For example, a CFO gets the expected range of expenses for the next 6 months and takes action to seek funds through various revenue generation models.
2. Continuous Accounting: This is the process of gradually closing the books of accounts at the end of the accounting period, unlike the tense end-of-the-month closing that can sometimes bring panic to users. This could result in delays due to unresolved issues, errors, and manual work. Cloud-native systems can help automate reconciliation quickly, enabling the accounting department to fasten their operations. It has a quicker transaction approval process and enhanced transaction matching. This is achievable because data is always up to date. Finally, the result is faster closure of books, fewer auditors’ issues, and reduced user stress.
3. Automated Transactions: With technologies like Optical Character Recognition (OCR), time is saved through systems automating the data entry work. For example, some cloud system users do not need to capture an invoice manually. There is no human intervention. This can help CFOs reduce fraud, errors and lower processing costs.
4. Enabled Analytics: These are various financial reports mapped in the system for quicker user consumption. No need for manual exporting of the report to the spreadsheets and other analyzing tools. CFOs don’t have plenty of time for formatting reports on Excel. It would sit well when they have a direct report, rather than a halfway-ready exported one. This enhances the decision-making process and saves resources.

6. Case Example

A major bank in Kenya adopted the native-cloud system for its finance operations. With the legacy system, everyone in the finance department would struggle to meet deadlines due to errors and a lot of paperwork. Upon the implementation of Oracle Cloud Fusion, the organization has reported tremendous improvements in user reporting, CFO visibility, and a high turnover for payable invoices. These are critical KPI in the financial department, and the finance boss could walk into the boardroom with a full confidence on their face.

7. Common Misconceptions CFOs Have About Cloud

1. Insecurity in the cloud. Due to a lack of detailed information regarding cloud security, the finance bosses are reluctant to migrate their operations to the cloud. They see it as data breaches and other organizational policy violations. This leads to the belief that data is safer locked in their premises. What they should know is that modern cloud technologies have better security systems than most organizations have in their premises. Cloud vendors have continuous monitoring, data encryption, strong identity access management, and 24/7 security team monitoring. They also have various certifications like SOC, PCI, ISO, and GDPR, among others. Having this information, the CFOs shall benefit more with a lower risk of breaches, reduced audit pressure, better compliance, and a lack of need to hire an expensive security team.
2. Expensive to Migrate. CFOs tend to relate the migration cost to the cost of implementing the on-premise systems. This is because of a lack of clear information on the cost of ownership. Migrating to the cloud is also associated with huge consulting costs. The honest thing is that moving to the cloud eliminates all the hardware requirements, server maintenance, and system upgrade costs. It’s good to note that with the subscription pricing model, it reduces the CAPEX for the business. An organization can even have a phased migration arrangement, which will be less costly and reduce the pressure of doing everything at a go. This approach benefits the CFOs with predictable monthly costs, lower total cost of ownership, and a fast return on investment.
3. Losing Control. Some finance bosses think that migrating to the cloud is like giving away their data. something that is not true. There is also the fear of having to depend on a system provider that they do not fully know. This is all about trust issues. Some also fear the fact that they may not be able to customize the system as they wish. Something possible while on-premises. Cloud is better with features like dashboards that give more visibility than on-premise. There is also role-based access that gives control over who sees what. We cannot overlook the fact that one can log in from anywhere globally and access work or perform some transactions. The CFOs will benefit from stronger oversight, better governance, more agility, and fewer errors and fraud.
4. Meant for large enterprises. Some CFOs associate cloud systems with some big brands on the planet. Missing the fact that they, too, can use them accordingly. Fear of complexity thinking that they will need a large IT team to manage it. They need to embrace the flexibility that comes with the cloud solutions scale up and down, based on the needs of the organization. It is also good to note that there are systems with light modules for SMEs’ consumption. Benefits could be enterprise-grade capability without enterprise-level cost. There should be easy compliance and reporting, together with the ability to grow without the need to switch systems.

8. How a CFO Should Approach Migration

1. Assess Existing State. The CFO must have an understanding of the actual operation of the business’s financial operations before migration is done. The finance boss should have a clear picture of the current operations per module, starting with Accounts Payable, Accounts Receivable, Cash Management, Fixed Assets, and General Ledger. They should be as well conversant with the existing reporting structure. With the help of the management, they should come up with a process inventory (AS IS process). It will help to know what is working, what is manual, what is duplicated, and what creates delays. Some of the major pain points can be month-end delays, manual reconciliations, spreadsheet dependacies, and data scattered across various systems. This visibility will assist the CFO to decide on what to keep and what to drop.
2. Rediness Check. Performing a readiness check involves people, data, and systems. Let’s look at them one by one from the following angles.
   1. Technical readiness. Check to determine the status of the current system. Is it outdated? Does it extract data and give the reports as required? 2. Financial readiness. CFO needs to confirm if there is a budget for the migration project, timelines available, and expected return on investment (ROI). 3. People readiness. Users will sometimes resist change. A proper change management plan needs to be set from the beginning, and it will assist in preparing users and also handling any eventualities that may arise. The CFO should involve all the stakeholders to achieve this. 4. Data readiness. Some projects involve a lot of data cleanup work. Through the assistance from the finance team, the CFO needs to confirm the quality of the data, data completeness, and migration strategy for be migration to production of the new system. Overall, the readiness checks help with project planning and avoid cost overruns.
3. Module Automation Priority. From the previous point of assessing the existing state, it brings the CFO to a point where they can opt to start with the most needy modules’ automation implementation and work on others later. For example, if the business utilizes Accounts Payables more than it does with Accounts Receivables, the business may decide to start with the automation of all supplier invoice capturing to reduce the manual handling by 60%-80%. The same procedure can be applied to Cash Management and Bank Reconciliation, or General Ledger and Reporting. When the business aligns module selection with business goals, it will optimize cost reduction, compliance, and real-time insights.
4. Phase Implementation. In some cases, the CFO may opt for the phased implementation methodology. This is a concept of starting with the most required modules. For example, the business can opt to start the migration of (i.) core finance (GL, AP, AR), then (ii.) Fixed Assets and Cash Management, (iii.)Procurement and Expenses, (vi.) Advance Analytics. This approach will build momentum for quick wins, build CFO confidence, and enhance faster adoption by users.
5. Ensure Staff Enablement. As it has always been the norm, most cloud implementations fail due to people and not the technology. The CFO can start the early championship by ensuring that the staff are extensively trained. This practice will give teams confidence before going live, and it will also enhance ROI. They can also have user adoption strategies in place to make sure that every change is well handled. A good example is the creation of responsibilities named Super Users and assigning them to various users based on their task assignments. This will enhance user motivation to accept change. Lastly, the CFO should remember that communication is also vital to all stakeholders for decision-making and preparedness.
6. Establishing a Cloud-First Policy. Cloud-First Policy in finance is where the cloud-based solutions are the primary, default options considered for all new IT decisions, services, and application development, with on-premise systems only used if a cloud solution is not viable for specific regulatory or other reasons. The CFOs should embrace it because it reduces IT overhead by replacing manual processes with automated workflows in an organization. Secondly, it ensures continuous improvement through the integration of cloud-native applications and the use of no-code app integration. Lastly, by use of analytic dashboards over static reports prevents the business from overusing the spreadsheets. At the end, the business will benefit from low TCO, predictable OpEx, and annual automatic system upgrades.

9. Conclusion

Cloud-native solutions are no longer the subject of the future but a necessity that could make the business lose face if it does not embrace them. The benefits of cloud solutions can only be enjoyed while on the cloud. Organizations that will embrace them and walk the journey of migration will leap more into modern finance management with real-time insights, low costs, and compliance in operations. This will enhance decision-making for CFOs, protect the business, and drive growth. Competitive advantage and great resilience will be their order of the day. This is the future, and the CFOs should lead the shift.