Every CFO needs comprehensive insight into their company’s financial processes to make good decisions. CFOs are currently struggling with multiple financial challenges: increasing commodity prices, supply constraints, and a labor shortage. All three of these issues contribute to concerns about a rise in inflation – the producer price index rose 10% in the G7 during the first half of 2021.
The best way to get ahead of these challenges is to automate manual processes, resulting in more visibility and the opportunity to take early action. This is the first of a five-blog series. It outlines the challenges that CFOs face and how process mining can help overcome today’s overlapping financial challenges. Four upcoming blogs will go into greater detail on how process mining works in typical processes.
CFOs Confront Multiple Challenges: Fear of Inflation, Supply Chain Bottlenecks, and a Labor Shortage
Labor, supply chains, and inflation are hardly new financial challenges. However, the pandemic has made all three more difficult to address. There are currently more open jobs than people looking for those jobs in the United States. The Society for Human Resource Management recently surveyed 1,200 employers – 90% of them reported struggling to fill open positions over the summer. Further, 73% reported a decrease in applications for positions.
Inflationary signals are mixed – the U.S. consumer price index rose 0.3% from July 2021 in August (5.3% higher than 2020), but the numbers were lower than projected. Prices may – or may not be – tapering off.
But waiting for inflation to cool down isn’t an option for companies. Monish Patolawala, CFO of 3M, “sees broad-based inflation in raw materials, labor, and logistics,” according to CFO Magazine. CFOs are taking steps to blunt the impact of increased input and operating costs.
CFOs need access to clean data to make good decisions based on reality, not what they think is reality, to address these challenges.
Responding to These Overlapping Financial Challenges
Automation isn’t a new response to cutting costs and gaining insights into a company’s financial processes – Doculabs has been helping clients automate processes for decades. Properly planned and implemented technology, from document imaging to process mining, provides companies control over their financial processes.
The Harvard Business Review article “6 Strategies to Help You Weather Inflation” outlines six strategies for addressing inflation:
Get visibility into spending
Differentiate between strategic and nonstrategic spending
Unpack the drivers of spending
While the HBR article calls out "automation" as one of the six strategies, in fact, the other five of these strategies are about increasing visibility and automation and then making better decisions based on that visibility.
While automation isn't new, what IS new is the ability to gather comprehensive insight and control over your processes. Smart companies have been investing in technology to gain insight into and control over their financial (and other) processes. While the pandemic has fueled inflationary pressure, it has also driven an increase in spending on digital transformation tools; including on advanced data analytics -- a trend reflected in any industry research you can find.
We have advised our clients as this same dynamic plays out during every economic downturn – companies who invest in automation perform better than those that don’t. Recent research from Celonis illustrates this point.
How Process Mining Helps Improve Financial Insight – Plus Four Examples
Insight into spending is limited by the hodgepodge of systems companies use. For instance, Salesforce is often used for order management. However, CFOs often don’t interact with Salesforce. An end-to-end look at spending is the foundation for all productivity efforts. Let's get into more detail about how comprehensive insight and control has been difficult -- until now, with process mining.
Process mining, especially from leading vendors like Celonis (Doculabs is Celonis’ 2021 Americas Region Partner of the Year), provides that insight. Here’s how Celonis defines process mining:
“an analytical discipline for discovering, monitoring, and improving processes as they actually are and not as you think they might be.”
Process mining extracts knowledge from event logs – data you already have but have zero to limited insight into – so that you can visualize your business processes.
To learn more about process mining, here are three resources to get you started if you’re unfamiliar with this technology:
How to Evaluate and Select the Best Process Mining Solution
What Is Process Mining (Celonis)
Doculabs Process Mining Overview
Here are four industries and the questions process mining can help CFOs and other executives answer, including all relevant spending data:
Manufacturing– Manufacturing CFOs and CPOs (chief procurement officers) are assuming greater responsibility. Managing the costs of the supply-chain to procure goods and services at lower costs is now coupled with the task of making sure the goods arrive. Process mining decreases costs by providing visibility into order blocks and maverick buying.
Retail– On-time ocean freight delivery is half of what it was a year ago at 38%. Ensure reliable supplier delivery with process mining, which allows you to place orders with continuously updated and accurate lead times.
Logistics / Transportation– Bottlenecks are causing container shipping costs to rise 40%. Process mining helps a company pivot during the process, switching priorities and cascading orders as needed.
Chemical– As the price of commodities fluctuates, chemical companies’ purchasing systems are stretched to their limits to avoid paying too much. Process mining will help you continue to make smart decisions on your supply chain while managing price inflation. For example, when purchase order prices exceed business rules, process mining can prevent that purchase, routing it for further review.
We’ll expand on the ideas in this post in the coming weeks. We’ll do this across four additional blog posts:
Order to cash – Find and resolve order errors to increase cash flow
Procure-to-pay – Take advantage of early payment offers and avoid paying invoices too soon to improve working capital
Inventory management – Real-time inventory management avoids bottlenecks and overpayment
What this looks like in practice – How companies can stay a step ahead of inflation pressures and other financial challenges by using process mining to deliver clean process information for improved decision-making
However, you don’t need to wait to get started. If you’d like help improving your processes now, Doculabs can help you use process mining to delve into your data so you know where you need to improve now and where you can create value in the future.
We do this with a “CFO Report Card” approach. It’s an X-ray of your current data combined with Doculabs industry expertise combined with process mining from Celonis to:
Diagnose how well core processes are performing
Provide an executive summary report that will include process improvement recommendations in order to budget for 2022.
Ready to see what your “grades” are?