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Cloud Apps Gain Traction with Finance Function

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Posted June 1, 2016 By Phil Britt     Feedback

Are companies moving finance functions to the cloud? Yes, especially in areas like payroll and expense management.

Though the initial movement was slow, more firms are moving at least part of their finance functions to the cloud, according to users and companies offering cloud services.

The privacy and secrecy that tends to surround financial information kept some of the finance function off the cloud initially. But for the most part those concerns have gone away, said Alyssa Johnson, board member of the Oracle Application Users Group, an independent organization of Oracle users.

"We've become comfortable with software-as-a-service and vendors handling the whole job, but each organization has to have its own comfort level with its own vendor; some are still reticent to move parts of the finance function to that [cloud] solution," Johnson says. "The vendor's hardware and security might be better than what the organization has."

Cloud Gains Traction with Finance Function

"In terms of the finance function, cloud solutions are gaining traction. The trust factor has largely been solved and companies are moving the finance function out from behind their firewall to the cloud," said Matt Clark, chief operating officer of Corcentric, a provider of financial software. "Businesses now more than ever want to outsource their non-core functions. Business partners can deliver economies of scale via the cloud, enabling enterprises to focus on what is core to the business."

Cloud-based solutions permit quicker updating of capabilities and changes for regulatory, tax and other reasons than do installed systems, Clark added.

"If you look over the last three or four years, this is an issue that has become top of mind for accountants," said Divya Bhansali, vice president of marketing at AccountantsWorld, a provider of cloud-based software for accountants. "They understand the value of any time, anywhere accessibility. They don't have to be at the client location. They can change the way that they work. The cloud solves several challenges."

Pre-cloud accounting solutions were of limited utility, according to Bhansali. The accounting programs themselves tended to require at least rudimentary accounting knowledge, meaning that most business owners couldn’t even make simple entries, like travel or business expenses. Additionally, though there were ways to securely transfer files between the client and the accountant, they were cumbersome.

Finance's First Steps to the Cloud

Payroll and expense management are the first two areas of finance that enterprises tend to move to the cloud.

Different cloud-based solutions enable authorized employees to enter expenses, an important self-service feature for enterprises with sales staff, field workers, managers or others who spend much of their time on the road.

By enabling rudimentary expense entries immediately, there's no wait until people return to the office. Additionally, Bhansali said, cloud-based programs make the entries simple so people don't need to possess any accounting knowledge.

"It allows accountants to be proactive rather than reactive," he said.

Payroll processing is up to 40 percent faster using cloud-based solutions, Bhansali said. The cloud-based systems stay up to date with changing payroll taxes, withholding, employee benefits and other items that can change from pay period to pay period.

Another advantage of moving finance functions to the cloud, Clark said, is that it enables companies to better match revenues and expenses. When business is going well, the enterprise tends to have more invoices, more workers and/or contractors and, therefore, more accounting needs. When business is slow, the reverse is true.

Supply Chain: 'Like EDI on Steroids'

The supply chain is also seeing growth in cloud finance functions, Clark said.

"It's being used to remove friction," he explained. Vendors at every level of the supply chain can enter purchase orders, invoices and payments to minimize accounts payables and accounts receivables issues in a more advanced way than with the electronic data interchange used before the advent of the Internet.

"It's like EDI on steroids," Clark said.

Challenges of Moving Finance to the Cloud

Though she sees plenty of advantages the cloud offers for the finance function for enterprises, Johnson cautioned that shifting from in-house finance software to the cloud still presents some challenges.

"It's crawl, walk, run," Johnson advised. "Companies aren't going to do a rip and replace; they're going to move to a hybrid solution. They need to understand how to integrate those two (cloud and on-premise functions) together. Any time you move from one system to another, change management needs to be addressed."

Companies should also thoroughly investigate vendors and their cloud finance solutions, she suggested.

"You need to do your due diligence and make sure that their offering meets your business requirements," Johnson said, adding that companies should pay special attention to cloud finance software's ability to seamlessly integrate with legacy solutions to ensure there isn't any lag or other performance issues. "Your requirements need to be clearly set and your expectations clearly set so the vendor can see that the software meets them."

Some companies, particularly larger ones, still resist moving the finance function to the cloud because they want to keep most of the corporate financials behind the enterprise firewall, Clark said. Middle market firms are moving to the cloud much more quickly, while small and startup businesses rely on the cloud as an economic necessity for the finance function -- and much of the rest of their business needs.

Future Forecast Favors Cloud

Yet the trend toward cloud-based solutions across the enterprise is evident, so experts believe companies of all sizes will keep moving their finance functions to the cloud.

The new Financial Accounting Standards Board revenue recognition rule that goes into effect in mid-December will be among the catalysts that will push some companies to greater adoption of cloud finance software, Johnson said. The new rule alters when companies record revenue in some instances. Cloud-based finance solutions help ease the complexity of changes in revenue recognition, Johnson said.

Phillip J. Britt's work has appeared on technology, financial services and business websites and publications including BAI, Telephony, Connected Planet, Independent Banker, insideARM.com, Bank Systems & Technology, Mobile Marketing & Technology, Loyalty 360, CRM Magazine, KM World and Information Today.

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