A System Transformation Should Support Strategic Business Decisions
Most insurance companies do not replace a financial system for the sake of updating to newer technology. They are trying to get better information to make strategic decisions.
Leadership wants faster answers, better visibility, and more confidence in the output. Finance wants less time spent piecing together reports, reconciling disconnected data, and maintaining workarounds that have accumulated over the years.
In many organizations, spreadsheets are doing work the financial system cannot. They hold the detail behind a general ledger number, handle allocations the system was never designed to perform, connect information from different entities, and become part of the month-end reporting process.
Over time, those spreadsheets add up. So do the manual reconciliations, adjustments, reports, and knowledge people only have in their heads.
The numbers may still be right. The harder question is whether someone can easily explain how they got there.
A system transformation gives the organization an opportunity to understand all of the current work, decide what should change before it carries over into a new system, and build in the future needs of the organization.
Understand What Is Happening Today
Spreadsheets and manual processes usually exist for a reason. An older system may not contain the level of detail the business needs, allocations may require calculations the system cannot perform, different entities may use different accounting structures, and consolidation may depend on processes developed over years of working around system limitations.
The answer is not to assume all of that should disappear when a new system is implemented. The team first needs to understand what each process is doing and why:
- What information does it contain?
- Where does the data come from?
- What calculations or business rules are being applied?
- Who uses the information?
- Where does the information go next?
- Does the business still need this process, or does it exist because a limitation in the current system?
The people doing the work every day are essential to these conversations. They know where the exceptions occur, what gets passed between departments, which steps require manual intervention, and which workarounds have become permanent over time.
That knowledge needs to be understood before the project gets underway.
Decide What Belongs in the New System
Once the team understands the current state, it can make informed decisions about what should stay.
Some processes still work well and should remain. Others can be simplified or redesigned. Some workarounds may no longer be necessary because the new system can handle something the old system could not. And some may simply be a carryover of ‘we have always done it this way’, when there are more efficient ways today.
The same applies to the data.
If leadership wants more detailed reporting, the system has to capture the information required to provide it. If Finance needs to understand how an allocation was calculated, the design has to support that traceability. If the organization wants to compare results across entities, regions, or departments, the underlying accounting and data structures need to support those comparisons.
These decisions should happen long before a vendor is even under consideration. This is the work of project readiness.
For a financial system transformation, this is also why the chart of accounts needs careful attention. Its structure affects what information can be captured, consolidated, reported, and analyzed after go-live.
Start With the Questions Leadership Needs Answered
When designing the future state, one of the most useful things a team can do is look at the questions leadership regularly asks.
Questions such as:
- What drove this result?
- Why are we seeing a variance here?
- How was this allocation calculated?
- Can we see what is happening before the end of the month?
- Can we trace this number back to the originating activity?
Those questions help define what information the new system needs to capture and how that information needs to move through the organization.
A reporting need may affect the chart of accounts, additional detail may require information from another system, a reconciliation issue may point to an integration that should work differently, and an allocation that has lived in a spreadsheet for years may need to become part of the new system so Finance can trace how the calculation was made and where the resulting entries went.
This is why reporting cannot wait until the end of the implementation. The information leadership needs after go-live should help shape the requirements and design from the beginning.
Build Traceability into the Design
Once the team understands what information leadership needs and how the work is being done today, those requirements need to make their way into the system design.
For insurance organizations, that often includes areas where manual work has accumulated over time:
- Allocations. The goal is not simply to move a spreadsheet calculation into a new system. The team needs to understand the methodology first, then determine how the new system can make the calculation easier to follow, maintain, and trace back to its source.
- Consolidation and intercompany activity. When these processes depend on manual adjustments, separate files, or several people completing steps in the right order, the team should look for opportunities to simplify and automate the work while still supporting the accounting requirements of the business.
- Transaction and adjustment history. Finance needs to be able to follow activity through the system. When someone asks why a number changed, the answer should not depend on reconstructing a series of spreadsheets, emails, and manual entries.
This is where system design begins to affect more than efficiency. Finance has a clearer path from the reported number back to the activity behind it, which makes the information easier to explain and use.
What Should the Business Gain After Go-Live?
A successful system transformation should produce results that go well beyond replacing manual processes with automated ones. For a CFO, the bigger question is what finance and leadership can do differently once the new system is in place.
Depending on the organization, those results may include:
Accelerated Close Process
Month-end close could be reduced by up to 50% or more. Less time spent on manual consolidation, reconciliations, allocations, and reporting can shorten the close time and give leadership access to financial information sooner.
Finance Resources for Strategic Work
Finance resources available for higher-value work. When experienced accounting professionals spend less time maintaining spreadsheets, tracing transactions, and manually putting reports together, efforts can be redirected toward analysis, strategic planning, and other work that requires their experience and judgment.
Timely Information for Leadership
More timely information for leadership decisions. Leadership does not have to wait until after month-end close to understand what is happening in the business. Better access to current financial information gives them more time to evaluate results, ask questions, and make informed decisions.
Greater Confidence in Financial Data
Greater confidence in the information behind those decisions. When allocations, transactions, and financial results can be traced back through the system, Finance can answer questions without trying to piece together the full picture from spreadsheets and manual processes.
Flexible Foundation for Growth
A financial system that can better support the business as it changes. The organization has a stronger foundation for new reporting needs, changes in business structure, additional entities, and future initiatives without automatically adding another layer of manual work.
Consolidation and intercompany activity are automated, allocations can be traced back through the system, and reports can run throughout the month as new activity is recorded.
The organization doesn’t need to invest in a new financial system just to replace an old one. Leadership wants better access to information, and Finance needs a better way to produce and explain it.
Give Finance More Time to Work with the Information
A new system does not eliminate the close, reconciliations, regulatory requirements, or the need for good accounting judgment.
What a new system can change, is how much time finance spends assembling information before anyone can use it.
When less time is spent rebuilding spreadsheets, reconciling disconnected information, and manually tracing calculations, the team has more time to:
- Understand what changed and why
- Analyze trends and variances
- Answer leadership questions
- Identify issues earlier
- Help leadership understand what the numbers are saying about the business
Instead of spending hours trying to determine where a number came from, finance can spend more of that time understanding what caused it and explaining what leadership needs to know.
Better Information Starts Long Before Go-Live
None of these improvements suddenly appear when the new system is turned on.
They come from the work done throughout the transformation: understanding the current state, involving the people who know the work, defining business requirements, deciding what should and should not carry forward, designing the data structure, establishing governance, and testing whether the system supports what the business needs.
That work is part of the Projenomics® process.
The goal is not simply to move an insurance organization from one financial platform to another. It is to understand what the business needs from the system, preserve the knowledge worth keeping, change processes that no longer make sense, and make sure the new environment provides the information people need to do their jobs.
When leadership asks, “Can we trust this number?” finance should be able to answer with confidence rather than spending valuable time proving where it came from.
When the information is reliable, traceable, and available when it is needed, finance can spend more time helping leadership understand what the numbers mean and leadership can make decisions with greater confidence.
Ready to move forward? Whether you’re starting a system transformation, refining your approach, or still evaluating your options, TAC4 can help you strategize the best path.