How focusing on cash can support a value-added finance transformation

Organizations seeking to transform finance should not overlook cash as they seek to create sustainable value.

Inbrief

• Finance transformation efforts need to look beyond cost cutting to focus on cash as a way of creating value.
• Optimizing cash-centric levers enables organizations to free capital resources to be deployed more strategically.
• Achieving sustainable value through finance transformation requires a data-centric infrastructure that provides a holistic view of the organization.

Most companies have historically viewed finance transformations as an exercise in taking cost out of the organization through business process improvement or automation. But that view can be short-sighted in an era where finance teams are under increasing pressure to deliver sustainable shareholder value.

While organizations should always employ continuous improvement to drive efficiencies and control costs, transformational initiatives also need to focus on value creation. Achieving long-term financial viability requires organizations to balance cost management with investments in innovation and growth, while also optimizing cash. 

Transformation efforts have historically struggled to deliver value, in part due to the difficulty of quantifying how those efforts impact the organization outside of cost reduction. Given the limited availability of data, further compounded by the relatively poor quality of that data, management teams have sometimes had a hard time drawing the insights necessary to make informed decisions; as a result, they struggle to articulate the value that can be added. 

That no longer has to be the case. Rapid advances in data availability and quality, driven by advanced analytics, including artificial intelligence and other corporate technology upgrades, offer the opportunity for organizations to accelerate delivering insights and make more informed decisions. Enhanced visibility across the organization sets the stage for a true transformation that integrates financial and operational stakeholders.

Focusing on cash-centric levers is integral to successful finance transformation

Extract more value from Finance transformation by optimizing operational cash and liquidity levers and connecting across the critical Finance stakeholders

Some cash-centric levers include: 

Value-added benefits of finance transformation

Cost reduction will always be a key goal of the Finance function. And while episodic cost-cutting efforts can be an important outcome of a transformation initiative, they require continuous improvement programs to maintain. Finance transformation efforts that focus on levers to deliver value creation can have a more significant impact for stakeholders. Outcomes that can be derived from focusing on these cash-centric levers can be truly “transformational,” but the transformation comes from data, leveraging modernized technology and advanced analytics. To further the transformation, organizations also need to move forward with plans to deploy contemporary liquidity structures, improve bank connectivity and then integrate purposeful process improvement and standardization into the organization.

Outcomes include:

• Debt reduction 
• A more efficient capital structure 
• Enhanced yields
• Tax efficiencies 
• Minimized earnings volatility 
• Improved working capital 
• Decreased operational risk 
• Enhanced returns 
• Improved forecasting, reporting and insight generation 
• More strategic deployment of cash

Transformation efforts should focus on value-added outcomes. Those that myopically focus only on cost-out will risk falling short when it comes to creating shareholder value.  Finance organizations should start by identifying outcomes that create value and then build a roadmap to execute on the levers needed to deliver. 

To that end, an increasing number of organizations focused on value creation are opting to move forward with a more balanced approach to transformation that considers both improving cash and balance sheet efficiency while also taking out costs. Finance transformation initiatives should be tailored to the unique context of the organization, with a clear understanding of how each focus area impacts the overall strategic objectives.

Finance transformation touches the entire enterprise

By its nature, a major finance transformation should have a broad reach across the enterprise. To secure a lasting impact, however, Treasury should seize this opportunity to play a more strategic role, particularly by leading a “cash culture” that encourages all employees in the organization to improve cash flow, deploy cash more strategically, enhance cash controls and mitigate risk. To extend its reach throughout the enterprise, the organization may also want to establish a “cash leadership” office that views cash on an equal footing with revenue and profitability, says Peter Kingma, EY Americas Working Capital Leader. 

Similarly, controllership stands to benefit from levers that can streamline cash processes, deliver automation and improve cash controls.  For example, technology enhancements to treasury systems can improve downstream accounting processes and provide efficiencies during the fiscal close. These streamlined processes enable more efficient bank-to-book reconciliation and a standardized finance operating model that improves controls around critical cash processes.

Data is the key, and technology underpins the entire transformation

Bottom line, the increasing importance of data elevates the role of technology in a finance transformation. Technology advances are enabling the acceleration of the Finance function as a more strategic partner, and Treasury is at the forefront.

Robust technology platforms enable organizations to deploy a fully integrated system infrastructure that is “data-centric” as opposed to “system-centric,” enabling access to data that supports holistic reporting and analysis. Coupled with tools to support advanced analytics such as machine learning and artificial intelligence, along with other modernization efforts such as robotic process automation, advances in technology are driving more informed decision-making and process enhancements that organizations can leverage to deliver value-added outcomes.

Conclusion

While cost-cutting can deliver significant financial benefits, an exclusive focus on cutting costs misses the boat in a Finance transformation initiative. It’s also important to remember that stronger cash management and achieving cost reductions are not mutually exclusive goals. An enterprise that embraces a robust cash and balance sheet strategy — and elevates cash so that it occupies an equal playing field with other key financial levers¹ — will typically position itself for more sustained value creation.  As such, finance organizations that focus their transformation programs on value creation by targeting outcomes that can be achieved by optimizing cash-centric levers will position themselves for long-term success. 

An often overlooked yet powerful benefit of a transformation is the unleashing of innovative creativity within the finance organization. A well-designed technology and data ecosystem built to support organizational finance objectives will yield tremendous benefits. Finance professionals will find themselves liberated from inefficient and boring tasks related to managing and manipulating data. Instead, they will be able to focus attention on the strategic value that finance brings to the organization, inspiring fresh ideas from those with an innovative streak. Enabled by a data-oriented approach, the freedom to create will energize finance teams, unlocking what is still the most powerful value creation lever: the human factor.

¹ Peter Kingma, EY-Parthenon Americas Working Capital Consulting Services Leader, The Better Finance Podcast, January 2025.