New CFOs don’t go into their jobs expecting to climb a mountain of legacy systems, tripping over hidden rocks of manual processes, and falling into holes of inefficiency. Unfortunately, many CFOs face this (figurative) situation when they take office. 

Instead of letting this cast a pall over your first 100 days, take the opportunity to tidy your finance stack until it’s the right shape to support your vision for financial success. 

Start at the beginning. Use our “Red Flag Checklist” to evaluate your infrastructure. 

Is Your Team Snowed Under?

Manual processes consume a lot of time. It’s time you can’t afford to waste when you’ve got a talented team begging for a challenge. Your red flags here include:

  • Routine reporting that relies on massive manual reconciliation or even outsourced financial assistance. 
  • Different departments deliver different answers to the same KPI. Your team has to find the source of the misalignment and then devise a solution to bring them back together. 
  • Data silos or disconnected systems limit the data available. Teams must find a way to unify data using manual interventions.

When the existing system does more harm than good, it’s time to ditch it in favor of processes that free up time for strategic decision-making. 

Spreadsheet Addiction

Many organizations take the right path and invest in ERP software. But it gathers dust while the fragile network of spreadsheets becomes increasingly complex. This is dangerous for many reasons. Here are the top three:

  1. Critical information is inaccessible because it’s lost inside complex Excel formulas that only exist on a specific person’s computer. 
  2. Spreadsheets show data as it was. Sometimes it goes all the way back to 30 days ago. Any decisions or actions are based on outdated information that could cause you to fall behind your competitors who are quicker on the uptake.
  3. All it takes is one corrupted file to take the stack down. Or one key employee leaving for the system to collapse. 

The latter, called key person dependency, is more common than you’d think. Many businesses don’t even realize that their system’s survival is hanging on a thread. 

Maintenance vs. Innovation

Are all the resources directed at keeping the system running as smoothly as possible? Is anything left over for strategic growth?

 You know you’re stuck in a maintenance loop when these red flags pop up:

  • The business is still paying annual maintenance fees and license renewals for software that was last used in 2012. It’s actually worse than that. According to Invest Suite, many legacy systems are built on technology that was innovative in the 1970s and 1990s. The incredible inefficiency that results gobbles 75% of IT budgets on maintenance alone.
  • Vendors charge premiums for “sunsetting” support, so you keep buying unnecessary updates or subscribing to services that have no business value. 
  • Workarounds that require custom integrations add technical debt because each future upgrade must align with an off-spec system. This requires more customization. The costs start to add up while stability teeters on a knife-edge.

The upshot is that you are paying premium subscription fees to lose ground to your competitors who got on the modernization bandwagon ages ago.

Pretty Financials Mask Ugly Chaos

It’s not exactly lying, but companies tend not to show new CFOs the precise state of their financials. The first week or so is a constant surprise as it becomes evident that underlying operational processes are pretty chaotic. Red flags to watch out for include:

  • “Normalized” processes that aren’t normal at all, like month-end taking 20 days.
  • Processes or operations that are out of sync, for example, when scheduling and inventory don’t meet, there’s the risk of unplanned downtime or stockouts. 
  • Manual workarounds are accepted as the norm simply because that’s how it’s always been done.

Ultimately, systems work but only because financial staff work their fingers to the bone just to maintain the status quo. 

Security Risks and Compliance Failures

The business world was very different when legacy systems were new. They were built to manage the risks at that time. Now, risks are at a whole new level. We’re talking about cyber-risks and the threat to data security and system integrity.

Red flags that leave your system vulnerable to cyber attacks include:

  • Never-ending patches plastered over vulnerabilities. Plasters come loose, but software with built-in security features provides long-term safety.
  • Legacy systems aren’t equipped to keep pace with evolving compliance requirements, especially when it comes to audit trails, encryption, and role-based authorization. 
  • Clunky old systems that struggle with modern regulations put businesses at risk of heavy fines and damaged reputations. 

In the end, obsolete software doesn’t just affect operations, but legal standing too.

Why Automation Fails On Legacy Stacks

Some businesses try to address the problem of legacy systems by burying them under advanced software with automation features. Unfortunately, this doesn’t fix any problems; it only exacerbates them. 

  • Data silos can be impervious to automation and refuse to provide a unified view of the entire business’s financial health. There’s more. Invest Suite has found that 53% of institutions can’t expand successfully because data silos and bottlenecks hold them back.
  • On the other hand, unstable master controls reveal all their vulnerabilities in the face of ruthless automation. However, automation only reveals weaknesses; it doesn’t fix them.
  • Employees know the data is iffy. So, instead of trusting the process, they resort to shadow reporting and parallel record-keeping. 

If you want to optimize automation’s benefits, you must first, literally, clear the path. Identify chaos, restore order, and implement custom software solutions to ensure all data is good data. 

Don’t Let Legacy Systems Sink You

Here’s the rub. Once you’ve identified all the red flags, you need to dig deep to find the patience to develop a proper strategy, rather than let your inner bull run free in a china shop. It’s important to be methodical, so you don’t replace one dodgy system with another. 

Remember, the goal is to create a robust, reliable tech stack that smooths out operations, facilitates healthy workflows, and provides one version of truth to ensure utmost accuracy.