2023 is currently shaping up to be another memorable year with budget and FP&A preparations probably being internally headlined with typical corporate budget banter. In other words, revenue up, costs down, and all executed with improved productivity. This of course is always challenging at the best of times, but made far more difficult for next year as evolving macro-economic changes continue to play out.
Economic Backdrop
Accelerating inflationary pressures, changing FX rates, increasing energy costs and rising interest rates are all going to play their part in creating this challenging global operational environment, with some geographical areas being far more susceptible to material changes than others.
Additionally, these types of influences (and perhaps others) are also going to be experienced throughout your supply chain, which in turn will potentially impact your ongoing procurement costs. In some cases you might actually be starting the year with higher than actual market supply chain costs that are currently locked into your cost base, as a consequence of having earlier secured your various supply chains from disruption.
Retention and Hiring
Another traditional major investment area to corporations is human capital management. Moving forwards, this area is likely to experience above normal pressures in the retention and hiring of staff, as workers either optimize their work: life balance, or simply search out new challenges.
Holistic reporting across applications can be a useful conduit to provide alternate dimensional insights as to the operational impact of these types of upcoming changes.
Cash is King
The above scenarios will come together in some shape or form to impact overall cash flow. However, there is potentially more volatility going forwards in this critical area, than perhaps can be fully appreciated at first glance, as prioritized budgetary corrective actions come together in both predictable and unpredictable ways.
Examples here might be, corrective actions that cut the wrong costs; sales mix or end user price changes that fail in their intent; additional actions to ensure a stable continuous supply chain that impact margins more than expected etc.
Line by Line Forecast & Budget Projections (FP&A)
All of the above factors, actually point to a call to action for operational, finance and property management teams to rigorously review their detailed forecasts and projections in their differing dimensions, ie top down; bottom up; line by line reviews by successive months; and also within each category of financial statement eg balance sheet, profit & loss statement, operating segment analysis (including ranked variances), and cash flows etc., and all executed over both differing timeframes and operational scenarios. In other words leaving no stone unturned to find that incremental value across customers, leases and properties across the real estate management system.
Other Macro Changes that Require your Attention
Depending on the scope of your operations further considerations regarding BEPS 2.0, GDPR, PIPL (China), might also be focus points. The common denominator here, as well as those for the points illustrated above, is that achieving the desired end results requires you to have ultra-granular data management. In other words, being able to easily build a process to achieve the desired end result, whilst at the same time fully understanding how and where data is being processed and stored from start to end.
Fluctuating Operational Dynamics
Whilst all of the above individual items can of course be handled in isolation, when they all come together at the same time it is easy to get overloaded and frankly lose some or all of the plot!
Even before covid, many senior operational and financial management staff could already see major pitfalls in their data routines i.e. untimely reports, a lack of data quality, which of course impacts decisions making.
Modern Days Systems
Today’s modern technology can drive deeper value creation. Processes are highly configurable and can go from data collection (including RPA, if required for document onboarding that can be with or without AI), through all required data transformations / enrichments to contextual actionable reporting / visualizations +/or workflows @anywhere @anytime within a process + API’s @anywhere to other applications or ecosystems (including the leverage of Open Banking API’s w/payments @anywhere) + simulations within the property management system.
This results in powerful digitally enabled qualitative or quantitative processes, and also provides you with granular knowledge regarding how data is used during each stage of a defined end to end process. These process attributes are very relevant to the topics covered above, and also underpin your own initiatives to be compliant with various data management regulations.
Apps + Applications + Digital Process
Typical operational and financial management systems have seen years of replacement and iterative investment, but until very recently the technologies to make ERP systems work for you, and not vice versa, have been very elusive.
Two technological advancements have enabled corporations to make significant advancements in this area. The first is practical compute power that facilitates far greater processing flexibility, and the second is the ability to define very flexible ultra-granular end to end business processes.
Note that this greater processing flexibility comes from the business software being optimized for latest hardware, as well as for other closely connected software advancements like compressions. It can also be specifically optimized by vendors to handle the individual quirks associated with particular domain areas that one would expect to meet, thereby leading to faster deployments.
As resultant processes are designed at an ultra-granular level they are in fact somewhat more future proofed than was possible before, by virtue of the fact that it is now easier to introduce new third party technologies. This is an important point, further expanded on below using the examples of x-application and x-ecosystem process & reporting workflows.
Cross Application Process & Reporting Workflows
Systems previously were unable to fill vital reporting gaps, particularly when key information was held and needed to come together (with transformation) from different systems, resulting in a plethora of inefficient spreadsheets.
As a result operational errors are much easier to make, noting that staff changes can exacerbate these shortfalls. New technologies allow for x-application reporting to be achieved on an auditable and repeatable basis, thereby filling reporting gaps that can drive change for deeper value creation.
Cross Ecosystem Process & Reporting Workflows
One of the most powerful enablers in the digital world is the use of API’s to connect and leverage other existing ecosystems. For example, they lead to increased intelligence with AI, faster execution speeds thru streamlining complex manual processes, and give users the ability to drive secure processes combined with mobility. An important takeaway here is that both quantitative and quantitative processes can be handled with the same levels of granularity.
Some examples to illustrate this:- integration with Open Banking API’s for tighter treasury management, noting that additional end to end control processes can be put in place to thwart business process compromise; tightly controlled sanction checking with specialist financial service providers to minimize operational risks; employee learning and development programs that leverage established knowledge providers in this area; integration of legal sign off processes with specialist providers; integration of lease management system and space systems that explode lease payments into their accounting entries over contract life and which also provide a mechanism to quickly manage delinquent accounts; provision of aggregate reports to owners according to the required GAAP.
BOTS
Forget your initial impression of what BOTS are, or are not. Within leasing systems they can be used to automatically review and smartly rank operational variances by entity, segment, region, customer, property etc, as well as additionally providing contextual reporting to the appropriate person eg the above handling of delinquent lease payments in the real estate management software. Property management processes are fully auditable and repeatable.
Simulations
One core characteristic of these modern day process systems is that many sequential or parallel tasks can be driven simultaneously. Simulation is therefore an area that can be leveraged further than ever before, as corporations play out various operational segmental scenarios in a lot more detail.
A key takeaway here is that reporting across leasing systems can be at the end or during a process, which in itself adds a lot more control and value to a corporation. Another takeaway is that you are combining information from multiple ERP systems to get a high quality data driven view of your business.
Complex Tasks by a Few People + Complex Processes Across Many
The ability to use the same technologies to drive both qualitative and quantitative processes has already been explored above, as has the ability to drive the granular design of end to end processes.
Another way of looking at process design is to view it another way. For example, consider 1) complex tasks that are undertaken by a few people e.g. leases, capex and consolidations (including segments, total company etc) and 2) complex processes undertaken by many people ie FP&A, Budgeting, both scenarios of which can be undertaken using the above process design.
Processes can become very functionally rich. For example, consider CAPEX. Leveraging the above technology, one can simultaneously drive connected insurance processes so nothing is missed off important risk based schedules, initiate ongoing cybersecurity considerations per asset, or plan any required building modifications as large sized assets are purchased or upgraded. At a more practical level additional controls can be put into place to ensure that critical onward report submissions can only take place once it has a key person sign off.
Another very topical example today surrounds companywide ESG reporting initiatives across current and future years. ESG is particularly challenging today as reporting disclosure requirements can be very varied, and will continue to be so until various regulatory bodies agree on appropriate formats. What has been described above is a strong enabler for ESG reporting initiatives.
Problem Areas
Another key takeaway is that when tackling digital transformation it is important to maintain additional focus in two areas. The first is to ensure that you have access to the right level of systems integration expertise to connect processes x-applications and x-ecosystems, and the second is to create a project team commensurate with the task at hand, particularly if an end to end process crosses functional areas (ie to manage politics, fiefdoms, and process compliance to various levels).
Conclusion
Operational environments continue to be volatile, and are likely to be so for the foreseeable future. During these times providing appropriate secure access to both high quality and timely data becomes a powerful enabler for value creation.
Achieving this requires access to latest technologies that allows information to come together from different sub-systems, and for it to be transformed into actionable contextual reporting and property portfolio workflows during the process itself, as well as allowing for access to the more traditional static reporting styles. More than ever before, due to increased regulatory frameworks, having tight underlying control as to where data is computed and stored is also a vital prerequisite to ensure compliance with relevant local data management regulations.
GaiaPM, a member of the FlexSystem Group, provides international lease and property management software designed to help you drive performance up and costs down. As a global solutions provider in over 38 countries GaiaPM, together with its proven solutions for multi-currency financials, human resources, and operations, is a business software vendor to 1 in 10 Forbes Global 2000 (May 2020), and 1 in 5 Global Fortune 500 (August 2020), operating at the intersection of new digital process and payment technologies, whether on-premise, hybrid or cloud, to provide you with iterative opportunities for value creation.