Finance Trends Survey: Inflation Emerges as A Top Issue for SAP Leaders

Every year, Protiviti conducts its Global Finance Trends Survey to learn finance leaders’ priorities for the next twelve months and beyond. Sharing the results enables readers to learn from one another’s thinking about the future of the finance function. The findings provide an overview of trends and priorities that are relevant not only to finance leaders, but to technology leaders as well. Comparisons to prior years’ results yield additional insights about how finance leaders’ focus shifts over time in response to changing economic and business conditions.

This post focuses on survey results for finance leaders in businesses using SAP software. The interplay of their priorities this year suggests new directions that unite finance leaders across industries.

Survey and results: what’s changed

Finance leaders in the SAP community consider these areas among their top priorities: data security, organizational leadership, cloud-based applications and profitability reporting and analysis. One new priority on their list? The impact of inflation.

In 2021, results reflected a world in which survey respondents focused on the pandemic’s impacts. Those findings reflected concerns of organizations that had only begun coping with newly-remote workforces. With costs rising and interest rates climbing, it’s no surprise that respondents this year have begun to focus on inflation as they prepare for the demands of 2023 and beyond.

Relationships between leaders’ priorities this year are striking. In particular, this year’s priorities for financial planning and analysis, profitability, and quality of leadership each relate to new concerns about inflation.

• Inflation puts profitability under threat.
• Inflation requires cross-functional forecasting with scenario planning capabilities.
• Inflation emphasizes the crucial role of skilled leaders in finance organizations to help organizations adapt to change.

70% of this year’s SAP finance leaders ranked both automation and process improvement as priorities for their next twelve months. With inflation as a new top priority for finance leaders, they see the value in applying automation and process improvement to help create efficiencies and reduce operating costs.

Inflation

71% of finance leaders in the SAP community indicated that inflation is a new top priority for them. Leaders anticipate increased costs of goods sold, of operations, of people and of capital. Cutting salaries is out of the question when competition for talent is as intense as it is right now. Raising prices too high to protect margins is risky, since it could result in reduced market share.

Forecasting inflation is notoriously difficult. It calls for making assumptions about the expected costs of materials, for example; leaders will now have to anticipate prices several months out with no clear idea about whether the inflation rate will rise, fall or stabilize.

Implementing or enhancing financial planning and analysis tools will help leaders prepare for the future and contend with the prospect of rising costs for materials, people and capital. Aligning financial plans with more sensitive analyses will enable faster and better-informed decisions. The right data, analytics and planning strategies will help leaders respond with agility to the inflation challenges they foresee in the future.

Leaders can maintain focus on changing business and economic circumstances while weighing the impacts of rising costs within the organization. They do so by identifying tools and approaches that support scenario-based planning, analysis and guidance for next-best actions, which empower them with heightened and immediate visibility into their organizations’ operations and financial indicators.

Automation and process improvement

Automation and process improvement ranked equally at 70% as secondary priorities for finance leaders in the SAP community this year. Finance leaders have seen their roles expand into talent management, supply chain management and environmental, social and governance program management (ESG) and more in recent years. These leaders see advanced automation and process improvement as ways to do more with less — not only in response to inflation but also to fulfill their expanding roles.

Both automation and process improvement relate to finance leaders’ new preoccupation with inflation. Some will pursue opportunities with automation and process improvement to contain costs. Many will look to leverage their investments in SAP and other technologies to help drive efficiencies and the right planning and IT involvement can help to achieve greater benefits across the organization. Both approaches deliver direct and indirect benefits: both not only reduce costs through efficiencies but also yield the data and insights that help leaders navigate changing markets and conduct business more effectively.

Leadership within the organization

While leadership has been a priority in past years, it’s increased a striking 4% in this year’s survey with 73% of respondents ranking it a top priority this year. Executives recognize that building the right leadership skill sets within the function will be essential to effective responses to inflation. The right leaders will be equipped to apply analytical insights from sophisticated systems. These leaders will apply those insights to define and drive rapid action to adapt to rapid change. Leadership skill sets must encompass managing processes, people and technology to ensure adaptability, profitability and efficiency.

Trends and solutions

Inflation drives the need to improve insights resident in the organization’s data. For example:

• If material costs are up $20, are the cost of goods sold up 3%, or 0.4%? How is the gross margin affected by changing costs? To answer questions like these, leaders can establish processes to capture the right information from systems. Tools like Protiviti’s xP&A Accelerator for SAP Analytics Cloud (SAC) can be deployed rapidly to extend and accelerate planning and analysis capabilities for finance and operational data. The expertise that Protiviti’s SAP Finance Transformation team brings to establish or re-design such processes can help leaders make the most of applying these tools within SAP environments.
• When a business is renegotiating a supplier’s price, it can improve its stance by arming itself with data like order history with the supplier, overall supply consumption across all suppliers, and industry pricing benchmarks. To prepare for negotiations like these, leaders need to evaluate current processes and systems to confirm they’ll yield data that enables successful negotiations.
• One business learned their initial data structures within SAP were not optimally configured, and they struggled to derive financial performance and costing information outside the system in spreadsheets. Finance leaders will want to verify accurate and consistent capture of operational and financial data elements in anticipation of analyses and approaches they’ll pursue in response to inflation. Implementation partners can help businesses avoid data design and configuration mistakes to begin with — or correct course after the fact.
• Businesses can take advantage of interoperability between SAC and S/4HANA (or other ERPs). Capturing and categorizing data accurately and enabling processes across systems enables effective reporting automation that facilitates and speeds decisions to streamline operations and supply chains, so businesses can respond immediately to price changes and other shifting conditions.
• Finance leaders can’t know which costs may rise — or how rapidly they will — but they can embrace SAP S/4HANA reporting and SAC’s real-time or near-real-time scenario-based planning to navigate volatile markets to come.

Final thoughts

Finance leaders in the SAP community are wisely preparing to prioritize inflation. Some of last year’s top priorities that repeat in survey results this year – like profitability, financial planning and analysis, and quality of leadership –relate to leaders’ new focus on inflation. Likewise, secondary priorities for respondents – including automation and process improvement – are emerging as preferred approaches to counter the inflation these leaders anticipate.

Protiviti’s Global Finance Trends Survey results drive the development of reports and webinars focused on ESG themes, supply chain topics and more general results, all relevant to leaders within and outside of the SAP community.