How analytics and process mining support CFOs

Data analysis—including big data analysis—enables the CFO to respond to a wide range of challenges. “Analytics are intended to be the CFO’s digital assistant, helping to support the company and make important business decisions based on big data,” says Ken Vanderstraeten, Audit & Assurance Director at Deloitte Belgium. “These decisions may range from strategic ones, cost and risk management, all the way to forecasting and planning.”

Powerful weapon for the CFO

“There is a wide array of analytics available for finance leaders,” Vanderstraeten continues. “They range from descriptive analytics to those that predict future behaviour. CFOs who really want to keep their stock management under control and link historically supported data analyses to sales trends and volumes can look ahead and predict their stock levels to some extent, which gives them another way to optimise their working capital. That is a very advanced example, but there are things that are easier to implement as well. One example is process mining, a particularly powerful weapon for the CFO.”

“Whereas CFOs used to look at a documented process model to understand a process in the company, process mining gives them a solution that considers the data objectively and takes all the exceptions into account,” explains Mieke Jans, Professor of Business Informatics at Hasselt University and Accounting & Information Management at Maastricht University. “It gives you a kind of heat map, with a complete image of the recruitment, asset or purchasing process, for instance. Humans always explain processes based on their own standards and often omit exceptions. They aren’t that good at estimating how often exceptions occur, either. Process mining is a way to counteract these shortcomings.”

From the perspective of business transformation.
 

How can CFOs get to grips with process mining? “In the future, they will probably be able to do it by themselves,” says Jans. “By then it will be so user-friendly that you hardly need to know anything about the underlying data, technology or algorithms. But we haven’t got that far yet. The preparatory phase for extracting data from your management system is important at the moment. You need to get it into the right format, so that you can run process mining algorithms on it. This preparatory phase requires a certain amount of work.” You might want to call in a specialist for that, someone familiar with process mining. “Or you could attract people in data-based roles within the company who have an affinity with finance.”

Vanderstraeten often starts by looking at process mining from the perspective of business transformation. “The priority is often to understand how current processes run and where there are opportunities to automate and optimise further,” he says. “Where is the company losing a lot of time with manual interventions, where is there a long lead time, and where is a lot of reworking needed? So process mining is used to discover processes for taking further steps in areas like RPA, AI, etc. Process mining is coupled with other solutions. The governance aspect comes after that.”

Governance and internal controls
 

Based on the availability of central data, you can also monitor governance, risk and compliance by means of process mining. This includes investigating how certain controls are run, how health checks can be conducted on a range of activities, where there are loopholes in the processes, and so on. “As such, process mining is also becoming part of the internal control environment,” explains Vanderstraeten. “Incidentally, taking a business transformation approach to process mining has inspired one partner to continue focusing on it from the perspective of internal auditing, because process mining gives you a continuous view of 100% of all the data, offering total assurance.”

Jans agrees: “There is another analogy that can explain the use of process mining for internal controls. A key differentiator used to be that you would look at the configuration of the internal control itself. At that point, you could see whether the door was open or closed. If it stayed closed, it was fine. With process mining, you no longer look at the door, i.e. the control itself, but at everything that has passed the control. That enables you to look at whether these things have met the conditions to pass the control. So it’s a totally different approach. You get a chance to inspect an entire period, rather than a limited period, the moment when you viewed the control configuration. That makes a huge difference.”

“Process mining is a powerful tool that a CFO can take to a meeting with the board of directors or the audit committee in two ways,” says Vanderstraeten. “Firstly, you can approach it in terms of operational excellence and supporting the business. Secondly, it detects the risks at granular level to see whether or not sufficient controls have been incorporated and whether they work. It’s an example of next generation data analytics.”

Start with the basics
 

Vanderstraeten believes it can be very easy to get started with process mining. “It’s true that there are a whole host of tools and solutions,” he says. “But keep it simple and make sure your tools are always suited to the organisation and your goals. Consider your company’s exact needs and the KPIs you want to measure. Today you will find simple basic analyses on the market that can be performed with Power BI, along with state-of-the-art solutions that connect different information systems and continuous monitoring based on real-time data (continuous control monitoring). Process mining is intended for every type of organisation, regardless of its size. Deloitte also does several quick process scans itself at present, which reveal where the sticking points are, how you can further optimise your processes and, quite simply, where you can save money.”

For Vanderstraeten, process mining offers CFOs a huge return on investment. “If you can take full populations and data analyses into account in areas where you only used to see one piece of the puzzle, you are making immense progress. Recently, an analysis based on process mining even saved a customer about €30,000 in double payments. That’s an extremely clear ROI if you ask me.”

Process mining

Process mining is a way to discover and analyse processes by using the data stored in information systems. Traditionally, companies design their core processes and report how they should run. Next, they configure information systems in such a way that the people involved are guided through the process. Then the system logs every activity in the system, creating a digital trace of process implementations, as it were. Process mining starts with these traces and identifies patterns. As such, it makes an ‘X-ray’ of the process and analyses a complete set of process data. This makes it possible, for example, to make a fact-based map of a company’s entire purchasing cycle, all the way from the issue of a purchase order to the payment of the invoice.