Public sector organisations in Asia are increasingly pursuing finance transformation as they look to improve the efficiency and transparency of their operations.
From using data to gain insights to automating repetitive tasks, finance transformation can lead to improved forecasting and decision-making, reduced costs and better value for stakeholders.
At its core, financial transformation involves automating certain tasks and increasing the use of data analysis to reduce the time it takes to gain insights, shifting the role of the finance function from reporting numbers after the event to playing a key part in the development and strategy of an organisation.
‘Leading finance functions are looking to transform themselves into business partners to the rest of the organisation, providing a one-stop shop for dashboards and reports to deliver real-time financial and non-financial data for decision-making,’ says Ivan Phuah, finance transformation leader at PwC South East Asia Consulting.
Tracy Shum, director of management consulting at KPMG China, points out that, like all organisations, the public sector needs to go through finance transformation in order to optimise its operations.
‘The automation of finance tasks helps to lower costs, and the shift to spending more effort on data analysis, helps to give management more information and visibility on the needs of the public’
Talent attractor
‘The automation of finance tasks helps to lower costs, and the shift to spending more effort on data analysis, helps to give management more information and visibility on the needs of the public,’ she explains.
She adds that finance transformation is also increasingly necessary to attract high-quality finance talent to the sector as well as retaining good staff who may not want to work on mundane and repetitive tasks.
Efficiency drive
Finance transformation in the public sector often also involves restructuring to drive efficiency.
Allan Mills, Deloitte’s civil government leader, says many public sector organisations in the region are revisiting the shared service and corporate centre model, which is changing where work occurs and who is responsible for it, with many activities being automated.
He is also seeing a trend for smaller departments to be amalgamated, both organisationally and in terms of systems.
‘The cloud is supporting the drive to standardisation and allowing multiple departments to be integrated in one environment, dramatically increasing governments’ ability to compare, contrast and fundamentally improve the outcomes for citizens,’ he says.
Customer concern
Phuah notes that this optimisation process enables the various ministries and government agencies to focus their efforts on serving the end customer better, leading to greater citizen engagement, speed of response and ease of use of services.
In Hong Kong, many public sector finance transformation projects have focused on investment in better data governance, reporting mechanisms and analysis.
‘We’ve not seen a big shift to cloud-based technologies, but we expect that this will also change over the next few years,’ Shum says. ‘To some extent, this trend has accelerated as a result of the pandemic influence and the public sector embracing remote working like other sectors.’
Utilising blockchain
Jane Yang, EY Greater China’s government and public service market segment leader, says that public sector finance transformation in China is currently largely focused on digitisation and harnessing data for insights, with some organisations also adopting robotic automation.
The firm has launched EY OpsChain Public Finance Manager (PFM) to help the management of public funds, using blockchain to drive transparency through tracking budgets, expenditure and results.
‘As governments around the world are modernising their cities and digitally transforming their processes, advanced technologies, such as blockchain, can positively impact processes from tax collection, to open data to public spending,’ Yang says.
Drivers for change
Accountants have a key role to play in helping public sector organisations carry out successful finance transformations.
Tracy Shum, director of management consulting at KPMG China, points out that with their good data analytics skills, public sector accountants can help perform relevant and timely analysis of data, helping to increase the effectiveness with which governments use their funding.
‘This process helps to keep public sector organisations accountable for the decisions they make,’ she says.
Jane Yang, EY Greater China’s government and public service market segment leader, notes that accountants can also contribute through improving the transparency of data and the information behind it.
Allan Mills, Deloitte’s civil government leader, advises accountants to get out of the back office and spend time in the organisation, acting as business partners or even going on secondment to delivery agencies in operational roles.
‘This increase in competency across government will mean better decisions are being made when finance is not directly in the room and help ensure rigour in the use of public monies,’ he says.
Under scrutiny
While public sector finance transformation brings many benefits, though, it faces the same challenges as in the private sector.
The main difference, according to Phuah, is that the public sector is under greater scrutiny and has more stakeholders to consider.
‘There is a stronger emphasis on balancing priorities, as putting funding into finance transformation will mean spending less in other areas,’ he says.
Shum agrees that public sector organisations need to justify their investment to the public and end-users. ‘While it is not difficult to justify the benefit of manual task automation, it is not as easy to justify the value of enhancing data analytics capabilities in a quantitative manner,’ she says.
Yang points out that public sector organisations can also face talent challenges in their finance departments, while change management across the organisation can be an issue for both the public and private sectors.
One of the biggest challenges in the public sector is the scale and pace of decision- making. ‘Some of the transformations are simply too big to tackle in one go and need to be tackled in stages,’ Mills says.
Learn from others
He adds that the public sector needs to become more open to other experiences and learn from the journeys of large multinational organisations.
While finance transformation is typically associated with private sector companies, Mills argues that it is important for the public sector to go through the process, as it is typically the largest enterprise in any country and is responsible for the delivery of critical services, ensuring that markets operate effectively and the appropriate allocation of taxes and duties.
‘Finance transformation is a critical step in the modernisation and pace of reform that the public sector is expected to deliver,’ he says, adding that, in recent years, it actually appears to be moving ahead of the private sector in terms of finance transformation.
‘It is not uncommon to find governments with faster payment processes, cognitive and AI tools being used to generate reports, and having the investment capability to move to cloud-based ERP [enterprise resource planning] platforms,’ Mills says.
Set the tone
Phuah agrees, pointing out that in Singapore, it is important the public sector sets the tone for organisations in other sectors in terms of best practice and leadership.
‘Finance transformation, if done right, will keep public sector organisations at the forefront of developments and are a reflection of the Singapore government’s digital strategy,’ he says.
Ultimately, good public financial management requires a focus on transparency, accountability and robust evidence for decision-making. ‘These are all factors that can be enhanced by finance transformation,’ Yang says.
