Financial management, critical to all companies, itself tends to be an under-examined area of business operations. CFOs want to improve the finance department’s productivity while delivering better quality financial information to the C-suite. Opportunities for transformative change have been hard to find, however, until now. The maturing of cloud computing opens up paths to more agile, cost-effective and insightful financial management.

Cloud computing, a brief overview

Hyped far beyond what’s healthy for any technology, cloud computing is indeed a remarkable innovation. At its heart, cloud computing is a software architecture. Traditionally, computers had a known physical address. They might be in a data center or a colocation facility where you rented infrastructure by the rack. With the cloud, computing resources can be (and in fact, are) anywhere.

Locations means nothing. What matters in the cloud is the resource’s logical address. A cloud-based virtual machine like a server is identified by an electronic address. It’s located somewhere… else. The hardware is completely abstracted from the virtual machines and virtual storage arrays. This creates a high degree of flexibility. It also enables essentially unlimited compute and storage capacity. Whatever you need is available when you need it, for as long as you need it—rented by the minute or by the day, etc.—and when you no longer need it, you shut it off and stop paying.

Cloud computing and cost of financial operations

It costs money to run a finance department. In addition, the IT department that supports finance has its own costs and capital expense (CapEx) budgets. Running finance may not cost a vast fortune, but it’s part of Sales, General and Administrative (SG &A), a favorite area for cost cutting. If you’re the CFO, you usually want to lower SG&A, including your costs of financial operations. The cloud makes this possible.

Cloud computing transforms the CapEx required for financial computing and storage infrastructure into an Operating Expense (OpEx). Instead of buying hardware every three or four years and standing it up in a costly, company-owned data center, with cloud computing, the company can rent the compute and storage resources it needs. Depending on the business, this might be a very attractive proposition. For example, if your business has a high cost of capital, then avoiding CapEx is a big advantage.

Flexibility and scale

Flexibility and scalability are auspicious features of the cloud in finance. Software-as-a-Service, for example, which provides financial management software through a browser, as needed, is typically more flexible than the traditional on-premises deployment of financial software. As the finance department grows and changes, SaaS adapts more easily than a fixed instance of software in the data center. Storage is either cheap or included in the monthly fee, so seasonal data storage needs do not require special arrangements.

Cloud-based software is also usually easier to integrate with systems belonging to partners, customers and suppliers. This capability leads to greater agility in financial management. Similarly, with mergers and acquisitions (M&A), cloud solutions make for faster, more streamlined unification of financial systems among merging entities.

Data management and analytics

Cloud-based financial software solutions often have built-in financial data management and analysis tools. Of course, traditional financial packages have similar toolsets, but in the cloud, they’re generally easier to configure and adapt. And, as business intelligence for finance tends to involve connecting with data streams originating in separate entities (e.g. from partner firms), cloud integration makes this simpler, faster and cheaper to accomplish.

Security and compliance

Cloud providers run some of the most secure infrastructure in the world. Having your financial data stored in the cloud is more, not less, secure than it is in your own data center. There are some rules to follow to make sure this stays true, but in general, you’ll be more secure and compliant in the cloud. With compliance rules that mandate long-term data storage, the cloud’s reliability and high availability are a real plus. Cloud backup and restore, which are economical and flexible compared to traditional approaches, offer a further layer of protection and business continuity for the finance department.