Digital transformation in corporate finance
It’s undeniable: we are in the midst of a digital revolution. From remote telemedicine to blockchain applications that and , almost every aspect of our lives is increasingly saturated with technology. Digital transformation affects all verticals in all markets around the world. While some industries have evolved faster than others, each transformation has followed an inflection point: the technologies needed to fuel meaningful transformation are reaching a level of maturity and availability that enables change. Companies that are able to adopt these technologies and successfully use them to drive their operational and digital transformations will gain a critical advantage over their peers.
“The technologies needed to reinvent finance are here and they will only get better,” observes by a global consulting and accounting firm .” Plus, we can learn a lot from other business functions. Modern factories give us a glimpse of what automation can bring. Smart contracts show us new ways to track assets. The lessons are there. We don’t have to reinvent the wheel. Instead, we can focus on adaptation and adoption.
The report, however, goes on to note that while the technologies needed to effect seismic change in industry are emerging (usually in the form of pilot programs and localized trials), there is still plenty of evidence of scalable transformational change. “The roadmaps for that future are still being worked out.” This month, Business Chief breaks down three of the top trends affecting the relationship between digital transformation and financial operations, and examines how businesses can best adapt and thrive under these new conditions.
From manufacturing to supply chain and logistics operations, automation is the emerging technology trend to define the century. In the financial industry, robotic process automation (RPA) has the potential to reshape the role of the finance professional, as well as the potential to create value across entire businesses.
Financial planning and analysis (FA&P) professionals are estimated to spend of their workdays on manually collecting, consolidating, verifying and formatting data, leaving only 20% for high-level analysis and strategic planning. Significant industry adoption of RPA could change all that. RPA, which uses AI to train software bots to increasingly complex performance from handling complaints and transactions to monitoring compliance and auditing processes.
This technology manifests itself primarily through a phenomenon known as “co-bots”. Rather than removing humans from the equation, the goal of a is not to replace the human worker, but rather to augment that worker’s capabilities through the automation of repetitive tasks, superior analytics, and workflow management. For example, process automation has a significant impact on invoice management. According to using AI-based predictive technology, Know with nearly 95% accuracy when a particular bill will be paid.
Finance automation is gaining traction in some of the most developed markets. In the United States, for example, a report published in June found that about 83% of enterprise finance functions have deployed RPA in some way, and about 95% are experimenting with or have deployed machine learning technologies in their finance and accounting processes.
Automation in finance has almost unlimited potential to increase efficiency, agility, and ROI. As the technology grows in sophistication, its applications “evolve from simply automating individual tasks to fully automating processes that could improve the accuracy of financial analysis and forecasting,” according to on automation in finance. Gartner’s report also notes, however, that the financial industry still faces pressure to increase ROI from automation deployments, adding that “at the same time, financial robotics must be extended to shared services and other finance sub-functions such as procurement and taxation. ”
One technology trend that remains closely tied to the rise of automation deployments in the industry is the growth and changing nature of analytics. The ability of financial services to shift their energies from back-office reporting to forecasting and predictive analytics has strong implications for industries such as insurance and investing. The power of data analytics to mine and derive insights from vast pools of data (which would simply not be feasible for humans to assess manually) is a game-changer for the industry.
However, the game has not yet been modified. A report published earlier this year by only 14% of financial organizations are successfully leveraging the large volumes of transaction data they accumulate. are either overloaded with too much data, limited in accessing their data, or hampered by the technology they use to analyze the data. The stakes are also high; that each incorrect decision regarding financial analysis can cost a company up to 1% of its turnover, a figure that can increase considerably during an unsuccessful transformation.
“CFOs need to consider what technologies will enable finance to deliver reports on demand, how should data be governed as reports expand to integrate financial and non-financial data, and what skills finance will it need to provide information in an on-demand reporting environment,” . “Finance needs to balance the need for precision with the need to make huge volumes of data available for decision-making, which is a new muscle for many finance teams.”
The era of the digital CFO
As digital transformation touches every aspect of a company’s organization, the need for digitally forward-thinking executives extends beyond the roles of CTO, CSO and other roles traditionally focused on technology.
A report from January this year from Sage found that 98% of CFOs say their jobs have changed significantly over the past five years, and around 75% say they now play a critical role in driving transformation. digital within their organizations.
“The modern CFO evolves from a retrospective numbers collector to a pioneering strategic leader who uses data and emerging technologies, like artificial intelligence and predictive analytics, to create a vision for the future of their business” , said in one . “The digitization of business is fundamentally changing the way finance leaders work, and embracing technological change will separate leaders from laggards in this new era. However, a lack of cultural readiness within the finance office can slow adoption of new technologies and hamper the achievement of optimal results with any digital transformation.
Simply being a tech-savvy leader is not enough for the modern CFO; top-performing executives in this area must drive cultural and digital transformation, not just in their own financial departments, but across the business. “Corporate culture plays a critical role in the effective integration of any technology,” warned “As CFOs drive digital transformation forward, they must not overlook the critical role they play in ensuring teams have the skills to optimize these solutions and dispel misperceptions and fears about the AI and automation across the organization.”
However, if the modern CFO can combine cutting-edge digital adoption with smart, agile strategic decision-making, while striving to successfully create cultural change and Industry 4.0 readiness throughout their organization, they can be a tremendous agent of change. “CFOs have access to the most important data in the business, and insights from that data are critical to driving the business forward,” commented . “Data such as inventory management, compliance changes, and financial forecasts must be configured and collected correctly in order to glean the right insights and operational efficiency. This creates a real opportunity for CFOs to be innovation “change agents” in the company’s digitalization journey. »
The changing role of corporate finance
As automation and analytics gradually take on a more mature role in the operation of corporate finance divisions, the roles of these business units and the finance professionals who work within them are set to change dramatically.
This trend can be described as an upstream migration. As functions such as budgeting, processing, and reporting begin to move closer to full automation, finance professionals will fill new roles for their partners and customers. According to Deloitte, with digital solutions offsetting routine workloads, financial services will have more opportunities to proactively create value and drive strategy. These new roles will include functions such as “scenario planning, advanced forecasting and better visualization”. Teams of business partners will come together to focus on the most complex business decisions, moving around the business as needed. »
Essentially, the digital transformation of the more mechanical functions of a finance department will create a world where the lines between financial discipline and other business functions such as leadership, supply chain and HR will be increasingly blurred. This interdisciplinary world will require a change in attitude and training focus for these departments, but has the potential to promote agility and cross-enterprise communication. “With automated operations, finance will double its business prospects and services,” predicts Deloitte. “Whether Finance will continue to direct the resources currently under its control will depend on its ability to add value. This will require quality information and exceptional customer service. Some financial organizations will become full-fledged business service centers.