Digital transformation in corporate finance

By Harry Menear
From AI and RPA to advanced data analytics, digital transformation in the corporate finance sector is poised to reach maturity...

There’s no denying it: we’re in the midst of a digital revolution. From remote telemedicine to blockchain apps that stop blood diamond smugglers, and artificial intelligence (AI) that verifies the freshness of high-grade tuna, nearly every aspect of our lives is becoming more and more saturated with technology. Digital transformation is affecting every vertical in every market across the globe. While some industries have moved faster than others, each transformation has followed an inflection point: the technologies required to power significant transformation reach a level of maturity and availability that allows for change. The companies that are able to embrace 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 reimagine finance are here and they will only get better,” observes a recent report by global consultancy and accounting firm Deloitte.” Plus, we can learn a lot from other business functions. Modern factories give us a glimpse of what automation can deliver. Smart contracts show us new ways of tracking assets. The lessons are out there. We don’t have to reinvent the wheel. We can focus instead on adapting and adopting.” 

The report continues, however, to note that although the technologies necessary to effect seismic change across the industry are appearing (typically in the form of pilot programs and localised trials) there has yet to be much evidence of scalable transformational change. “The roadmaps to that future are still being drawn.” This month, Business Chief breaks down three of the key trends affecting the relationship between digital transformation and the finance operation, and looks at how companies can best adapt and thrive under these new conditions.  

Increased automation

From manufacturing to supply chain and logistics operations, automation is the technological trend that is shaping up to define the century. In the finance sector, robotic process automation (RPA) has the potential to reshape the role of the finance professional, as well as dramatically increasingly the potential for value creation across entire businesses. 

It’s estimated that financial planning and analysis (FA&P) professionals spend as much as 80% of their workdays on manual data gathering, consolidation, verification, and formatting, leaving just 20% for high-level analysis and strategic planning. Significant RPA adoption across the industry could change all that. RPA, which uses AI to train software bots to perform increasingly complex yet repetitive digital tasks, from processing claims and transactions, to monitoring compliance and auditing processes. 

This technology is primarily manifesting through a phenomenon known as “co-bots”. Rather than removing humans from the equation, the goal of a co-bot deployment is not to replace the human worker, but rather to augment that worker’s abilities through repetitive task automation, superior analysis, and workflow management. For example, process automation is having a significant impact on invoice management. According to Manoj Shroff, MD, Finance and Accounting Business Process Lead at Accenture, using AI-powered predictive technology, finance departments are now able to know with almost 95% accuracy when a particular invoice will get paid. 

Automation in finance is gaining a good amount of traction in some of the more developed markets. In the US, for example, a report released in June by ISG found that around 83% of enterprise finance functions have deployed RPA in some way, and around 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 increases in sophistication, its applications are “evolving from simple individual task automation to full process automation that could improve the accuracy of financial analysis and forecasts,” according to Gartner’s report on automation in finance. Gartner’s report also notes, however, that the finance industry still faces pressure to increase ROI from automation deployments, adding that “at the same time finance robotics must be scaled out of shared services and into other finance sub-functions such as procurement and tax.”

Powerful analytics

A technological trend that remains closely linked with the increase in automation deployments across the sector is the growth and changing nature of analytics. The ability for finance departments to shift their energies away from back-office reporting, and towards forecasting and predictive analysis, has powerful implications for industries like insurance and investment. The power of data analytics to harness and draw insights from vast pools of data (that would simply not be feasible for humans to manually evaluate) is a game changer for the industry. 

However, the game hasn’t been changed yet. A report released earlier this year by FSN, a mere 14% of financial organisations are successfully harnessing the large volumes of transaction data they accumulate. These organisations are either laden down by too much data, constrained in accessing their data, or hindered by the technology they are using to analyse the data. The stakes are high, as well; Gartner estimates that each incorrect decision regarding finance analytics can cost a business as much as 1% of its revenue, a figure that can mount dramatically over the course of an unsuccessful transformation. 

“CFOs must ask what technologies will enable finance to deliver on-demand reporting, how should data be governed as reporting expands to integrate financial and nonfinancial data, and what skills finance will need to deliver insight in an on-demand reporting environment,” commented Craig Wilton, Senior Director, Advisory, Gartner. “Finance must balance the need for accuracy with the need to make a huge volume 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 business’ organisation, the need for digitally forward-thinking executives is extending beyond the CTO, CSO and other, traditionally tech-focused roles. 

A report from January of this year by Sage found that 98% of CFOs say their job has significantly changed in the past five years, with around 75% claiming that they now play a critical role in driving digital transformation across their organisations. 

“The modern CFO is evolving from being a backwards-looking number collector to a trailblazing 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 Marc Linden, Sage EVP and GM of Medium Segment Native Cloud Solutions, in a press release. “The digitalisation of business is fundamentally changing the way finance leaders work and embracing technological evolution will separate the leaders from the laggards in this new era. However, a lack of cultural readiness in the office of finance may slow adoption of new technology and hinder achieving optimal results with any digital transformation.”

Simply being a tech-savvy leader is not enough for the modern CFO; the most successful executives in this area need to be drivers of both cultural and digital transformation throughout not only their own finance departments, but the entire company. “Company culture plays a vital role in the effective integration of any technology,” cautioned Nancy Harris, Managing Director, Sage North America. “As CFOs are driving digital transformation forward, they must not overlook the critical role they play in ensuring teams have the skills necessary to optimise these solutions and allaying any misperceptions and fears about AI and automation across the wider organisation.”

However, if the modern CFO can combine cutting-edge digital adoption with smart, agile strategic decision making, while working to successfully create cultural change and readiness for Industry 4,0 throughout their organisation, they can be a formidable agent of change. “CFOs have access to the most important data in the business and the insights pulled from this data are critical to driving the company forward,” commented Marie-Helene Simard-Brown, CFO, Costa Farms. “Data such as inventory management, compliance changes and financial forecasting must be set up and gathered properly in order to glean the right insights and operational efficiencies. This creates a real opportunity for CFOs to be innovation ‘change agents’ in the digitalisation journey of the business.”  

The changing role of corporate finance

As automation and analytics steadily take on a more mature role in the operation of corporate finance divisions, the roles of those business units, and the finance professionals working within them, is set to change dramatically. 

This trend can best be described as an upstream migration. As functions like budgeting, processing and reporting begin to approach full automation, finance professionals will fulfil new roles for their partners and clients. According to Deloitte, with digital solutions compensating fro routine workloads, finance departments will have increased opportunities to proactively create value and direct strategy. These new roles will include functions like “scenario planning, advanced forecasting, and better visualisation. Teams of business partners will come together to focus on the most complex commercial decisions, moving around the business as needed.” 

In essence, the digital transformation of a finance department’s more mechanical functions will create a world where the lines between the finance discipline and other business functions like leadership, supply chain and HR are increasingly blurred. This interdisciplinary world will require a shift in both attitude and training focus for these departments, but has the potential to promote agility and cross-company communication. “With operations automated, finance will double down on business insights and service,” predicts Deloitte. “Whether Finance continues to direct the resources currently under its control will be dependent on its ability to add value. That will require quality insights and exceptional customer service. Some finance organisations will evolve into full-fledged business service centers.” 


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