The power that digital transformation has as an essential tool for business growth is undisputed amongst CFOs. Many businesses have made a significant investment in this area with the aim of developing the finance function and future-proofing the business as a whole.
In 2018, eight in ten respondents to a McKinsey Global Survey said they were undertaking transformation utilizing digital technologies that year. Indeed some finance executives consider investment in finance transformation to be a “matter of survival”. It is predicted that decision-makers will only lean further into these new technologies as a means of staying ahead of the competition and remaining as agile as possible in challenging economic circumstances.
What are the benefits of digital transformation?
The benefits of updating business models with digital technologies range from quick wins within the finance operations to long-term and large-scale changes to decision-making and business operations as a whole.
Quick Wins
Spend
One of the fastest notable impacts of digitization is on department and company spend. Reducing staff hours spent on manual tasks, preventing erroneous cash loss, promoting cash savings and improved analytics influencing decision-making and strategy are just some of the ways in which CFOs will be able to make a quick ROI.
A market-leading operating model offers robotic process automation as an alternative to manual data entry. RPA improves departmental efficiency saving money in staff hours as time-consuming work is given over to automation. Artificial Intelligence meanwhile takes care of the auditing process meaning that staff intervenes only when necessary.
Departmental digitization, promises analytics that will help CFOs to optimize spend on many levels. First, machine learning ensures that incidents of cash leakage are identified automatically. Whether they are the result of errors, misuse, and abuse, or fraud, automated systems will pick up on these anomalies. By highlighting ant weaknesses in security, teams have the opportunity to resolve them and correct errors. For example, expenses abuse or duplicate transactions will be more easily identified and resolved by finance teams.
The use of predictive analytics using big data will flag savings opportunities to business leaders. Poor buying decisions and late or wrong payments will be spotted within data analytics. It may be that savings can be made by consolidating vendors, taking advantage of early payment discounts or making adjustments to the supply chain.
Real-time data on financial transactions allows CFOs to set up better policies and controls across the business. This will avoid non-compliance issues cropping up and help to reduce out of policy spending. Ultimately, digitization can revolutionize company culture surrounding compliance and spend. Finance leaders can draw attention to the importance of compliance and careful spending for business success.
Finance leaders can finally rely on accurate and up-to-date budgeting. This in collaboration with all of the above, will enable a quick ROI for the digitized financial service. Without having to waste time with manual data entry and identifying and dealing with individual instances of non-compliance or spending, finance organizations can use those resources on more valuable tasks such as strategy and data analytics.
Long-term gains
Decision-making and strategy
Digitalization frees finance leaders to focus on business growth. With real-time analysis available in seconds and more time to do the analyzing, advanced analytics becomes a part of daily life in the finance department. Improved business strategy leads to better supplier relations, more agility, improved speed to market and better customer experience.
What are the challenges?
Despite numerous business-wide benefits of digital strategy in the finance department, transformation is not without its challenges. When faced with multiple departmental and functional silos, the journey towards digital integration can seem long and challenging. For example, when spreadsheets exist only at a departmental level, finance teams won’t have a clear real-time view of how they are being used or what is being spent. This kind of data management is also rife with errors. Often, spend is made through many sources and systems which are hard to account for and control.
The process of digital finance transformation impacts more than just the finance team. If different departments have different levels of digital maturity it may be difficult to onboard everyone as quickly as managing directors might expect. Old-style departments operating constrained workflows that are slow and full of mistakes will struggle the most. And perhaps as a result of their workload, they have no time to perform the kind of value-added activities that would onboard them to digitization.
For some, the biggest obstacle to digital transformation is cultural. There is a misguided belief that automation will cost jobs. But managed properly, it can increase headcount and lead to more fulfilling roles as companies grow thanks to increased strategic insights and support. Some digitization projects lose momentum after their initial wins. To avoid this outcome, it is essential to plan carefully, set quantifiable success metrics, but remain agile to change and evolve both the plan and the metrics as the project develops.
The CFO’s role in overcoming these challenges
In the face of potential challenges, the CFO has the skills and position to overcome them to ensure the successful integration of digital technologies into the organization. They have unique insights into many parts of the organization and so can strategize where quick wins can be made compared to where long-term projects should be planned.
As a data entry-based department, finance is a good example to show how much time automation frees up and begins a wave of automation across the whole business. Finance can use their leverage in other business functions to partner with them for a more holistic digitization. Global payroll technology within the payroll department offers many benefits to a digitizing company. It can deliver improved cybersecurity, reduce errors, increase compliance and offer the kind of high-level, real-time reporting that finance teams need to remain strategically agile. HR meanwhile, can assist with skills management and talent acquisition should skills gaps emerge during enterprise resource planning sessions.
Best Practice
In summary, to lead a successful finance transformation program and maximize on your investment. It is important to use the tools to improve processes first, whilst looking to mitigate long term risks. Focus on spending less time collecting data and more time analyzing it. Analysis should lead to strategy and action taken for the greater good of the whole company
Though CFOs must lead the charge, you must ensure that you have the appropriate human resources in place at management level and throughout the business hierarchy.
For more information on Payslip Global Payroll Technology as part of an overall digital transformation strategy across HR and Finance departments, contact us today.