Applying digital technologies to finance processes will create more efficiencies, insights, and value over the long term.

An emerging concept in many organisations is digital finance. Today, CFOs are yet to completely join hands in digital-transformation efforts, even though they own and manage much of the relevant business information that feeds such initiatives.

CEOs and boards want CFOs and the finance function to provide real-time, data-enabled decision support. The onset of innovative technologies plus a lack of top technology talent won’t make it any easier.

To start, CFOs must encourage senior leadership teams to proactively find tasks and processes within the finance function that would benefit from digitisation.

Emerging use cases

Digitisation is a specific goal for the finance function due to rapid technological advances.

Unlike in the past, the availability of business data is widespread and readily accessible; teams’ ease of processing large sets of data using algorithms and advanced analytical methods; and developments in connectivity tools and platforms, such as sensors and cloud computing.

CFOs and their teams are the guardians for the critical data required to generate forecasts and support senior leaders’ strategic plans and decisions—among them, data relating to sales, order fulfilment, supply chains, customer demand, and business performance as well as real-time industry and market statistics.

The new finance skillset will be anchored on data science, predictive and prescriptive analytics, and business partnering.

Four areas of Technology

Digital transformation is a phenomenon that can enable the CFO and the finance function as a whole to be more strategic and add-value to the organisation, specifically around driving growth objectives.

There are four areas of technology that, right now, has the potential to show, the most promise for use in finance:

  • automation and robotics to improve processes in finance
  • data visualisation can give end users access to real-time financial information and improve organisational performance
  • advanced analytics for finance operations to accelerate decision support
  • advanced analytics for overall business operations to exhibit hidden growth opportunities

CFOs must decide on priority to hone and pursue investments in either one or all of the areas based on the company’s strategy and goals. Companies willing for digital transformation should not prejudice enterprise resource planning and other backbone systems as reasons not to start the change.

Initiating the above on a pilot basis in small pilot projects and successfully digitising the most critical tasks, the CFO can establish clear proof points and eventually ease the rollout of digital technologies across the entire function and other parts of the company.

Simplifying processes: Automation and Robotics

Fundamentally, automation is an essential aspect of digitisation because it prevents rework and revisits. For instance, finance activities like cash disbursement, revenue management, and general accounting and operations can be fully automated. CFOs have an edge in simplifying core internal transactions, establish standardised reporting mechanisms, and increase efficiency.

The other category of automation software, Robotic Process Automation (RPA), is a critical tool that performs needless tasks on a timed basis and ensures they are completed quickly, efficiently, and without error. RPA is advanced enough to not only handle discrete business activities but across multiple areas of the business.

Implementation of RPA can help to realise tangible outcomes.

Advanced analytics

Mining massive business data on people, profits, processes, and so on gives insights that can elevate business leaders’ tactical decision making. CFOs, with the aid of advanced analytics, can manage financial operations, core processes efficiently, and accelerate decisions.

Assuming standard transaction finance teams can use advanced analytics to identify duplicate expenses and invoices.

Facing the Obstacles

The CEO and CFO agenda, for most organisations, is to uncover new sources of revenues to fuel growth. Technology can prove useful to search for available options to generate income for the companies or the treasury. But to truly succeed in constructing a digital finance function, CFOs will need to develop a clear vision of the desired target and how that connects to the overall business and strategy.

Executives will encounter few obstacles in digitising the finance process like:

Obstacles Solutions
Overall digital vision not clearly defined Hold integrative discussions within your organisation, bringing representatives from across the organisation to arrive at a joint digital vision
Digital initiatives not linked to comprehensive business strategy Link specific initiatives to elements of broader corporate strategy, identify linkages in strategy discussions and monitor outcomes
Lack of clear, strong mandate to digitise processes across the organisation Identify sponsor from top management who will openly promote the digital agenda, and give owners of digital initiatives clear responsibility and authority over their projects
Backlash and criticism within finance function over changes resulting from digitisation initiative Establish or redefine employee incentives so they align with digital agenda
Lack of understanding between digital-finance teams and business units Work in cross-functional squads, integrating various business-unit perspectives as well as customer view
The gap between current capabilities and those required in digital-finance function Set up a dedicated capability—building program in finance, and invest in top talent

Future digital agenda

The CFO should refine competency models by engaging with other senior leaders, particularly those concerned with the finance function, to recruit and retain the employees needed to carry out a digital agenda. A willingness to learn and update about new technologies or process-design expertise—skills that go above and beyond traditional finance tasks.

CFOs and senior leaders might need to significantly rework incentives and compensation schemes to handle resistance to change and reward those who support the creation of a digital finance function.

Such incentives can also help the company attract top digital talent. Perhaps most important, CFOs will need to associate with other business leaders to ensure that any digitisation and transformation efforts adhere to the company’s cybersecurity standards. The CFOs responsible for digitisation will not only help the finance function work more efficiently—potentially reinforcing their candidacies for leadership positions inside or outside their organisations—but also become stronger partners of CEOs and business units.

For all the benefits of digitising the finance function outlined, more human judgement is necessary. But the possibilities overtake the obstacles at this point, and the mandate is clear: CFOs have a winner in their hands to shape the evolution of their companies and gain valuable insights and experiences along the way. But those insights and experiences will never come to fruition at all if CFOs don’t take the first steps.