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Forward-thinking CFOs must prioritize and allocate resources towards the strategic digital transformation of their operating model within the Finance organization. About 86% CFOs now recognize the significance of digitizing crucial Finance processes such as accounts receivables, accounts payables, cash management, and cash forecasting systems. They perceive this digitalization as essential for enhancing operational excellence, ensuring business continuity, and ultimately optimizing bottom-line margins for their organizations.

The Office of the CFO currently encounters a significant hurdle in the form of siloed traditional systems like accounting systems, budgeting systems and countless spreadsheets – which confine finance data. In the absence of a future-focused financial transformation mechanism – this dependence on siloed and semi-manual processes creates substantial obstacles, particularly in the order-to-cash (O2C) and record-to-report (R2R) processes. Consequently, valuable data remains inaccessible to stakeholders across the organization who require visibility into this information for effective strategic decision-making. However, by implementing digital order-to-cash (O2C) processes, the efforts, time frame and cost of converting orders into cash can be reduced significantly, with greater cost savings for smaller businesses due to the fixed minimum overhead of accounts receivable.

Today, adopting smart automation and digitization of the finance function is an indispensable requirement – in order to establish organizational resilience and ensure long-term sustainability. This expedited journey towards digital transformation also fosters stronger alignment between the office of the CFO and the entire organization, enabling them not only to thrive efficiently but also to lead the organization towards future success. Consequently, CFOs now have a heightened responsibility to assume a strategic role in guiding pivotal business decisions.

Fast Tracked Digitization to Lay the Foundation for Economic Recovery, Resilience and Sustainability – Collaboration with the CIO’s Office

To ensure the organization is well-equipped to drive digital transformation, close cooperation between the CFO and CIO is extremely critical. These two leaders, given their distinct roles and responsibilities, complement each other effectively. The CFO can make informed decisions to drive change and deliver value in innovative ways for the finance team, while the CIO can enable the finance department by providing a strategic vision and implementing relevant systems and technologies. By working together, they can collaborate and determine the optimal path for the Office of the Chief Technology Officer (CTO) to modernize, automate, and transform their operational processes.

Factoring in the significant disruptions in the early 2020s, the office of the CFO faces a multitude of pressing priorities and the need (often, mandates) for modernization. It is now crucial for the CFO to align their financial transformation strategy with the organization’s overarching digital transformation strategy, creating a unified roadmap. Accomplishing this successfully requires close collaboration with the IT department to integrate technology solutions, prioritize initiatives, and effectively communicate the benefits of automation through interconnected workflows and heightened visibility to the organization’s leadership.

Gaining a COMPETITIVE EDGE: Utilizing Benchmarking to Improve Finance and AR Workflows

Organizations definitely need to leverage the power of benchmarking in their digital transformation journey for the Finance function – and in the process, gain valuable insights from industry peers. By analyzing the successes and shortcomings of competitors, organizations can establish realistic internal targets for their own digital transformation journey and set up effective, realistic digital transformation goals. This approach not only provides a more accurate assessment of the challenges at hand but also serves as a motivator to drive the effectiveness of digital transformation efforts.

Benchmarking finance operations also offers valuable guidance in terms of technological maturity and the likely roadmap for improvement. With modern finance software incorporating advanced functionalities such as robotic process automation (RPA), artificial intelligence (AI), and domain-specific machine learning, organizations can assess their technological maturity and compare it to industry benchmarks across finance operations. This enables them to identify specific areas for improvement that drive increased productivity, transformation, and operational efficiency.

At a technical level, highly mature finance operations rely on sophisticated analytics, visualized reporting, and advanced automation and orchestration. Each technology category follows a maturity curve, exemplified by analytics with its four stages:

  • Descriptive: Providing insights into past events.
  • Diagnostic: Explaining why an event occurred.
  • Predictive: Forecasting future outcomes based on trends and the current state.
  • Prescriptive: Offering optimal solutions by calculating numerous resolution pathways. Prescriptive finance analytics, representing the pinnacle of maturity, serve as virtual consultants and powerful tools for critical financial planning and decision-making. They provide real-time, always-on strategy optimization recommendations, moving away from relying solely on infrequent and costly human analysis toward a data-driven approach for crucial operational and decision-making processes.

For the purpose of this report, advanced analytics refers to accessing the full range of analytics, including prescriptive analytics. Such high-quality benchmarking resources are now widely available for digital transformation in finance, allowing organizations to assess their position across various technology dimensions. This enables the CFO to establish prioritized, realistic goals and create a roadmap. Effective benchmarks focus on two key metrics in each finance functional area: waste reduction and transformation potential. By leveraging benchmarking insights, organizations can optimize their finance operations and unlock their full potential.

The NON-NEGOTIABLE NEED for Digital Transformation in Finance for Midsize Organizations

The finance function is facing an urgent need for near-complete digitization due to advancements in technology that offer various operational possibilities. These advancements include the widespread availability of business data, enhanced algorithms and analytic methods for comprehensive data processing, and improved connectivity tools and platforms such as cloud computing, self-learning automation, and advanced analytics/AI.

In today’s business landscape, CFOs and their teams play a crucial role as owners and handlers of essential data required for generating forecasts and supporting strategic plans and decisions of senior leaders. This data encompasses sales, order fulfillment, supply chains, customer demand, business performance, as well as real-time internal, industry, and market statistics. 

Four key technology areas that hold significant promise for Finance teams of midsize businesses, and are likely to yield substantial RoI are:

  • 360 degree automation and AI usage: Covering processes across the finance function.
  • Data visualization: Providing self-service access to real-time financial information for end-users and improving organizational performance.
  • Advanced analytics for finance operations: Accelerating decision support and operational efficiency.
  • Conscious decision to operate using a cloud based ecosystem. The integration of cloud technology in finance has significantly increased the speed and efficiency of operations. High-growth companies are experiencing accelerated growth by digitizing business critical functions like order to cash. The idea is to make the move and get up to speed, now!

To maintain a competitive finance capability, CFOs must champion and consider investing in these areas, as per organizational needs. However, successful adoption depends on the company’s current strategies, needs, trajectory, available technologies, and talent. It is important to acknowledge and call out that digital transformation in finance cannot occur all at once. It is important to roll out a roadmap with logical milestones.

Moreover, companies should avoid falling into common pitfalls. Legacy enterprise resource planning (ERP) systems and other core business systems should not serve as excuses to avoid necessary changes in finance areas like order-to-cash functions (e.g., invoicing, collections, working capital management). 

By undertaking right-sized proof-of-concept projects and successfully digitizing high-value finance tasks, CFOs can establish proof points that build experience and confidence. This will facilitate the rollout of breakthrough digital technologies across the finance function and eventually extend to other areas of the company, with collaboration between the CFO and CIO being crucial.

Next Steps

  • Act on it, NOW! Initiate the process of modernization and transformation by focusing on the day-to-day transactional activities within the finance function.
  • Work with the HR team to ensure smooth transition (via retraining, upskilling, internal movements, redeployment of human resource), en route to digital transformation of the Finance function. 
  • You want to move up to a higher orbit – plan your resources around the organizational OKRs. Update the talent profile to attract finance professionals with the necessary digital skills, relevant experience and mindset to effectively help in driving the function.

The roadmap outlined above definitely calls for a clear directive from organizational leadership, as is the case with any transformation endeavor. Getting that top-down mandate and then implementing the plan successfully is easier said than done. Nonetheless, the strong desire to establish a fully modernized foundation for finance remains the motivating force. The potential impact, possibilities, and promise associated with this paradigm shift far outweigh the obstacles, that may persist without it.

Finance leaders have a unique opportunity to take the lead and spearhead this initiative by crafting and presenting a visionary plan for the digital finance function to other senior leaders. By doing so, they can shape the transformation of their companies and gain invaluable experience that will serve as a guiding force for the organization’s future endeavors.

Devang Mundhra

Chief Technology and Product Officer

Devang is an innovator who has spent the past 17 years building technology that has empowered businesses around the world. The BITS-Pilani and Stanford University alumnus honed his skills at Lattice Engines (since acquired by Dun and Bradstreet) and Oracle before joining KredX in 2016. At KredX he has led the creation of fintech innovations like KredX Invoice Discounting platform and KredX Cash Management Solutions. You can reach him through LinkedIn.