Finance in the Age of Digital Transformation
Technology has been around for many years but the transformative ways it affects all avenues of our lives is becoming more apparent. From the way we order lunch online to the way we can do almost everything on our smartphone that we do on our computer, business operations are also being transformed and affected by digital transformation.
Anton Sher, Steven Ehrenhalt and Jonathan Englert of Deloitte explain that “from phone apps to home automation to cashless commerce and beyond, digital disruption is the new normal for consumers today. It’s changing what we do-and how we get things done-in countless ways…What does this have to do with the future of Finance? Everything.”
Role of CFO
Finance, specifically the role of the Chief Financial Officer, will be deeply impacted if it has not been already. The Chartered Global Management Accountant (CGMA) explains that the traditional scope of a CFO’s job description includes the following bullets:
- Organizational Leader
- Business Partner & Steward
- Integrator & Navigator
- Finance & Accounting Leader
Furthermore, they have divided the CFO position into four roles: creator, enabler, preserver and reporter. Given that their purview is already of great importance to the business model of any company, the digital transformation is putting another log on the fire of an already all-encompassing role.
It is for this reason that CGMA concluded that “one of the key challenges facing CFOs today is the dilution / divergence of focus.”
Digitization is certainly contributing to the dilution of focus as it raises new concerns and factors to either mitigate or address in a live environment. Cyber security is a large element as the amount of digital transactions is only increasing as is the number and type of financial risks. So are digital businesses environments as “there is no framework or guidance, in financial governance, control and compliance, areas that also traditionally fall under the purview of a CFO,” explains CGMA. Social media is also an element that is a double-edged sword as the demand for products or services can eb and flow based on the outpouring of public opinion on various platforms. The advancement of IT tools for a CFO and finance department are aiding in the reporting functions but also pose the risk of taking away job tasks from people. However, telling the story behind the numbers is sometimes as important as presenting the numbers themselves.
Bob Violino for ZDNET also outlines digital transformation concerns that CFOs and finance departments are facing. The following results are from a survey of over 300 CFOs and finance professionals conducted by CFO Research and Grant Thornton LLP. The highlighted concerns centered around automation technologies and other IT tools. Having the right staff members in place once these technologies become more commonplace and the CFOs themselves being properly equipped with the ability to understand and advance data analytics are central concerns. In addition, being able to quantitatively measure the ROI of advancing IT technologies for finance is a worry.
The Way Forward
These uncharted territories allow people with a background in both finance and IT a chance to really advance their career as the two departments are becoming closely mingled. When applying to finance positions either for entry level, laterally or for advancement, highlighting experience and interest in IT is sure to be a huge bonus for any company.
Violino also shared that the survey indicated that due to competition and strategic opportunities like cost cutting and customer experience, more money will be allocated and spent in IT for finance.
Sher et al for Deloitte succinctly presents the importance of technology within finance by saying that “the needs of the business are growing. The pace of innovation is accelerating. CFOs can either plan for change, or plan to retire.”
Some of these affected topics have been detailed by Deloitte and include the below:
- The finance factory
- The role of Finance
- Finance cycles
- Operating models
- Enterprise resource planning
- Workforce and workplace
In their publication, Deloitte expounds on what companies and employees can do to address these and why they will make an impact on company culture.
Future of Finance
According to McKinsey & Company’s Kapil Chandra, Frank Plaschke and Ishaan Seth, the need and expectation for technology within finance is now expected yet there is still trepidation and uncertainty: “…today’s CEOs and boards say they want CFOs and the finance function to provide real-time, data-enabled decision support…but our research also shows that CFOs still spend less time on digital trends than they do on traditional finance activities…CFOs are often content to let colleagues in IT, marketing or other functions press the issue.”
Chandra et al suggest that in order to get the ball rolling, CFOs could work with their senior leadership to devise a game plan of where digitization would be the most effective for their organization. They predict that the following four technologies will revamp the finance team:
- Automation and robotics “to improve processes”
- Data visualization “to give end users real-time financial information”
- Advanced analytics for finance “to accelerate decision support”
- Advanced analytics for business “to uncover hidden shareholder value and growth opportunities”
McKinsey & Company also details two digital revamps that will greatly affect workflow and reporting in finance. Robotic Process Automation, or RPA, is “a category or automation software that performs redundant tasks on a timed basis and ensures that they are completed quickly, efficiently, and without error.” This ties back to the concern of taking job functions away from finance employees, yet it was explained that numbers need human explanation for them to give meaningful guidance to a company.
The second is a self-service approach, such as a dashboard, that enables employees and key stakeholders to pull the information they need in live time without waiting to get reports sent to them. Chandra et all explain that “this self-serve approach has decreased the need for the finance group to generate reports by more than 50 percent and has cut the cost of reporting by 40 percent.”
Even though the promise of these new technologies and procedures stand to make individual workflow and company-wide procedures more streamlined and accurate, there is still a cloud of confusion and resistance.
Tim Sandle for Digital Journal explained that “across those tasked with leading digital transformation, the executives reported that resistance to introducing new ways of working was common and many felt overwhelmed by digital complexity.” This sentiment exists even though the CFO is the perfect person to take on this challenge, according to the Global Banking and Finance Review: “only one C-suite executive sits at the intersection of strategy, technology, operations, and financial management: the CFO.”
James LaCamp, partner at Deloitte, conducted an interview with Todd Ford, CFO of Coupa Software, in which he discussed his views on the role of the CFO amidst digital transformation.
“You have to be able to get the right data to the right people at the right time. True digital transformation takes place when organizations use machine learning and artificial intelligence (AI) to mine that data for insights that improve processes and create value.”
Doug Alexander, EVP of Finance Operations at Shell, echoes Ford’s sentiment by saying that “we are focusing on getting the right people in the right place with the right skills to transform the organization.”
Based on that opinion, it doesn’t seem like finance employees need to worry about their job functions being completely eliminated by technology as the numbers generated by the technology are only as good as the people that tell the story behind them.
Ford goes on to divulge that “real time is where finance is headed: By 2025 there won’t be a need for a monthly or quarterly close process in my opinion; financials will be closed in real time.”
Where there is great opportunity can also be uncertainty and doubt, and that is perhaps the current climate of finance digital transformation summed up by Mark Evans, CFO at O2: “digital technology is fundamentally changing customers’ behavior and business models which is both a threat and an opportunity if we can foresee the next evolution.”
“A CFO’s Key Competencies For The Future.” Chartered Global Management Accountant, 14 Sept. 2018 <https://www.cgma.org/content/dam/cgma/resources/reports/downloadabledocuments/cfo-competencies-report.pdf>
“CFO Challenges in a Digital World.” Genpact, 14 Sept. 2018. <http://www.genpact.com/insight/article/cfo-challenges-in-a-digital-world>
Chandra, Kapil et al. “Memo to the CFO: Get in front of digital finance-or get left back.” McKinsey&Company, 14 Sept. 2018. <https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/memo-to-the-cfo-get-in-front-of-digital-finance-or-get-left-back>
“Coupa Software CFO Todd Ford on Digital Transformation and the Future of the CFO.” Deloitte, 14 Sept. 2018. <https://deloitte.wsj.com/cfo/2018/05/21/coupa-software-cfo-todd-ford-on-digital-transformation-and-the-future-of-the-cfo>
Sandle, Tim. “Are CFOs the answer to digital transformation leadership crises?” Digital Journal, 14 Sept. 2018. <http://www.digitaljournal.com/print/article/524126>
Sher, Anton et al. “Crunch time V: Finance 2025 (Our predictions).” Deloitte, 14 Sept. 2018. <file:///C:/Users/llestino/Downloads/us-ft-crunch-time-V-finance-2025.pdf>
Violino, Bob. “For digital transformation, CFOs are loosening the purse strings.” ZDNET, 14 Sept. 2018. <https://www.zdnet.com/article/for-digital-transformation-cfos-are-loosening-the-purse-strings/>