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Digitalization in Finance

Digitalizing finance: a major challenge for organizations of all kinds.

According to Gartner, the term “digital” in the early 2000s only ranked among the Top 5 priorities for CEOs in 2.1% of the companies surveyed, whereas today it is a priority for one out of every five companies. The proportion of companies that have a digital strategy rose from 62% in 2018 to 82% in 2019, confirms Gartner, which considers that 90% of companies today have already been confronted with different types of disruption in their business models.
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Why digitalize your accounting?

 

Corporate entities are now all concerned by digitalization and are faced with the need to digitalize their accounting to simultaneously adapt manual processes and services and accomplish other goals, namely: achieving greater agility, smoother flow, and simplicity; improving relations with customers, which is an issue that affects both sales and margins; leveraging electronic platforms to increase performance and productivity; and rethinking human resource management to increase people's digital skills.

 

According to a study on finance departments in 2020 by the human resource consulting firm Robert Half, 80% of CFOs can already see the difficulties they will have recruiting and retaining skilled teams of co-workers, particularly people with digital profiles.

 

This performance requirement in a complex and uncertain environment is a recurring factor for finance departments: according to a recent survey by PricewaterhouseCoopers (PwC) on 2020 priorities for financial directors, it has been a leading consideration since 2018 and will remain so for the next three years. According to the study,  the goal is to “make relevant,  high-quality, and meaningful data available to better anticipate and facilitate decision-making. Companies need open systems that can collect non-financial and other types of data.”

 

Digital transformation and its assortment of new technologies therefore represents a major opportunity for financial decision-makers. That includes digitalization as a priority, but also Big Data, analytics, Robotic Process Automation (RPA), not to mention artificial intelligence and virtual assistants. All these technologies have a transversal and universal goal, which is to valorize data.

 
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According to a study on finance departments in 2020 by the human resource consulting firm Robert Half, 80% of CFOs can already see the difficulties they will have recruiting and retaining skilled teams of co-workers, particularly people with digital profiles. 

If companies were to valorize data, the status of financial professionals would thus also be valorized. With digital transformation, finance professionals change their positioning within their organizations. They are seen less as occupying back-office roles and more as people who support business efforts. Being successful with this evolution is critical in a world where data volumes are increasing at a dizzying rate.
 
International Data Corporation (IDC) estimated that the size of the global “datasphere” (which comprises all the data that is created, collected, or duplicated around the world), represented about 33 zettabytes in 2018, compared to 10 zettabytes in 2012. The number is expected to reach 175 zettabytes by 2025.

Did you know ?

  • Suppliers call management represents 41% of an accountant’s time,
  • Payment delays management represents
    31% of an accountant’s time,
  • Average invoice processing time from intake to approval varies from 45 days for Novices to just 5 days for Innovators,
  • The cost of processing an invoice varies between £12.40 per invoice for Novices and £1.94 for Innovators, representing a profit contribution of £10.48 per invoice.
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Financial data is no exception to this trend of information overproduction, notably because regulatory obligations require more information to be stored for longer periods of time, and because business intelligence and visualization tools incite organizations to increase their use of dashboards. Also, digital transformation speeds up electronic processing and increases the volume of digital data. Data remains at the heart of the process, such as invoices in electronic solutions, structured data in predictive models, labels for classifying accounting entries, product references in ERP systems, and more.
 
According to PwC, people in the most efficient finance departments are already spending 75% of their time analyzing data. A report by Dresner Advisory Services published in late 2019, shows that 40% of finance departments intend to acquire Big Data solutions in 2020, notably as a way to benefit from information in real-time, align their work with management needs, and make data more reliable.

 

The CFO role in digital transformation

 

Companies and finance departments are clearly going to continue investing massively in digital technologies, pressed by upper management. According to IDC, European companies are going to dedicate 271 billion dollars to their digital transformation in 2020.

 

Even though these companies may have some degree of maturity in this area, and the effort continues to move forward, there is still enormous margin for progression: one out of every two companies is still at the thinking or would-be-good-to-have stage, Gartner is confident that 67% of corporate boards will also place digital technologies and disruption at the top of their list of challenges, ahead of acquiring skills, handling regulatory issues, growth, and profitability.

 

Two thirds of all CFOs feel that their organization’s future success depends on proper alignment with technologies. Similarly, in its 2020 study on finance departments, the human resource consulting firm Robert Half reveals that the top priority of CFOs is to keep up with technological progress, even more so than with regulatory issues. These priorities were the opposite in 2017: “Process automation, implementing digital solutions for corporate departments, and the need to limit management costs and risks are issues of concern for finance professionals.

 

To address these issues, finance decision-makers, accountants, and auditors today have four very different roles to play: they must be sprinters, as digital transformation is a continuously accelerating process; they must be marathon runners, as they need to be able to keep up the pace with respect to data flows and multiple work projects arising from digital transformation; they must be coaches, guiding staff and business units; and they must be referees, confirming and securing decisions.

 

It is nothing less than mission impossible for financial decision-makers to handle all these different facets alone. Fortunately, technologies are here to facilitate and accelerate the CFO role in digital transformation. Compared to their historical role as financial decision-makers, CFOs move from a support function towards that of a value creator with predominantly technical expertise to optimize more assertive leadership within the value chain. According to the PWC study, 25% of financial directors become leaders in digital transformation thanks to their position at the convergence of all corporate functions.

The constant evolution of the CFO role

 

Watch now this roundtable from Sage, PwC, Salesloft, Yooz and Hotwire to learn:
 
How CFOs can use learnings from COVID to their advantage
Why now is not the time to play it safe when it comes to innovation
Why the CFO will play a central role in driving businesses forwards
How the CFO’s relationship with technology will change in 2021
How the CFO role will evolve to take on new responsibilities
How CFOs can drive innovation and agility in 2021
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Automation and digital transformation: what are the best new technologies for digitalizing your accounting?

 

In addition to the four roles mentioned earlier for CFOs, there are also five other core principles. CFOs drive performance, innovate, stay connected and mobile, communicate, and create value. A range of technologies applies to each of these missions. Steering process and organizational performance leverages an increasing number of Cloud applications and, of course, digitalization technologies such as AI and blockchain.
 
On the innovation side, artificial intelligence is already making headway into the finance function. Value creation is derived from a smart arrangement of technologies that feed the entire organization. 2019 was already an intense year for finance departments and Chief Financial Officers: according to the Protiviti consulting firm, 58% of finance departments increased their budgets for acquiring data visualization solutions; a similar proportion expanded its use of Cloud-based financial applications; 56% invested more in analytical solutions; and half of all CFOs invested in robotic process automation (RPA). These investments for the future are expected to show their benefits starting in 2020.
 
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Change management and digital transformation

 
Digital transformation has become an inescapable reality. But as American investor Warren Buffet once said, “only when the tide goes out do you discover who’s been swimming naked.”
 
2020 forced digital transformation upon almost every single business unit and function specifically finance departments that have lagged behind on digital tools and initiatives for quite some time, tending to focus more generally on marketing and the client experience.
 
But in order to make their digital transformation a success, companies have to take into account the human factor and consider the crucial role of change management in their digital transformation. Companies that experience the greatest difficulties carrying out their digital transformation successfully are specifically those that consider digital transformation above all to be a technology project that “people will follow” (McKinsey has observed that 70% of companies fail to reach their objectives; Forrester notes 60%) (2). It would obviously be an error in judgment to count solely on automatic adoption, as we can consider that the success of a digital transformation process is only 10% based on technology tools, but 40% based on organizational adaptation and 50% on effective change management. In other words, professional expertise and soft skills (non-technical skills related to how people work) weigh heavily in the functional richness of a given technology solution, however high-performance the solution may be.

Finance departments: What's your digital plan?

What does digital transformation really mean for finance departments in 2020? How can you catch up? 

 

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