HOW TO BUILD A RESILIENT AND AGILE FINANCE FUNCTION
“It is not the strongest or the most intelligent who will survive but those who can best manage change.”
CHARLES DARWIN
The era of digital acceleration is here, and finance’s role in this seismic shift is beginning to become clearer. In just the last five years, the number of finance leaders responsible for their companies’ digital activities has more than tripled1.
However, digital adoption alone is not a silver bullet. COVID’s initial shock forced many organisations to expedite or even improvise their digital initiatives without a clear vision or strategy beyond short-term survival.
Now, as we emerge from this period of significant disruption and transformation, it is time for finance leaders to not only rethink the viability, sustainability and ROI of existing digital investments, but to create a stronger, more strategic financial roadmap and a resilient and agile finance function.
If the last two years are any indication, the future is something that is impossible to predict — but we can prepare for it. It is therefore incumbent on finance teams to identify and embrace their newly expanding roles within the enterprise. They must go beyond the balance sheet and reassert themselves as the architects of value, change and resilience their companies need to sustain long-term growth.
In this article, we will look at the role digital transformation plays in future-proofing finance departments such as Accounts Payable, Credit Management and Accounts Receivable.
EVOLUTION OF THE FINANCE FUNCTION
| Google is no longer just a search tool. Netflix has long outgrown its DVD rental roots. And what used to be everyone’s go-to online book seller (Amazon) is now the go-to everything seller and beyond. The willingness to evolve is paramount to success. The more open modern-day finance teams are to change, the more doors of opportunity they will open. | 69% of CEOs described their CFOs as being “Enterprise Value Creators2.” |
FROM BOOKKEEPERS & NUMBER CRUNCHERS …
The demands placed upon a finance function of a company are rapidly changing. Traditionally, finance departments would provide data and numbers that senior leaders used to make important business decisions, but they would not necessarily make those decisions themselves.
TO DIGITAL CATALYSTS & VALUE-DRIVERS
Today’s finance function has a much broader and diverse set of responsibilities that are often global in scale. What was once considered a primarily back-office support and number crunching function has now taken on a more strategic role with an emphasis on driving value through digital technology and critical thinking. It has become more critical than ever for finance departments to act as digital catalysts to drive business improvement initiatives and support real-time, data-enabled decision making across an organisation.
PROSPECTS & PRIORITIES
The wallop of COVID-19 has had a two-pronged effect on finance: accelerating pre-existing financial trends while simultaneously throwing open a Pandora’s Box of new economic and political unknowns that will linger for years to come. Thus, this is a “make or break” opportunity for finance teams to parlay their established financial acumen and increasing obligations into building a business foundation of substantive, long-term value. If they can successfully navigate the obstacles standing in their way, that is.
WHAT’S KEEPING CFOs UP AT NIGHT?
- Retention, retention, retention
It’s hard to stay competitive while top talent flees for greener pastures. What’s more, 3 in 4 CFOs say compensation changes are impacting their forecasting3.
- Supply chain logjams
Fewer than 10% of CFOs believe supply chain troubles will be resolved by year’s end4. Yet another serving of complexity added to the CFO’s already-full plate.
- Digital pains & pressures
The pressure to accelerate digital finance investments and competencies is only growing. No biggie, CFOs have more than enough bandwidth… “Yeah right” …
RESOURCING CHALLENGES
A DEEPER DIVE INTO THE FINANCIAL IMPLICATIONS
According to the CFO survey 2021, 74% of CFOs voted “labour quality/availability” as their most pressing challenge5.
It’s easy to see why: When a valued member of the team leaves, the implications go beyond the cost of replacing that individual. Talent loss also means:
- Months of effort & resources expended on recruiting & onboarding replacement
- Added expenses such as training costs, admin. costs, compensation increases, etc.
- Lower productivity, engagement & morale for remaining team members
- Negative impact on customer service & overall business reputation
“In my experience, team morale significantly improves when they’re able to focus on more advanced processes and tasks.
This requires CFOs to broaden their strategy of adding value across finance and the company.”
Michelle Demarco, CFO | ENVISTA
BUILDING A RESILIENT FINANCE FUNCTION
A 3-STEP ROADMAP
Do not let unexpected events – such as COVID-19 – catch you off guard. Resilience is all about ensuring it is business as usual when the unexpected happens. What is needed is a framework to build a resilient finance function to construct a more future-proof organisation. There are many ways to get there, but you cannot go wrong with these three objectives:
- EMPOWER FINANCE PROFESSIONALS
The expectations of today’s top talent — particularly the Gen Z/Millennial varietal — go beyond higher
wages. According to Deloitte research, modern workers want a job that is “meaningful, fulfilling and
contributes to something bigger than themselves6.” Organisations that can empower their finance teams in this way will enrich their business for years to come.
- BE DIGITAL-FIRST
Digital is taking over. Recent Gartner research shows that 82% of CFOs report their investments in digital are accelerating7.
This means finance leaders going beyond further developing their own digital prowess and rather restructuring finance to support future digital initiatives.
- BUILD A FOUNDATION OF RESILIENCY
Think COVID was simply a one-off bump in the road? Not so fast. A 2021 Deloitte survey found that a
whopping 60% of global leaders see “occasional or regular” disruptions of this scale moving forward8. In
other words, the architectural groundwork being laid by finance leaders now will have a lasting impact when the headwinds of uncertainty return in full force.
FINANCIAL TRANSFORMATION
WHY AUTOMATION IS A FINANCE FUNCTION’S BEST FRIEND
The evolution of document process automation perfectly aligns with the evolution of the modern finance department — going from a transactional-heavy business focus to now having a much broader, more strategic influence.
Now is the time to pursue financial transformation through a single automated platform. This type of technology enables organisations to address the wide range of both immediate and future priorities:
- Improve cashflow & revenue streams
- Optimise cost control & operating margins
- Reduce fraud risks impacting financial health
- Boost profit margins via better asset utilisation
- Reinforce employees with more productive, purposeful jobs
- Enhance customer experience & future business opportunities
- Leverage advanced data analytics & cognitive technologies
- Attract new talent while simplifying training/onboarding
DESIGNING YOUR DIGITAL APPROACH
| Given the increasing pressure on finance teams to deliver more value, it’s no surprise that the adoption rate of digital transformation is accelerating. Digital technologies are helping finance reach its true potential. | By 2023, 50% of large finance organisations will use AI to create short-term financial forecasts9. |
IS RPA ENOUGH?
The use of RPA has seemingly become the de facto choice for finance teams thanks to its proven results in delivering efficiencies to tedious, easily repeatable processes. However, what RPA cannot do is fill in those pesky manual gaps that require more complex judgement and prevent a finance function from achieving widespread digital transformation.
HOW AI FILLS THE GAPS
What is recommended is combining RPA with AI tools such as machine learning to maximise results, often referred to as “hyperautomation.” Not only do automation solutions play nice with ERP systems, the AI technology that powers them picks up where RPA leaves off — further freeing up staff while enabling finance function to capitalise on more strategic activities.
SOLUTIONS AS SMART AS THEY ARE SIMPLE
Best-in-class automation solutions are not meant to replace the people and processes that create value for your company. Instead, think of them as a digital assistant that never takes a day off, freeing up your finance teams to do what they do best.
ACCOUNTS PAYABLE AUTOMATON
Bringing strategic value to how & when you pay
Over two-thirds of finance departments are still typing in their accounts payable (AP) invoices10. Manual data entry means errors, errors mean delays, and delays often mean a more stressed-out staff and damaged relationships with vendors and suppliers.
Thanks to AI-driven data capture and other digital technologies, AP automation eliminates manual pains to deliver benefits across the AP spectrum such as:
- Greater efficiency via automated invoice approval
- Improved access & collaboration around AP data
- Enhanced control to reduce fraud risk & stay compliant
- Increased savings by capitalising on discounts
- Satisfied suppliers through timely, accurate payments
CREDIT MANAGEMENT AND ACCOUNTS RECEIVABLE AUTOMATON
The key to a healthy invoice-to-cash cycle
On average, companies that rely on manual accounts receivable (AR) processes take 67% more time to follow up on overdue payments11. To a CFO, this translates to higher operating costs and DSO, difficulty in managing credit risks, and a harder time staying competitive when times are tight.
Many companies continue to rely on manual approaches to manage credit, leaving the credit control teams with little time to focus on strategic high-value tasks.
By automating credit management, companies can avoid extending credit limits to high-risk customers and lower the rate of late payments. Automation of credit management and AR optimises the invoice-to-cash process and removes the obstacles preventing timely cash collection, resulting in:
- Faster collections via automated tasks & predictive analytics
- Improved decisions with better cash collection forecasting
- Faster allocation through AI-powered efficiencies
- Instant visibility into all customer actions & performance
- Happier customers thanks to more strategic relationships
“One significant change since implementing a cash automation solution is that the banking team is under much less pressure to complete payment allocations each day. They have more time to focus on their other duties and learn new tasks. They enjoy the benefits it has provided.”
Pamela Rochester, OPERATIONAL TEAM LEADER | LAMINEX
BENEFITS THAT ALIGN WITH THE PACE OF CHANGE
The benefits of an organisation’s digital investment need to align with the pace of change. That is what makes automation so appealing — the results are as transformational as its ambitions.
Cashflow position that is healthier & more stable
Automation’s real financial impact is how it bolsters a company’s cash and credit health by allowing you to:
- Capture early pay discounts
- Remove bottlenecks that slow down collection & allocation
- Avoid late fees & other unnecessary expenses
- Reduce fraud & other risks
Employees who feel fulfilled & appreciated
Employees will always be the straw that stirs the organisational drink. Automation keeps them happy by enhancing their jobs with:
- More dignified, meaningful & impactful work
- Less stress & more autonomy
- Increased well-being & career-pathing
“Automation has changed our lives in terms of cash allocation. We wanted a simple tool to provide automation for a manual process and stop getting up at 5:00 am at month end to process payments. We were successful in this transformation.”
Mozima Mohammed, CREDIT MANAGER | FLETCHER STEEL
Decision making that is guided by “good” data
Digital transformation requires all hands-on deck — especially when it comes to aligning and integrating data. Automation simplifies the struggle by equipping finance teams with custom dashboards for:
- Real-time data tracking
- Predictive forecasting
- Performance monitoring
Business growth & continuity in any circumstance
Have a generalised feeling of pessimism about the future? You are not alone. Fortunately, automation is a great tool to adopt a more “glass is half full” mindset by helping businesses:
- Improve cash position
- Attract & retain staff
- Scale & adapt quicker
CONCLUSION
DON’T WAIT AROUND TO MANAGE CHANGE — CREATE IT
The onset of the recent pandemic has created an unprecedented shock to businesses globally, but it has also presented finance functions with the opportunity to transform and build for the future. There is a clear mandate for finance departments to become more agile, and more accurate in their day-to-day tasks. What is required is a careful orchestration across finance functions and leaning heavily on data to accelerate the scale and pace of decision-making.
It may even mean rethinking old business models and adopting new ones.
Will it be easy? Hardly. But that is what being a future-ready finance function is all about.
SOURCES:
1. Mastering change: The new CFO mandate. October 7, 2021. McKinsey & Company.
2. The Future of Office Finance: How to adapt to new trends & shifts in the industry to optimize for success
3. Most CFOs face high turnover rate, labor shortages. September 3, 2021. CFO Dive, Dive Brief (based on PwC research).
4. Data & Results – Q3 2021: Cost Pressures Mount Amid Widespread Supply Disruption and Labor Shortages, October 14, 2021. The CFO Survey.
5. Data & Results – Q3 2021: Cost Pressures Mount Amid Widespread Supply Disruption and Labor Shortages, October 14, 2021. The CFO Survey.
6. Elevating the workforce experience: The work relationship. Langsett, Melanie. Deloitte. March 9, 2021.
7. Top Priorities for Finance Leaders in 2022: The Path to Autonomous Finance, 2022. Gartner for Finance.
8. 2021 Deloitte Global Resilience Report: Coping with the unexpected challenges, Deloitte Insight. 2021.
9. Top Priorities for Finance Leaders in 2022: The Path to Autonomous Finance, 2022. Gartner for Finance.
10. Accounts Payable: Automation Trends 2022: The Speed of Change, 2022. Institute of Financial Operations and Leadership (IFOL).
11. B2B Payments Innovation Readiness Playbook: Adapting to Cash Flow Challenges Posed By The Pandemic, December 2020. A PYMNTS and American Express collaboration.