As the tsunami wave of digital transformation washes across every industry, a new champion is emerging: The Chief Financial Officer.
As we all are pretty aware of by now, Digital transformation is all about the use of new technologies to drive significant business improvements. Emerging innovations such as artificial intelligence (AI), Robotics Process Automation (RPA), and the Internet of Things (IoT) are transforming the way people work - paving the way for process improvements that minimize costs while maximizing productivity and efficiency.
Between 2018 and 2021, IDC predicts that companies will spend nearly $6 trillion on digital transformation initiatives. Thus, most companies are no longer struggling with if they should embrace digital transformation, only where and how much they should spend to maintain a competitive edge in the global marketplace.
At the center of this tidal wave are CFOs, charged with the double duty of transforming their own Finance Departments while also taking the lead in determining data and technology strategies that drive growth and operating velocity across the business. Modern CFOs are no longer pigeon-holed as number-crunchers, as much as they are now expected to serve as key advisors with their fingers on the pulse of an organization’s core objectives.
And in today’s world, it's become pretty evident that business insights are inextricably tied to emerging technologies.
Today’s C-suites and respective boards expect CFOs to provide real-time, data-enabled decision support. They are expected to interpret varied data streams to build business cases and enhance growth and investment outcomes, all while delivering intelligent forecasting and budgeting.
And with a responsibility for shareholder value, it is often forward-thinking CFOs who are taking the lead in pushing digital transformation to the top of corporate agendas. CFOs are the first to measure the benefits of digital initiatives, and the often greater-than-expected returns on investment (ROIs) have many assuming a role Accenture refers to as “digital apostles” for their organizations.
By offering quantitative insight into projected revenue and shifting business trends, CFOs are integral to helping businesses strike the right balance between automation and staffing levels – and spot new opportunities and profit centers.
IT may be the architects of transformation, but CFOs are the discerning investors in internal digital initiatives that can add value to their organizations. With that being said, let’s take a look at four key ways digital transformation is also affecting the role of the CFO:
- Minimizing distractions that stop Finance Departments from becoming strategic business partners. Finance Departments will always be responsible for low-value tasks like closing the books and billing customers. But this transactional work drains too much time and energy from the Finance Team and keeps it from becoming the true business partner the company needs.
The average Finance Department spends at least 75 percent of its time on monotonous tasks – leaving little bandwidth for the critical, high-value work that drives growth and provides strategic insight to a business. Even CFOs can’t avoid getting dragged into issues that distract their attention from more important activities: fixing mistakes, soothing customer complaints, and chasing down invoices that weren’t paid.
Integrating digital transformation into their own department is arguably the most important task of the modern CFO. Historically low unemployment rates already have CFOs struggling to hire skilled professionals. Maximizing their team’s talent – and building the type of Finance Department that’s able to play a critical role in strategic decision-making – means automating many non-value added tasks and refocusing their employees on more important strategic work. At the same time, the data and analytics these innovations instantly provide enable human employees to make optimal business decisions.
Digital tools are more efficient and less error-prone than human workers - and they don’t need to rest. Not only do they enhance productivity by completing tedious manual tasks faster, they drastically reduce mistakes and rework. RPA implementations alone drive average cost savings of 40 percent and productivity improvements of 41 percent. In fact, a whopping 70 percent of businesses recover their investment during the first year.
- Meeting the mission-critical need for high-value business advice and informed decision-making. Best-in-class CFOs are shrewd, proactive business partners, and digital tools are arming them with powerful new insights for boosting financial performance. With access to better, real-time data, CFOs and their finance teams can more easily spot patterns and trends, gain better insights, offer timely analysis to key decision-makers, and adapt faster to changes in the marketplace.
For instance, digital dashboards can instantly identify and evaluate the effects of unexpected events like supply chain disruptions or new entrants into a market. AI tools can reveal patterns that indicate a likelihood of nonpayment or fraud, an extremely time-intensive endeavor when done manually. Machine learning and AI algorithms also create predictive models that help CFOs minimize risk and achieve higher returns from investments and capital market financing.
Digital tools can improve the speed and accuracy of financial plans and forecasts as well. Automated on-demand budgeting, planning, and forecasting capabilities provide the agility finance teams need to adjust to the short shelf life of plans and forecasts in today’s fast-paced business environment.
Previously, Finance Departments consumed with transactional tasks, struggled to keep up with the constant fluctuations that result from macro-economic or geopolitical volatility on the world stage. By adopting digital tools, changes from tax policy to foreign currency valuations can be quickly and easily modeled, revising assumptions and offering instant feedback that help businesses revise their strategies.
- Achieving benefits that expand beyond process improvements and cost savings. Digital transformation initiatives often stem from a desire to boost profits, cut costs, and improve process efficiencies. More than 62 percent of CFOs say implementing new technologies has improved the efficiency and effectiveness of their business, according to a CFO magazine report.
But progressive CFOs are also beginning to take a broader view of technology investments as well, digging deeper to also increase the value of intangibles like customer satisfaction. Nearly half of CFOs say digital transformation has led to improvements in customer experience, analytical focus, decision-making processes, and overall management strategies this year, CFO magazine reports. Adopting this big-picture approach requires CFOs to forge a deeper understanding of emerging smart technologies and data analytics so they can grasp its benefit for high-value, strategic purposes.
- Changing responsibilities demand new skills on Finance Teams. Digital transformation is also transforming the role of CFOs and their finance teams. The technology-focused Finance Department of the future will require new competencies to drive business growth and achieve enterprise goals. Besides deepening their own technology expertise, CFOs will need employees who not only possess traditional finance backgrounds - but also embrace the opportunity to learn about emerging technologies and process designs.
More than half of CFOs rank data analytics as the most important skillset to develop within their department through additional hiring or training, according to CFO magazine. A third would also like to see employees with technology acquisition expertise.
There's no doubt that Digital transformation is a key to propelling a business forward in today’s ultra-competitive environment. There's also little argument that emerging technologies can enable CFOs to take full advantage of their team’s talents and skills, and solidify their spot as an integral member of the management team. But the real key? The real key will be progressive CFOs who can be the driving force for ensuring that digital initiatives that the business adopts, move it forward on its growth agenda.
Ready to begin your company’s digital transformation? At Auxis, we support organizations through the entire journey, starting as your implementation consultant all the way to managing and operating technologies like RPA for you under our Business Process Outsourcing model.