Global businesses have had a lot to deal with over the past year – forcing an increase in remote work, super-scrutinized business spending, and even the inclusion of cleaning products as approved employee expenses.
Yet, despite the unprecedented level of challenges and change, a large proportion of finance leaders are strongly optimistic for the future. According to Deloitte, CFO confidence is at a 12 year high as of December 2020 — with specific exuberance about business growth in the coming months. With the global economic outlook shaky at best, the rate of infection increasing, and political upheaval ongoing, what is fuelling this optimism?
On closer inspection, THE crucial factor in the positive outlook is the focus on digital transformation within Finance.
Defensive v. offensive finance strategies
A crisis drives both defensive and positive reactions when it comes to technology adoption. Defensive measures such as staff layoffs and office closures are standard, but for those organizations looking beyond cost-cutting, COVID-19 has presented an opportunity – a chance to implement new technology solutions to automate processes, optimize workflows, and empower employees to mitigate against the adverse economic impacts of the pandemic.
Numerous organizations accelerated digital transformation initiatives in 2020 as a direct response to the pandemic, but many finance leaders are looking even further.
CFOs who understand how and where to use technology to good effect within the finance department are increasing efforts to reduce manual processes and better equip the remote workforce moving forward. Those predicting growth in 2021 are focusing on implementing new technology and—according to Gartner—priority areas for CFOs in the coming year include the increased use of analytics, workflow automation tech, and accelerating digital skills.
Leveraging new technology is critical to finance
When a finance team uses new technology, it increases the efficiency of the department as well as across the entire business. Beyond pure efficiency, however, finance becomes a champion for technology use across the broader organization. Yet, this does not happen by accident. Technology adoption only comes as a result of strategic vision, direction, and proactive investment — key traits required of a modern CFO.
But those who are not investing in tech are getting left behind — so far behind that they may never be able to catch back up.
Companies who have already adopted and mastered the basics of automating invoice processing, procurement, and expense management are now focusing their investment on emerging critical areas of focus that could boost business success, including advanced analytics, AI, and RPA.
These are obvious areas for investment. AI, Machine learning, and RPA in finance can all help CFOs better understand vendor payment risks, detect the statistical probability of invoice anomalies, identify fraudulent expenses, and even optimize the distribution of workload within the department.
And there’s plenty of room for improvement
Technology deployment is the first step in an ongoing process — effective usage of that technology and the adoption by users comes next. The drive to enable remote working across the whole organization has deployed a lot of technology in recent months — but not in areas that directly increase the finance department’s efficiency. Finance leaders recognize there is much room for improvement.
Two specific areas that are prime for further disruption and enhancement are AI-based invoice processing and expense auditing. Currently, less than 20% of invoices are processed “straight-through”, a key reason why the average time to process an invoice is still over 10 days. Those organizations with more proficient automated processes only take 2.9 days to process an invoice on average — a stark illustration of how significant an impact the effective deployment of advanced technology can have within the finance function.
Go on the offense or lose out big time
Despite working through possibly the most challenging business year in living memory, finance leaders are looking forward with a positive outlook. The sharp transition to remote work and the unexpected turn of events over the past year forced CFOs to implement a clear, long term vision, and strategy.
Many succeeded, defining clear views of which technologies warranted priority investment and deployment — and these are the organizations that will thrive in the coming months and years. But some adopted a more defensive approach, choosing to focus on cost-cutting rather than investment in technology — these are the organizations that very quickly will find themselves on the wrong side of a growing technical divide.
Commentary by Anant Kale. Here’s what you’ve missed?
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