CFOs Need To Drive Change Through Automation

The days of manual number-crunching are over. Innovation is increasingly dominated by the digital wave. Now, more than ever, it’s a case of adapt or fall way behind.

Across the globe, artificial intelligence (AI) and robotic process automation (RPA) is ushering in a new era of rapid change. Everywhere you look, AI is creeping into the corporate mentality. Companies large and small are looking to RPA and AI to improve efficiency and to reduce long-term overheads. Investment firms are offering automated investment accounts, retail franchises are turning to automated shop assistants, and banks are dramatically reducing the number of physical branches that they operate.

Just about every level and process within a company structure these days can benefit from automation to improve overall efficiency, customer service, compliance, and costs. Computerized business forecasting when combined with rapid data processing is outstripping human ability from one perspective. Another way of looking at it is to see the opportunity to take human decision-making to a new level.

With all this change taking place and the widespread acknowledgment that robotic process automation tools are the way of the future, why do some refuse to board the train? C-suit level is where the overarching strategy and vision is meant to emerge, if the benefit of automation is accepted at all other levels, then why not here?

Finance and automation

It is quite curious that many CFOs are content to be the traditional players of the corporate world. Often, CFOs will push technology trends hard within their companies but will stick with their own manual methods when it comes to the top financial function.

Taking a step back, does it make sense that the CFO function should be the only area in a business that dodges the digital era? Is there any practical or cost-saving reason why such a vital strategic and decision-making function should be content with slow and tedious processes?

Traditionally, a CFO has been tasked with the company reporting, forecasting, liquidity, ROI, and any adjustments that flow from those functions. Reporting by itself can be a mundane and immensely time-consuming responsibility that capitalizes much of a CFO and their teams’ time.

According to the latest PWC global survey of CFOs, 78% of companies are expected to reach advanced levels of digitalization by 2020. This may have been offset to some extent by the impact of the Covid-19 lockdown, but the trend will certainly resume as economies begin to recover. CFOs seem to overwhelmingly concede the need for digital strategies but neglect their own immediate sphere of influence.

The COVID era served to highlight this and a range of other shortfalls within many US companies’ financial planning mechanisms. More than half of businesses were unable to adapt effectively to the impending ramifications of lockdowns. Companies did not have early warning systems in place, suggesting that regular operational and financial reviews of trailing and leading company indicators were not up to scratch. Less than half of companies did not have an agile planning process in place. A lack of scenario modeling for forecasting adjustments left businesses flying by the seat of their pants.

In addition, 57% of surveyed CFOs found that time lags and disconnected data reporting made decision-making difficult and stressful. Sometimes it can take a freak event to expose the need for innovation and adaptation. If ever there was a need for enhanced risk management, forecasting, and real-time data, COVID should have certainly opened the eyes of the financial and accounting community.

What's in it for a CFO?

Broadly speaking, automation within a finance department removes the need for people to be bogged down with repetitive and time-consuming work that detracts from the bigger picture. Core financial processes can be streamlined by RPA to achieve a range of benefits.

Invoicing customers and collecting funds is essential for managing cash flow and business liquidity. Creating new customer accounts and invoices based on sales orders as well as collecting the payments still involves manual processes in most businesses. This function is prone to errors that can result in lost revenue and delays in cash flow. RPA streamlines these processes and automates reconciliation.

Paying vendor invoices for goods and services received is another financial task that is heavy on manual input. Most companies devote significant time and resources towards checking the accuracy of billed amounts and ensuring timely payment to avoid late fees. Matching purchase orders with billed amounts and manually capturing information from invoices is the bane of any accounts payable department. RPA can automate many of these tasks to enhance efficiency and reduce the risk of over or late payment.

Financial reporting is generally taken care of by finance ERP systems. Automation does not replace this tool; rather, it complements it by eradicating the remaining manual processes such as journal entries and external reporting.

Financial planning and analysis (FP&A) enters into the CFOs’ priority domain. After all, this is a key area where a CFO demonstrates their worth. A great deal of time is consumed by sourcing, aggregating, and formatting data instead of analyzing and planning strategically. RPA once again removes all manual aspects of data collection in order to free up time for better forecasting and decision making.

Financial automation is not just another IT project. It should be a standard feature in any companies’ business transformation plan or digital strategy. The role of CFOs is evolving and it is becoming increasingly apparent that they will need to board the innovation train.

The CFO of the future

Two years ago, the average number of business functions reporting to CFOs was four. McKinsey partners Agrawal and Brown have concluded their latest survey of CFOs in the US and have found that the number has increased to six.

Ironically, digital strategies are amongst the new functions that are being allocated to the CFO role together with the increasing demand for quality data from customers and industry sources. The need for reporting on outcomes will never go away but the role is becoming far more complex and strategy-driven. In effect, the position is moving away from a specialized function and becoming more generalized.

This will undoubtedly place a burden on CFOs as they try to juggle the broader-stokes thinking required for many roles that report to them and to create strategic synergies in the process. Eradicating resource-heavy manual tasks will not be helpful, they will become mandatory. If the changing role of a CFO continues on its current trajectory, then at least in terms of long-term strategy, the lines will become blurred between a CEO and a CFO. The most obvious solution for adapting to this challenge is technology.

The top financial position will demand heightened levels of efficiency, real-time decision-making, and multi-discipline thinking. The role's importance within the company and its ability to remain competitive will make it impossible to stay with the old-school finance and accounting mindset. Automation tools are the solution, the alternative is to become redundant.

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