Why CFOs need to accelerate their digital plans
In 2016, a senior financial executive told CFO Magazine1:
<<< Start >>>
“Finance is IT. They are no longer separate items. Without IT, you can’t do finance.”
<<< End >>>
She was absolutely on the money. Two years later, and Accenture has helped more than 100 global Fortune 500 finance organisations to go digital. On average, these transformations have automated 50-60 percent 2 of the finance functions in question and shifted data and analytics from being an occasional ancillary finance activity to a consistent routine supporting the execution of business strategy.
The results have not just revolutionised finance teams, but profoundly improved business performance. Digital finance investments are having an impact beyond their immediate purview, transforming the business at large: Our research found 82 percent of CFOs seeing measurable business ROI from digital finance investments.3
However, let us start with the basics. The cost difference alone, between those leading the finance transformation charge and those falling behind, is startling. In our experience, leading companies are now spending 0.6 percent of revenue on finance, compared with 1.2 percent of their average counterparts.4
And cost improvements are just the start.
Digital doesn’t just reduce FTE input and lower cost—it improves responsiveness. When you fully automate accounts payable processes, you dramatically accelerate transaction processing times. When you automate reporting, documents can be produced in hours—not days.
But this is not just about doing the same thing better, cheaper and faster.
Digital not only liberates finance professionals from the tyranny of the spreadsheet, it embeds finance organisations with sophisticated tools and analytic techniques to deliver finance services differently. This means digital finance organisations can:
- Drive operational excellence – With cost reduction under control. CFOs can focus on promoting revenue growth and operational excellence. Digital allows CFOs to analyse the business through consistent, precise attention to financial metrics. On average, companies report 132 metrics to senior management every month—and 75 percent of those measures are based on lagging indicators.5 CFOs can review, streamline and modernise metrics so they align to strategy, lead to action and change behaviours, challenging performance against a variety of measures: shareholder value, vulnerabilities in strategy, debt, capital structure and risk.
- Deliver more value to the business – Before transformation, less than 10 percent (sometimes a lot less!) of overall finance time is spent on actual analysis. A massive, 60-70 percent are engaged in transaction processing and accounting. The rest is data collation and stakeholder management. An average 90 percent of the team are not in value adding roles. Even professional staff spend up to 70 percent of their time working on lower value tasks.6 In contrast, in a digital finance organisation, less than 20 percent of teams are engaged in transaction processing and accounting. More than 80 percent are free to use new tools to find insights, predict outcomes and offer advice.7 Using analytics, finance teams can offer the business powerful insights by connecting market and operational data to financial outcomes. CFOs can act as advisors that other leaders can rely on as a central source for key business information and its implications.
- Sharpen annual financial planning – The traditionally painstaking, time-consuming process of predicting operational and financial performance can now be done faster and better using insights from machines. Combining historical, internal and often unaccounted-for external data sources – like market reports, weather or geo-political events – can produce a far more accurate financial plan, far more quickly, than anything based entirely on human intuition.
- Placate demanding shareholders – More accurate forecasts and real-time financial performance metrics strengthen a CFO’s credibility with shareholders and the market.
Time to act
According to an Accenture Strategy survey, more than 75 percent of CFOs believe they are not very well positioned to meet the needs of tomorrow’s digital business, requiring a significant change in how they work. They know they aren’t spending enough time on decision support. They need cost reduction to be baked into BAU—and they need faster, more robust forecasting capabilities.
All I can say is: Be bold. Reimagine a different finance organisation. Stop thinking only in terms of testing and piloting. Think strategically and holistically. Break FTE activity into tasks (not roles). Decide what can and should be automated. Build a rolling 18-month digital road map for the entire function—and start executing.
The pace of change is only getting faster. The new imperative for business is exponential growth. If the finance function moves too slowly with digitisation, that will be a real growth inhibitor.
1 CFO Magazine, The Digital CFO
2 Accenture Strategy estimates based on insights from client experience
3 Accenture Strategy Digital Adoption in Finance Survey, September 2016.
4 Accenture Research
5 Harvard Business School Press, 2001
6 Accenture Research
7 Accenture Research