Digital transformation is in full swing within financial enterprises of nearly every size, but one thing has become crystal clear: The CFO must play a crucial role in determining the strategy and tactics to automate and standardize key processes throughout the organization.
The transformation of the accounting and finance function is not the result of mere happenstance, but rather profound social and economic shifts, such as supply chain disruptions, rapidly changing consumer behavior, growing sustainability goals and advances in digital technology. These factors are forcing leaders to reposition how they are managing their organizations to ensure future success — and CFOs are looking at automation as a key driver of change.
A recent Horváth study, for example, found that 87% of CFOs surveyed named “process standardization, centralization and automation” as the primary goal in their digital transformation efforts. That was followed by “reduced costs through process automation” (63% of CFOs); “cross-functional change to end-to-end process models” (50%) and “improved service portfolio” (45%).
Unfortunately, many organizations are falling behind when it comes to integrating today’s digital tools. A Workday/FT Longitude survey found that 42% of finance leaders said their organization “lacks a digital finance transformation strategy.”
To successfully automate accounting and financial processes, CFOs must look at it from a holistic perspective. Important aspects include integrating different technologies, using machine-assisted intelligent services (for forecasting and simulations to support decision-making, for example), understanding the role of data and artificial intelligence, and leveraging the power of the cloud as an enabler for standardization and continuous innovation.
A fully automated finance function remains a vision for the future, but we are getting closer. Here is how you can get your organization on the right track to reap the benefits of automating the accounting and finance function:
1. Be mindful of employee pushback. A high degree of automation requires the right mindset. Employees and managers must be convinced of the rationale and the benefits. Automation should not be viewed as a threat, but rather as an opportunity.
2. Connect each step in the process. Automation runs along the respective process chains. Tasks at the end of the process can only be automated if a corresponding prerequisite task is completed at the beginning. For example, an invoice without a purchase order reference and/or goods receipt cannot be released automatically.
Automation is also cross-functional. Departments that automate processes within their boundaries may not necessarily contribute to automating the overall process. In some cases, a functional focus may even result in departments optimizing their tasks at the expense of others. Departments and divisions must be closely interlinked and work together where applicable. Fortunately, finance and accounting sit at the crossroads of most value chains within the organization.
3. Take a holistic approach to technology. To create a stable technological basis for automation, attention should be paid to the following points:
- Platform approach: End-to-end automation along process chains requires the interaction of different systems and modules. The more these systems and modules are based on a uniform platform, the deeper the technological integration at the handover points in the process flow will be, resulting in more streamlined and simplified automation processes.
- Release capability: Care should be taken with information technology architecture. New releases should not jeopardize the functionality of automated processes. In-house developments or vendors that cannot integrate new releases into their solutions in a timely manner should be avoided.
- Maintainability: Companies should build sufficient internal expertise to enable their personnel to operate their systems. Through cloud and software-as-a-service offerings, the focus will increasingly be on mapping specialized processes and requirements in the technical systems, and less on the administration of hardware and software.
A methodical approach to change
Successful and systematic automation of key processes requires that the departments involved are all aligned. Here are other guiding principles that CFOs should follow:
- Keep your eye on the prize: Create transparency and clarity regarding the goals to be achieved through automation. There should no longer be a discussion about why, but only about how. Remember, even during the current economic uncertainty, digital transformation should be one of the last areas cut, not the first.
- Have a long-term perspective: Automation is a marathon, not a sprint. A lot will change and there are many opportunities in this process if everyone pulls together. Executives should act as an anchor for the defined automation goals within the company.
- The transformation never stops: Technologies, methods and requirements are constantly evolving. The finance transformation acts as a catalyst for continuous process improvement, even after the transformation project has been completed.
Process automation will likely affect the entire organization, so the governance role will need to be significantly strengthened. Standards and rules underlying automated processes must be defined, implemented and followed. Effective governance is essential to mitigate the risk of human error and safeguard the organization.
Also, it is important to know there are limits to the use of automation in the finance and accounting departments outside of transactional processes. Assessing new accounting standards, working with auditors and tax auditors, monitoring and controlling systems and tools, meeting internal compliance requirements, as well as investor relations and business partnering — while these are all areas of accounting and finance that cannot and should not yet be automated to the maximum possible extent, they would nevertheless all benefit from greater technological support.
It is no longer a question of if, but when and how, your organization will need to integrate more automation within the accounting and finance function. CFOs who start the process now will be able to improve operations more effectively and efficiently in the future and better position their organizations to stay ahead of the competition.