Award-winning journalist Oliver Pickup on the digital tools finance teams need in this time of uncertainty
By Oliver Pickup, Award-winning Writer, Pickup Media
With real-time data at their fingertips, greater connectivity to other functions and by dialling up automation, financial professionals can drive strategy and improve organisational agility in this increasingly tumultuous period.
In 2022, businesses operate in a ‘VUCA’ world – an acronym for volatility, uncertainty, complexity and ambiguity, coined in 1987. Organisations that give their finance teams digital tools and invest in cloud computing and automation, among other technology solutions, will come out on top, whatever the business landscape. However, with a global recession looming, organisations must double down on technology solutions today and empower their financial teams to survive and even thrive tomorrow.
This approach is markedly different from the one many businesses used after the 2008 economic downturn, when cutting back was the common strategy. Thanks to the gallop of digital technologies in recent years, investment in pioneering innovations is critical to triumph in times of crisis.
Although there is a widespread understanding that digitalisation must be at the heart of financial processes, allowing businesses to respond with greater agility and better support business objectives, there is still a worrying sluggishness in many areas. Hence, tech-savvy finance functions, equipped with digital tools, will seize a significant advantage over rivals, while slow adopters will fall.
Peter Boerhof, VAT Director at Vertex, a provider of tax technology solutions, offers one example. “Despite six out of 10 financial decision-makers stating that new technologies will provide opportunities for business scalability, our research indicates that manual processes are still being used for indirect tax management,” he says. “This is becoming increasingly unsustainable at the rate sales continue to grow.”
In this instance, Boerhof argues: "Best-in-class technology can handle the changing requirements of the tax landscape, apply correct tax determination and calculation rules to online shopping baskets in real-time and help ensure data is error-free and audit ready.”
He adds: “This frees tax teams up to provide valuable strategic insights to move the business forward, but also means new territories can be entered confidently.”
Unparalleled insights to deliver business goals
The Dutchman makes an important point: more than before the coronavirus crisis, a finance function equipped with data and digital tools can – and should – shape business strategy. Traditionally, these teams have been a siloed part of businesses, buried away from other departments with their members completing process-led tasks with their heads buried in spreadsheets.
The stereotype of financial professionals as ‘number crunchers’ is outdated in the digital era. Developments in technology have led to the finance function increasingly becoming a centralised business function, partnering with other parts to deliver departmental and broader business goals. Now, in a VUCA world, the finance team is at the cutting edge.
With real-time data at their fingertips, combined with advances in automation plus connectivity to other business applications – including human capital management, customer relationship management, supply chain and payments systems – finance professionals can provide unparalleled insights.
Further, they can establish agile financial technology such as continuous planning, which provides a clearer picture of the numbers and the reasons for the change in figures, be it supply-chain issues, declining demands, or a myriad of other factors. The days of an annual or bi-annual financial review should be over, given six-month predictions run the risk of being risibly out of date within weeks, if not days.
The tech-enhanced role of the modern Chief Financial Officer has never been more closely tied to the success – or failure – of a business. With a global economic crash on the horizon, those who have not already invested in tech solutions and improved efficiencies in the financial function will likely struggle.
Given the recent increase in volatility and uncertainty in the world around us, continuous planning is an essential business practice – the annual fixed budget is no longer fit for purpose.
Spurring financial transformation
“Business leaders need to invest in a technology strategy that expedites business value from data while future-proofing their tech stack by easily integrating new and existing finance tools and reducing operating expenses,” says Nick Jewell, Technology Evangelist at Incorta, an analytics platform for acquiring, processing, analysing and presenting business applications data. There’s much work to do for many businesses, though.
“Sadly, finance teams are often mired in silos of dirty data that require considerable manual effort in order to be fit for purpose when it comes to analytics,” he continues. Indeed, the Workday CFO Indicator Survey 2021 found that only 5% of a finance team’s time is spent generating actionable insights for the business, compared with nearly 75% spent on lower-value background data preparation activities such as summarising or filtering datasets.
Now, Jewell suggests, with many businesses facing economic hardship, the CFO is pivotal to an organisation’s prospects. Owing to rising inflation, budgets will be squeezed, meaning month-end reporting will be under greater scrutiny.
But could that added pressure on business operations be the spur organisations require to improve financial processes, revamp old ways of working and fund what Mark Bodger, Director at financial and operational planning consultancy ICit Business Intelligence, calls 'financial transformation'?
“Given the recent increase in volatility and uncertainty in the world around us, continuous planning is an essential business practice – the annual fixed budget is no longer fit for purpose,” he says. “The ability to plan resources in response to business challenges and opportunities requires rolling forecasts and scenario-planning capabilities.”
The increased burden on CFOs, in particular, necessitates the evolution of processes as well as individuals and their teams. To maximise this opportunity, finance leaders and their staff must have the requisite data science skills. Again, this requirement is a definite upgrading of what most people consider the typical accounting background.
Concurrently, quality data from across a business must be shared to inform financial teams better and build long-and-shorter-term strategies. The value exchange for this greater visibility of data is that a CFO is expected to communicate insights to the rest of the C-suite – no easy task without adequate expertise, but a win-win for business.
CFOs leading the charge in the digital age
“The increased demand on CFOs from Chief Executives and other board members has put finance and the service they provide in the spotlight,” Bodger says. “A major shift has been the need to react in the moment and provide clear leadership and decision support to mitigate risks and take advantage of new opportunities.”
As organisations firm up their hybrid working strategies, the onus is on CFOs and their colleagues to test what’s working. “The challenges of remote working with legacy on-premise systems, poor connectivity and often firewalls preventing access, meant many finance functions could not operate efficiently,” continues Bodger. “The most pioneering finance teams understood this and moved their systems to the cloud.”
In addition to shifting to cloud computing, high-growth organisations have realised that they can no longer rely on legacy systems and manual processes to scale operations. But what are the best digital tools that empower finance teams in a VUCA world? “The core requirements are an enterprise resource planning and customer relationship management solution that integrate seamlessly,” says Bodger. “This means the transactions that flow in and out of the business are recorded accurately in the ledgers. These form the factual basis for planning and reporting future outcomes.”
Excitingly, we are just beginning this era and early movers will gain much ground. But, ultimately, staying still is not an option, as Darwin’s theory of evolution will be played out in digital form.
“Those that wish to stay ahead of the pack invest in the best people, processes and technology,” concludes Bodger. “CFOs are hugely influential in determining strategy and driving operational rigour to achieve companies’ objectives. While keeping score is necessary, having the best tools to help make the right decisions for the future will set them apart.”
Those that wish to stay ahead of the pack invest in the best people, processes and technology.
