All hands on tech: how to digitalise a finance department

The quest for greater cost-efficiency is driving ever more automation in finance, but CFOs must take several key factors into account if they’re to digitalise the function successfully
Illustration of a sailboat, with a mouse pointer as one of the sails

With corporate investment in automation, analytics and risk management systems on the increase ever since the start of the pandemic, research suggests that finance chiefs are planning to splash out even more on IT over the coming year. 

Digitalisation is a necessary consideration for any finance chief, given its potential to reduce costs, shorten processing times and boost productivity. But, while some are venturing into more advanced tech, such as artificial intelligence, others have only just locked down a cloud provider. 

To create a fully digitalised finance function, you first need a solid foundation on which to start building its basic features. So says Richard Beeston, CFO for Ozone, the provider of an application programming interface that supports open banking. He stresses that it’s crucial to “get the underlying accounting policies, transaction processing, financial control and regulatory reporting processes all working effectively”, whether digitised or not. 

Beeston’s recent experience of working with startups and scale-ups has shown him that “it’s these basics that enable a firm to adopt digital solutions in a considered manner, thereby avoiding the dreaded prospect of having to rebuild its systems at some point”. 

He adds that cloud-based accounting systems allow for automated bank reconciliation, account coding, billing and payments, while easing compliance processes such as the submission of tax returns. More cloud-based extensions can be layered on top of the basic program, including enhanced reporting functionality and the integration of HR and payroll systems. Harnessing the full potential of cloud-based accounting tech should in turn reduce the team’s burden of repetitive and mundane tasks. 

“I foresee the increased adoption of such integrations over the next 12 to 24 months, as well as the uptake of software that can handle the extraction, consolidation and integration of financial information from the vast numbers of software-as-a-service solutions that are being used daily by all functions,” Beeston says. “The finance team is invariably best placed to identify which third-party systems are being used – or being paid for but not used – across the company.”

Pinpoint tech priorities

Research published by Gartner this year reveals that CFOs are prioritising back-office automation as a way to boost efficiency in areas including revenue management, general accounting and internal IT services. McKinsey has estimated that 40% of financial activities can be automated. Expediting this process is becoming more of a priority for many finance chiefs, as their firms deal with soaring inflation and the prospect of a global recession. 

The top priority for CFOs will be to focus more on adaptability, collaboration and decision-making in their departments

But businesses need to be circumspect when approaching any new tech project, warns Deborah O’Neill, a partner at management consultancy Oliver Wyman who specialises in helping big companies through complex digital transformations. 

“Some organisations have been undertaking very large projects, which are complex, time-consuming and expensive, that have actually had mixed success in moving things forward,” she reports. “We have worked on a lot of programmes where there’s been tension between how much has been spent and what has been achieved.”

To avoid such an outcome, companies must pinpoint all the problems they’re intending to solve at the outset, says Dr Hassaan Khan, head of the school of digital finance at Arden University. Once they’ve done that, “they can select a case where technology is likely to produce a return on investment and they can track the results and learn lessons from that pilot before adopting it on a larger stage. It will be a very iterative process.” 

As businesses face mounting fiscal pressures in 2023, they will invest in improving the financial management and agility of their businesses, according to research provider TechMarketView. The company expects that “this will result in a boom for technology in areas such as real-time demand forecasting and the management of the supply chain, inventory and accounts receivable. The focus will be on achieving improved visibility, predictability and resilience.”

The future for advanced technologies

Many companies have adopted basic enterprise data analytics, but TechMarketView predicts that more powerful technologies, such as advanced analytics and artificial intelligence, are set to play a growing role. Indeed, there is an increasing expectation on financial software providers to embed such functionality into their products. 

O’Neill reports that some CFOs are becoming more comfortable with using analytics and AI to crunch data and forecast crucial trends ranging from costs in the supply chain to consumers’ purchasing habits. 

“Where the business is making purchasing or promotion decisions, these are ripe areas for real-time predictions,” she says.

But uptake has been slow so far. A survey of CFOs in 89 large companies by EY last year found that, although 92% had started digitalising their departments, only 11% were at an advanced stage.

Khan notes that British firms in general have been less inclined than their equivalents in other developed economies to adopt more advanced IT. This is evident in the financial services sector, where blockchain technology is being used by multinationals ranging from ​​ US bank Wells Fargo to French insurer Axa Group. 

Staffing the future finance team

The human element of the finance function’s digitalisation process is crucial yet often underappreciated, according to Khan. 

“The top priority for CFOs will be to focus more on adaptability, collaboration and decision-making in their departments,” he says. “People skills go hand in hand with utilising technology.” 

But finding such skills in the recruitment market is an ongoing problem for finance teams. Well over a third (38%) of the CFOs surveyed by Deloitte in Q3 2021 reported that their businesses had faced either significant or severe recruitment difficulties in the preceding three months, for instance. 

One of the key aims of technology adoption – freeing people to do more interesting and valuable work – ought to make jobs in finance more appealing to talented professionals. 

“I think finance has historically been viewed as a blocking function as opposed to an enabler,” O’Neill says. Adopting advanced digital technology, she argues, can help to transform finance into a function that’s seen by the rest of the organisation as more of an inventive, value-adding business partner.