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Finance 4.0: How Can Mid-Market CFOs Embrace Automation

12 October, 2021
4 min read
Bill Sarda, Chief of Staff, Digital Transformation
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What you'll learn

  • Finance 4.0 – The latest revolution in the finance world
  • Key finance automation technologies and use cases
  • Upskill your team, invest in automation, and re-align your strategy for Finance 4.0
What is Finance 4.0?
Why embracing Finance 4.0 is a win-win for mid-size businesses
6 key technologies driving Finance 4.0
Finance automation: Some examples
Steps to prepare your business to embrace Finance 4.0
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What is Finance 4.0?

Finance 4.0 is all about using digital technologies such as automation, artificial intelligence (AI), internet of things (IoT), and blockchain to transform finance functions such as treasury, budgeting, financial planning & analysis, and order-to-cash management.

The finance department is traditionally portrayed as record keepers who manage order books, receipts, cash balances, and annual reports. While many of the core responsibilities remain the same, the adoption of technology helps finance leaders become strategic experts. They can then steer the businesses toward modernization, market expansion, and growth, all the while managing the costs and the bottom-line.

Here’s how the finance function has changed over the last few centuries.

Evolution of Finance

Finance 4.0 will herald a new era in the world of capital management with the use of crypto-currencies, financial data analysis, and newer responsibilities in environment, social, and governance (ESG) management.

Finance 4.0 prompts finance departments to play the role of a trust-giver. CFOs need to build a trustful relationship with multiple stakeholders including shareholders, board of directors, CEO, employees, customers, and partners. You need to manage the funds and drive business growth transparently.

Why embracing Finance 4.0 is a win-win for mid-size businesses

Here we discuss the benefits of adopting Finance 4.0 and what makes it a win for all stakeholders.

Lower costs and improved efficiency

Online software solutions provide features that help complete accounting tasks such as invoicing, accounts receivables and payables management (AR and AP), payroll management, and cash flow forecasting with minimal human intervention. Intelligent automation helps lower costs by nearly 40-75% and allows your finance and accounting employees to devote more time to high-value tasks.

Improved client experience

Finance teams directly and indirectly work with client companies to send invoice communications, collect payments, and procure supplies. Redundant payment methods offered to customers or late payments to suppliers due to manual processing methods do not paint a good picture of your brand. It is pertinent that finance teams also modernize operations with digital technologies.

Competitive advantage

A strong balance sheet and robust growth numbers are the goals of every CFO. While AR and AP automation technologies can strengthen your working capital, data analytics can help you plan your investments and forecast business metrics more accurately. Going digital will also help SMBslevel the playing field with large enterprises.

Employee experience

You do not want your staff to be overworked or to spend time on mundane activities. Making them work on paper-based systems or other manual methods is outdated and you’ll find it hard to get young professionals interested in your company. Empower your employees with the right finance management technologies to enhance and ease their work.
60% of traditional finance tasks are automated

6 key technologies driving Finance 4.0

While several factors drive Finance 4.0, here are the key technologies that drive this revolution.

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Cloud technology provides companies with on-demand computing, data storage, and network capabilities. This helps reduce capital expenses (CAPEX). For finance teams, the cloud offers a means of automating their processes at lower costs.

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Robotic Process Automation

RPA solutions help automate specific tasks such as checking emails for payment receipts, matching data records, or sending recurring communications. RPA is often considered the first step that finance executives take to automate processes.

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Artificial Intelligence

Like RPA, AI and machine learning tools also help automate processes. But unlike RPA that are coded only to accomplish specific tasks, AI tools continuously learn with new datasets and adapt to any deviations from the core process as needed.

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Internet of Things

Today data, including corporate finance data, is spread over multiple sources including physical devices such as computers, machinery, etc. IoT technologies connect these physical objects so that you no longer have to scout for data but have the objects connect with each other over wireless channels for data sharing. For example, your finance app preparing your balance sheet can connect with sensors on your industrial equipment to get data on depreciation.

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Blockchain technology, though still in its nascent stages, is expected to help in financial reporting, ledger management, and payments. Its immutability makes it a preferred method to build trust, reduce errors, and eliminate fraud.

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Data analytics and visualization

Data is vital to any function today. The volume of data generated and processed exponentially rises with each year. Tools that help analyze data and share the insights via easy-to-comprehend charts are one of the most needed technologies for finance teams.

Finance automation: Some examples

In this section, we look at some corporate finance processes that technology has helped simplify. These are Finance 4.0 use cases that you can easily adopt.

Function or Process area Traditional teams Finance 4.0 teams
Reconciliation Manually check records to match data. Error-prone and time-consuming. AI or RPA-powered tools match records from multiple sources quickly and more accurately.
Data entry Enter data from multiple sources by hand to a digital system or paper records.
Mundane, error-prone, and tedious
AI tools capture relevant data directly from multiple formats including paper records, photos, emails, and websites without any human intervention.
Reporting Manually browse multiple records and data sources to build financial reports on spreadsheets. Automate report creation with pre-defined templates using RPA tools to capture data and record it correctly
Accounts receivables Manually prepare invoices and contact customers to track payment status. High DSO and bad debt ratio. Automate invoice creation and delivery as well as dunning processes. Prioritize collections worklists and reduce DSO and bad debt ratio

Steps to prepare your business to embrace Finance 4.0

Preparing your finance team to adapt to the Finance 4.0 age requires adoption of finance automation technologies as well as a significant change in the mindset . Here’s how you can tackle it.

Re-Align your finance teams’ mission and strategy

To embrace the concept of Finance 4.0, modern CFOs need to bring a shift in the attitude of the finance team. You should position the finance team as the driver of profits and value creator for sustainable growth rather than as bookkeepers. Automation helps finance functions such as accounts receivables to move up the value chain and explore new opportunities.

Upskill and reskill your team

Train your employees on the latest technologies and other skill sets such as data science, communication, and innovation. Prepare them to take up responsibilities that are outside of the scope of traditional finance teams.

Invest in technology

At the heart of Finance 4.0 lies the use of technology to drive everyday finance tasks. For your finance function and business to successfully transform itself, it should invest in digital technology. But this should not be done in an unplanned or random manner. Adding new apps to your legacy system will only increase its complexity and lead to security and integration issues. Look at investing in a digital core that can scale with your business needs and adapt to the frequent tech changes.

Stay abreast of competition and market trends

While you may not be ready to embrace the latest technology advancements , it is prudent to keep a tab on them and understand how your industry peers react to them. Do pilot studies and trial launches to see how technological changes can benefit your business.

Identify the right tech partners

Shortlisting the right tech partner is one of the most important steps. Your tech partner should understand your business and industry needs as well as help you identify and implement the right technology at affordable rates and within optimal timelines. Tech consulting firms, software providers, and IT service providers can all help you here.
HighRadius is a leading provider of autonomous software that helps transform the office of the CFO. We’ve helped over 600 companies transform their order to cash, receivables, and treasury processes. Learn more about our Integrated Receivables solutions that offer AI capabilities to transform your order-to-cash and receivables processes.
Take the right steps to adopt and adapt to Finance 4.0 today.

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