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“Finance autonomy” and “digital transformation” are not merely fads; they are becoming essential functions for many businesses.
In the years ahead, cloud-based ERP, touchless back office automation, and cognitive innovation will continue apace, creating opportunities to streamline operations and free analysts’ time radically.
It is no surprise that finance teams have become leaner, primarily a headcount function in operational finance (order-to-cash, procure-to-pay, transactional accounting).
Meanwhile, expectations for support from business finance (reporting, planning, budgeting, forecasting) and specialized finance (record-to-report, treasury) will continue to grow.
According to the State of CFO’s Office Report 2022, “outdated technology stacks are one of the leading causes of business inefficiencies.” Workflow digitization is the new norm and a necessity for firms to sustain and flourish.
But how can a business determine the ideal time for a digital transformation, particularly in finance operations and back-office functions?
There are usually clear indicators that a business is ready for digitalization, and recognizing these indicators and their impact on your revenue and performance will help you determine the appropriate timing.
This article explores two universal indicators of transformation readiness. These criteria are evaluated based on potential optimization opportunities in your company’s financial operations.
Understanding why it’s essential to invest in digitalization is a good start. Understanding how CFOs can be visionary drivers of an organization’s financial success and fiscally responsible can be a significant next step.
Where to begin? Here are five levels of digitalization indicators:
Companies falling under this category don’t employ technology to automate their finance operations. This level is often the starting point for most businesses. They typically rely on the following:
This phase leaves no room for reevaluating workflows and fine-tuning processes, making technological investments necessary for scalability.
The level marks the start of a company’s financial digitalization. This phase focuses on specific repetitive and manual tasks and seeks to automate their management on a daily or weekly basis, such as three-way matching, invoice creation, and sending customer payment reminders.
This level of automation leaves room for human intervention in holistic operations, despite the potential of a minor efficiency boost.
For instance, a lack of data standardization leads to inconsistencies in financial procedures, and cost coding can yield results that cannot be consolidated and compared without significant manual work. This could cause ambiguous collaboration for analysts and conflicting reporting for stakeholders.
At this stage, the company uses accounting software, such as an ERP, to automate individual holistic processes, such as ‘cash application’ or ‘eInvoicing.’ This phase refocuses analysts on higher-value strategic tasks. This automation is entirely workflow-based and governed by a set of rules.
Some advanced systems may provide real-time data and reporting dashboards, including KPIs, enabling leaders to monitor results closely and react quickly.
However, finance teams must continue to track these operations and ensure they are always accurate and valid.
Moreover, from a cost-reduction perspective, several software vendors are cutting support and mandating upgrades to the cloud or SaaS platforms while simultaneously optimizing their development and maintenance structure.
If technology suppliers have issued a sunset timeline, it is crucial to consider a replacement and optimize the financial processes with better API connectors and organizational structure surrounding that application.
This level leverages AI and Machine learning to seamlessly collaborate and exchange data across individual operational and specialized financial functions (order-to-cash, procure-to-pay, record-to-report, treasury), anchored by holistic automation.
For example, with an autonomous receivables solution, CFOs can gauge the financial health of each customer, including credit risk scores and the likelihood of bad debt from a single user interface.
To enable recession-proof scalability, CFOs need a holistic view of the business to ensure it operates as efficiently as possible.
At this level, CFOs can:
However, as your business expands across geographies and regions, it demands adaptable end-to-end finance software with enterprise-level autonomy so that your teams can evolve from problem solvers to revenue generators globally.
At this level, autonomy aims to transform the entire finance process world-class, which can only be achieved through AI across all operations.
At this stage, your finance software can act as the single source of truth, connecting multiple data nodes to create a complete view of all your operations.
This level of autonomy uses real-time analysis and forecasting across all locations to respond to changing customer patterns and suggest intelligent actions to maximize cash flow.
Once you identify your business digitalization level, a CFO’s next steps are critical to determine the feasibility of an upgrade and set the stage for a successful transformation journey.
There are four main factors to determine whether the next solution enables more efficient finance processes compared to the current expenditures.
Understanding the current situation and the barrier to achieving the company’s transformation objectives is essential. A business should thoroughly assess all problem areas, pain points, and improvement opportunities.
Typically, this process answers concerns such as:
CFOs must evaluate transformation against other changes across the company, considering factors such as resource commitment, duration, risk, budget, and level of change, among others.
Every company is in a different position, and CFOs must align on the importance and extent of transformation to meet the overall company strategy.
Reassess how the solution required to transform your digitalization level impacts your cash flow and profitability. By building a nimble strategy, CFOs can create a framework that helps stakeholders make decisions, then track investment results in real time.
This process typically answers questions like:
Consider employing a modified version of zero-based budgeting wherein expenses are justified one by one, and budget owners must exemplify how spending is aligned with defined essential capabilities. The key is determining when and which cuts to make.
One approach is to create tiered forecasts that reflect cuts in response to revenue reductions of 10%, 20%, and 30%. Keep all line items on the table and provide sufficient detail to ensure you’ll achieve the desired ROI.
This process typically answers questions like:
Now is an opportune time to invest in technology that can automate manual tasks and free up analysts for upskilling and more strategic work.
When growth is slowing, your analysts are forced to work harder. Restructuring when everyone is paddling as hard as they can is painful.
Don’t wait until all you can do is slash spending and schedule layoffs. So start working to ensure your business is ready to ride out the storm.
The desired state of financial transformation and the roadmap on how to get there helps mid-market CFOs plan out their digitization roadmaps, even with:
Undergoing finance digital transformation allows your finance to make informed and data-backed decisions, which helps boost efficiency even with lean teams and frees up time to concentrate on more strategic tasks.
HighRadius offers the entire suite of Financial help with offerings such as Autonomous Receivables, Autonomous Treasury, and Autonomous Accounting for the Office of the CFO. More than 700 of the world’s leading companies have transformed their order to cash, treasury, and record to report processes with HighRadius. Our customers include 3M, Unilever, Anheuser-Busch InBev, Sanofi, Kellogg Company, Danone, Hershey’s, and many more, guiding them on their finance digitization journey from a mid-sized business to an enterprise.
Learn how HighRadius can help you in your journey of transitioning from Level 0 to Level 4 of finance digital transformation.
Automate invoicing, collections, deduction, and credit risk management with our AI-powered AR suite and experience enhanced cash flow and lower DSO & bad debtTalk to our experts
HighRadius Integrated Receivables Software Platform is the world’s only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway – covering the entire gamut of credit-to-cash.