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:
Level 0: 100% Manual Finance Operations
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:
- Manual and paper-intensive processes
- Error-prone tools such as spreadsheets
This phase leaves no room for reevaluating workflows and fine-tuning processes, making technological investments necessary for scalability.
Level 1: Introduction to Automation
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.
Level 2: 80% Automation of a Process
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.
Level 3: Introduction to Autonomy
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:
- Forecast critical triggers even amid uncertainty
- Project workflow costs and avenues to reduce OpEx
- Keep tabs on customer aging analysis
- Implement a rolling forecast methodology
- Take immediate steps to maximize cash on hand
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.
Level 4: 80% Autonomy of End-To-End Finance
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.
