To bring the 2021 plan of safeguarding the cash flow, CFOs and finance leaders are working towards improving the operational efficiency of the finance function.
This includes areas that have been impacted due to remote working in the new normal, like employee productivity, staff engagement, and retention. Besides these areas, they are also looking for ways to optimize the finance organization structure (which includes improving the structure, talent, and capabilities) and the operational costs to support growth. They need to optimize the existing operational model in a manner that helps them meet the business objectives.
Even as they focus more on digitization, the CFO’s need to address the other tasks present on their to-do lists for 2021. They acknowledge that the other concerns on their plate will take more time and effort to achieve than anticipated.
As seen in illustration #2, most finance leaders believe that some of these everyday activities will take longer. Activities like enterprise cost reduction, business restructuring, working capital optimization, and shared services portfolio growth are considered challenging to achieve by the end of 2021.
The executives need to prioritize their initiatives in descending order (pick the one with the highest priority and work on delivering it). They should consider all the factors that might delay these initiatives and strategize an action plan to execute them effectively.
One of the ways CFOs can meet their business needs faster and bring about a change in the organization is with the help of technology.
As per a recent study conducted by Gartner, 7 out of 10 CFOs believe that COVID-19 impact has accelerated digital business initiatives. And the D&B survey reveals that 36% CFOs have begun expanding automation of transactional tasks (like accounts receivables) within their finance operations in 2021.
With digitization becoming a mandate for CFOs in 2021, there is a dilemma which they need to solve – whether to accelerate growth through digital initiatives or preserve/restore the organization’s financial health by cutting costs?
The answer lies in taking the digital journey forward by accelerating investment in technology. It helps deliver continuous value, establish an agile strategy around real-time credit risk assessment and mitigation, and make better-informed decisions.
An organization’s digital journey depends on its current state of maturity, which defines the difficulty of achieving the digitization goal. And the biggest concern that CFOs have with digitization efforts is the bandwidth consumption of their resources and ability to balance the ongoing business-critical deliverables. Hence it becomes essential to identify the functional areas that need to undergo transition first.
Both the Gartner and D&B surveys revealed that advanced data analytics is the most important of the other digitization initiatives that finance executives would focus on. Coincidentally, data analytics also happens to be the one area that is perceived as time-consuming and challenging to achieve.
The lack of access to good quality data will disable the CFOs and finance leaders from having better visibility into the performance of the finance operations and stop them from making informed decisions. This will also induce a ripple effect on the other business operations, like the order-to-cash function, which is not something that organizations can afford in this volatile economic climate.
As per the D&B survey, 41% of the finance executives indicated that data quality is essential to their current plans to improve finance operations. 84%, on average, stated that they expect to spend more time towards this initiative as per the Gartner survey.
Managing data seems to be a relatively common hurdle across the finance function. The D&B survey helped us understand that the top two areas related to data which the CFOs and finance leaders find challenging are consolidating/ managing the customer data in one place, and generating insights from the data with minimal human intervention.
Finance executives must consider an automated solution that collects good-quality data from different sources, integrates it into their system, helps them update the customer records in real-time while minimizing human errors as much as possible.
These concerns highlight how data quality is inseparable from automation capability. Without high-quality data, automation technologies cannot work effectively or bring about the change required by the finance organizations in 2022. The D&B survey responses (illustration #6) reflect a typical scenario where finance organizations primarily utilize legacy technology that is complex, inflexible, and difficult to upgrade due to the cost and lack of internal alignment.
Post the events of 2020, CFOs are keeping the accounts receivable (A/R) function under close watch and expect it to contribute to the working capital by fast-tracking the Order-to-Cash cycle.
Many executives have already started to consider automation or update their automation further with the next generation of technology in 2021 to support the critical order-to-cash processes.
Order-to-Cash automation brings speed, efficiency, and cost optimization to finance. Given these benefits, the use of robotic process automation (RPA) as the go-to automation choice for finance teams has grown exponentially. On average, 61% of the CFOS and finance leaders stated they expect to spend more on RPA initiatives, as per the Gartner study.
But finance executives need to move ahead from these automation bots as a tool and leverage more advanced technologies like Artificial Intelligence (AI). These emerging technologies can process complex or unstructured data, learn about the customer behavior based on their payment patterns and work with minimal human intervention – and still leave the strategic decision-making for the humans.
Automating such dynamic processes can improve the executive visibility on the finance function’s performance and productivity and enable them to achieve more of their objectives that were earlier perceived as challenging.
Simply providing the necessary tools and technology to the finance team would not suffice anymore. In a Gartner survey, only one-third of the finance leaders agreed that their teams have sufficient skills required to work effectively as a digital finance function. This means the majority of the executives acknowledge that their workforce needs to develop the skills to leverage the new wave of automation technology.
But upskilling finance teams may be more complex than it appears – one common challenge of such digital initiatives is overcoming their fear of getting replaced.
The first step for CFOs and finance leaders is to identify relevant digital skills, especially those specific to the employees’ daily workflows.
Based on the Gartner study, we have listed the five critical digital skills that the finance team should be equipped with:
The events of 2020 upended the CFO’s objectives and brought about dramatic changes to the way businesses reacted to the situation. As circumstances shift and things start to return to normal, CFOs will be asked to provide financial guidance to their internal and external stakeholders, including other C-level executives. To do this, they’ll need to identify the right business strategies and tools to improve efficiency and create accurate, real-time strategic insights in a rapidly changing business landscape.
As they strive to maintain efficient revenue growth, we have identified the three-steps every CFO should implement to sail their organizations through this uncertain period and thrive in 2022.
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.