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Innovation in the Finance Function

28 October, 2022
5mins read
Brett Johnson, AVP, Global Enablement
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What you'll learn

  • Importance of innovation in the finance function
  • Roadblocks to modernizing the finance function
  • What steps to take to make your finance team more inclined towards innovation?
CONTENT
Why is innovation important for the finance function?
What are the benefits of embracing innovation in finance?
What are the challenges of innovation in finance?
Steps to make your finance team more inclined toward innovation
How HighRadius can help your finance team achieve innovation?
Conclusion
FAQs
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Financial innovation is the process of inventing and introducing new products and services around financial markets. In the present age, financial innovation has evolved due to the advancement in payment technology and instruments. It has helped the finance industry to move in a positive direction that allows people to save, invest and pay for goods and services without any second thoughts.

Why is innovation important for the finance function?

Example of financial innovation

Innovation in the world of finance helps employees to close their books faster and deliver highly accurate information when it comes to cash forecasting. It also helps in attracting the best talent in the sphere of finance, keeping everyone else in their wake.

85% of modern CFOs and finance leaders believe that innovation is a must in order to drive more accurate and better insights about the business. They also trust that finance function needs advancement with each passing year which will help them accelerate their delivery of correct management information. This implies that in many companies, the process of generating management information might be outdated and ineffective. Thus, improving the technology by bringing robustness in the process is the most-needed innovation for the finance function.

What are the benefits of embracing innovation in finance?

Innovation in the finance sector is the act of inventing something new for a company that allows the employees to promote new value and growth. It can be a new marketing strategy or a new product that can be introduced to the company by the business leaders. 

The following are the benefits of adopting innovation in the finance function:

Getting ahead of the competitors

With the rapid development of the market, there are more competitive businesses emerging than ever before. Innovative thinking can act as a catalyst to develop new products that the customers needs. If your business doesn’t contribute to the process of innovation, you might observe a sudden lack of progress, and thus, you’ll have to climb a number of steps to keep up with the trends.

Improving reputation within the company

Introducing the latest technologies within the company will make sure that your employees are staying up to date with the trends. They get a chance to learn and polish their skills in technologies like ML, AI, or cash forecasting. Thus, innovation within the company can improve the reputation of the business and finance leaders.

Improved customer satisfaction

Financial innovations are a must to grow customer satisfaction and the size of potential customers. For example, modern-day ATMs have the feature to deposit money right from the machine. This technology has helped customers get rid of lines in banks and deposit their cash without wasting any time. This has improved customer satisfaction and enhanced the experience through innovation.

Increasing revenue of the company

Finance performance of a company depends on a number of factors such as business revenue, profits, loss, and others. Improvements in technology can increase the revenue of sales and, in return, can grow the business’ profitability. This can be achieved by competing with other companies in a similar industry and overtaking them with your improved technology in the finance domain.

Achieving 100% productivity

A study conducted by the World Bank’s Enterprise Survey Indicator Database in 32 countries of Africa says that a company’s innovation in technology significantly affects the firm’s productivity. If we talk about the modern financial market, there is an important role of well-developed technologies in the growth of a company. 

For a developing country that cannot spend much on R&D but is open to adopting innovative ideas from technology-rich countries, they’ve always seen static economic growth and increased productivity at a larger scale.

What are the challenges of innovation in finance?

With every positive value has its price in negative terms. While innovation is a must for modern-day companies, some believe that the traditional approach is important to solve real-time problems. Following are some of the challenges which come in the way of innovation in finance function:

No support from top management

It becomes a problem when the top officials of the company do not appreciate innovation within the company. Some believe that the traditional approach is the only way to achieve success and gain effectiveness among the employees of an organization. Thus, when you do not get support from the higher authorities of the company to innovate with the processes, it becomes a major challenge.

Lack of innovative culture within the organization

When you join a company as an employee, one of the major things that you focus on is the working culture. You thrive on learning new working techniques each day that can make you more efficient than others. But when there is a lack of innovative culture within the company, the learning trajectory falls down. You keep on working with the traditional methods,

 which in turn makes you slow and thus, you lag behind others. 

No time to embrace innovation

There are times when you get so much involved with your work that you forget to innovate the process. Few executives within a company have the slack capacity to spend time on new learning techniques and software that can make them more productive. 

Steps to make your finance team more inclined toward innovation

The finance industry is slowly moving towards technological advancements such as machine learning, AI, and automation, which is opening up a world of opportunities for people.

As modern-day auditors and analysts spend less time on manual and repetitive tasks, they have the liberty to spend more time sparking innovative thinking. Here are a few steps to make your finance team more inclined toward innovation:

Create an innovation-friendly environment

Does your company support innovation? When you propose an idea to your business leader that is worth exploring, do you receive support and the required resources to take it to the next level? 

To get answers to these questions, you need to seek input from the employees of the organization- either by an anonymous survey or by asking them directly. If your idea is supported by the top management, then you are already a part of an innovation-friendly organization.

Dedicated learning time for employees

As a business leader, you must spare time for your employees in which they can learn new financial technologies to make their work more efficient. You can also conduct workshops and seminars where the employees are taught about the future technologies that will rule the financial world.

Have a strategy for change management

It is the process in which a company implements changes within its internal and external processes to prepare the employees for post-change activities to ensure successful implementation.

Therefore, change management is extremely important to support innovation within a company because the process prepares the employees for any sudden shift in processes that can be brought about because of innovation. You must be well aware and ready to adapt to any changes that the higher management can imply at any time.

Hire employees who strive for innovation

Hiring officials must hire new employees keeping innovation in mind. Candidates who possess innovative qualities and experience must be filtered to the top because only those will contribute to the success of the company. They will directly impact the work culture, the market position of the organization, business practices, and ROI.

How HighRadius can help your finance team achieve innovation?

HighRadius’ Autonomous Receivables software strives towards innovation with each passing day. It is the world’s only AI-powered accounts receivables solution that is created to impact a company’s working capital.

You can connect credit, billing, and invoicing into a single business process to build a high-performance culture within your O2C teams. AI can predict potential invalid deductions with just a click of a button so that your analysts can focus on resolving and recovering the debt.

Conclusion

Innovation is the stepping stone to success. Adopting both an inside-out and outside-in strategy for innovation is crucial at a time when collaboration between businesses and stakeholders is becoming the norm. To build a successful finance function, you not only need an innovative mindset, but also a continuous iteration of ideas that makes your job easier.

Streamline your accounting process with HighRadius’ Autonomous Accounting solution to fast-track month-end close and reconciliation processes.

FAQs

Question: What are the functions of financial innovation?

The primary functions of financial innovation are to reduce costs, improve economic growth, complete the market and increase team efficiency.

Question: How do you innovate in your finance department?

Your finance department can be innovated in a number of ways such as by improving team communication, upskilling your employees, ensuring compliance with policies and procedures, and reducing manual processes. 

Question: What are the three categories of financial innovation?

The three categories of financial innovation are institutional, process, and product. Institutional innovation includes the creation of financial firms such as credit card companies. Process innovation includes the process of doing financial business such as telephone and online banking. And, product innovation includes the creation of new products and services such as foreign currency mortgages.

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