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Guide to finance digital transformation – Treasury solutions for balancing cash flow automation and forecasting

What you’ll learn

  • Understand why digital transformation is crucial to treasury leaders.
  • Discover the main aspects of focus for finance digital transformation.
  • Learn how digital transformation can help treasury improve cash flow automation.

What is finance digital transformation?

Finance digital transformation makes use of the digital world and cutting-edge technologies. Financial transformation, if done well, can provide several advantages, including:

  • Enhanced organizational efficiency
  • Minimized errors
  • Optimized and accelerated data processing
  • Accurate cash forecasting
  • Efficient workforce allocation

Companies are forced to reimagine and reinvent themselves faster than ever before as exponential technologies such as artificial intelligence, machine learning, and automation become widespread. To truly benefit from the finance digital transformation, the CFO must harness the impact of technology. In an increasingly crowded and competitive marketplace, digital transformation helps businesses in the following ways:

  • Increased revenue
  • Reduced costs
  • Improved customer satisfaction
  • Distinguished offerings

However, reimagining an organization is impossible without investing in new technologies. According to the PwC US Pulse Survey – CFO, August 19, 2021, 68% of CFOs are investing in digital transformation over the next 12 months, through technologies like cloud and analytics. In the digital age, treasury needs to stay competitive and fulfill shifting market demands by ensuring that the right people are involved in implementing emerging treasury technologies.

What are the main areas of focus for digital transformation?

Areas to consider when planning to embark on a finance digital transformation journey are:

  • Process transformation– Process transformation requires changing components of a company’s processes to meet new objectives. An organization’s procedures are modernized, new technology is integrated, money is saved, and essential systems are better integrated as a result of such a transformation.

    Process transformation includes:

    • Identifying transformation goals– A clear idea of business objectives and long-term goals should be identified before progressing with the transformation process. The finance digital transformation should provide value to the organization and shouldn’t be implemented just to automate processes.
    • Establishing baseline metrics– Organizations need to gather data required to ensure the process transformation is a success. These include cost, time, number of errors, and other measurable metrics.
    • Bringing in stakeholders– This consists of gathering feedback from all individuals involved in the process on what they expect from the transformation project that will be carried out.
    • Mapping out the best-case scenarios– Businesses should design an ideal workflow path that includes both human and system tasks that must be completed.
    • Make it live and monitor it– Small teams should be introduced to the new process at first, and progress and any necessary changes should be regularly monitored in order to measure success.
  • Business model transformation– Corporations can achieve a makeover that leads to new growth opportunities by considering flexible treasury solutions and robust models.
  • Domain transformation– New technologies can:
    • Reshape products and services
    • Blur industry lines
    • Create new value

    All firms going through a finance digital transformation should be aware of the new prospects for domain change that come with the use of new technology.

  • Cultural or organizational transformation– Merely upgrading technology or rethinking goods is not enough for a successful digital transformation. If a company’s finance digital transformation efforts aren’t aligned with its internal values and habits, it can have a negative impact on the company’s culture. The negative consequences are:

    • Slow adoption of digital technology
    • Loss of market competitiveness
    • Initiative’s ultimate failure
    • Loss of productivity and money.

A thorough and collaborative effort can greatly assist in shifting the culture to comprehend, accept, and promote digital transformation.

What are the core elements and components of digital transformation?

Some of the salient technologies for digital transformation are:

  • Cloud technology– Costly, complex customizable enterprise resource planning (ERP) systems are giving way to cloud-based solutions that are dynamic, scalable, and virtualized. Leveraging the cloud is key for digital transformation as it enables greater flexibility and agility across an organization, and in many instances, faster scalability.
  • Application program interface (API)– API-based integration is a critical business digital transformation technology. Its advantages include:
    • Shorter market time
    • Faster development
    • Increased accessible information
  • Robotic process automation (RPA)– RPA automates repetitive tasks and helps treasurers allocate their time to work that demands their expertise.
  • Machine learning & Artificial intelligence (ML & AI)– They are used by businesses to help with operations and decision-making. With the increased availability of data and high-performance computing power, AI and ML are used to provide unique and accurate analytical insights.

How are Treasury solutions a part of digital transformation?

Corporate treasury is entering a new era that gives possibilities to manage the company’s financial resources in a way that is:

  • Lean
  • Inventive
  • Efficient

The need for a more flexible, secure, and scalable IT infrastructure was evidently recognized during the pandemic, which expedited the digital timeframe for treasury solutions. The corporate treasury functions are now evolving for effective working capital management and supporting the company’s long-term goals. Treasurers must equip themselves to better deal with the digital era as the role and underlying expectations of corporate treasury departments evolve.

Finance digital transformation helps treasurers take data-driven approaches and maximize value in business through accurate cash management and cash flow forecasting.

Benefits of finance digital transformation within treasury

Some of the benefits of digital transformation are:

  • Improved data gathering
  • Stronger resource management
  • Data-driven decision making
  • Enhanced customer experience
  • Increased agility
  • Improved productivity

Cash flow forecasting processes

Cash flow forecasting has always been a top priority for treasurers.

Traditionally, cash forecasting follows the following steps:

  • Manual data gathering– Data gathering is done manually by a treasury analyst from A/P, A/R, and accounting teams.
  • Spreadsheet-based process– Data entry is done in spreadsheets, making it error-prone.
  • Manual adjustments– Human intelligence is applied to make manual adjustments to the forecast due to limited data visibility and accuracy.

However, this method of cash flow forecasting has a lot of repercussions such as:

  • Poor & untimely decisions
  • Error-prone
  • Time intensive
  • Misallocation of labor
  • Mismanagement of capital
  • Low cash visibility

Maintaining a treasury solution with a digitized financial automation system is very important to create accurate cash forecasts and move forward with your digital transformation journey. HighRadius’ cash forecasting automation software helps the treasury department in the following ways:

1. Increased forecast accuracy: The scope of human errors is reduced because data is gathered directly from data sources. To improve the accuracy of the sales forecast, customer-specific characteristics and external elements such as raw material price variations are collected. Furthermore, the AI-based software enables a closed feedback loop model that evaluates past and current results and adjusts estimates to improve cash forecast accuracy up to 95%.

2. Improved variance analysis: The drill-down and dashboard tools provide a more granular view of financial flows. Treasurers can then examine the differences between forecasts and actuals for various currencies, cash flow categories, geographies, and time periods. Moreover, accurate variance analysis helps to improve the accuracy of cash forecasts by identifying the variance drivers.

3. Accurate scenario analysis: Treasurers can assess multiple scenarios and understand their influence on the business’ cash flows by making adjustments while cash forecasting. This aids in the proactive implementation of decisions. Furthermore, the system supports frequent cash flow forecasting to make decisions timely.

4. Informed decision-making: Treasurers may implement data-driven decisions for managing capital, risks, and enhancing corporate treasury management on time with automated reporting, and continuous data access.

Schedule a demo with HighRadius today if you are looking for convenient and effective treasury solutions that not only meet your company’s needs but also move your company toward the digital transformation journey.

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The HighRadius™ Treasury Management Applications consist of AI-powered Cash Forecasting Cloud and Cash Management Cloud designed to support treasury teams from companies of all sizes and industries. Delivered as SaaS, our solutions seamlessly integrate with multiple systems including ERPs, TMS, accounting systems, and banks using sFTP or API. They help treasuries around the world achieve end-to-end automation in their forecasting and cash management processes to deliver accurate and insightful results with lesser manual effort.