Digitising finance to support business transformation

By Joga Singh, Partner, Global CMAAS Leader, PwC United Kingdom and Christoph Gruss, Partner, PwC Germany

CFOs can leverage digital tools to add value across the company, from project management to leasing contracts

New digital technologies are revolutionising the finance function, turning accounting processes into value generators. Artificial intelligence, faster processing, robotics and digitised data sets will allow businesses to zero in potential new revenue sources. From, AI-enabled cash predictors can allow businesses to hedge their currency risk, access to real-time financial data helping organisations take actions at pace, through to revamping processes and systems to optimise the finance function and reduce costs.

Several factors have accelerated this revolution in the past year. Firstly, the COVID-19 pandemic has forced companies worldwide to increase the pace of their digital programmes in response to surging demand for real-time financial data to help organisations survive the crisis and the mass shift to remote working.

Secondly, the pandemic has intensified on-going cost reduction programmes, pushing the finance function resize and realise gains for the business through rapidly evolving technologies such as robotic process automation (RPA) and process mining. Lastly, many current Enterprise Resource Planning (ERP) systems are reaching the end of their lifespan and need replacing with more advanced solutions. Their replacements will use higher tech and deliver better solutions.

By leveraging digitisation, CFOs can support the finance function to add value throughout the organisation, rather than operating at arm’s length as a separate cost centre. We believe the potential benefits of digitised finance are greatest in three areas: business transformation, managed services and prediction and analytics.

1. Transforming finance to help transform the business

Globally, digitisation is triggering fundamental changes in the finance function, as companies overhaul ERP systems, automate accounting processes and deploy AI, robotics and other emerging technologies to manage and utilise financial data. The challenge for CFOs is to understand how digital finance tools and systems can support broader business transformation programmes.

One example is a Chart of Accounts (CoA) assessment tool created for a leading multinational retail company based in Mexico. The CoA Data Profiler displays the usage and purpose of each account to enable viewers to make management decisions to align with the project goals. In addition, the profiler also serves as a project management dashboard that displays real-time updates on which individual project accounts have been completed.

Benefits delivered by the Data Profiler include dynamic, customised insights into changes on the CoA, and real-time analysis that enables data-driven decision-making.

To develop similar digitised solutions, CFOs need to ask firstly whether they are keeping up with their competition by using the latest technologies to achieve efficiencies. Key focus areas include automation and standardisation; next-generation ERP; AI; cloud computing, and robotics.

For example, cloud-enabled ERP transformation shrinks the finance function’s digital core and supports standardisation of services and systems such as revenue, leasing, CoA and reporting. Meanwhile, RPA programmes can identify and implement automation use cases. On a more detailed level, digital tools can minimise inconsistencies between finance processes that are split between various shared services centres (SSCs) and centres of excellence (CoEs), with production lines in different countries.

Other potential efficiencies delivered by new technologies include smarter digitised contract analytics, accounting manuals and chatbots, and intelligent accounting solutions with multiple AI layers for non-purchase order (PO) invoicing.

2. Managed services – a potential fast-track to digitised finance

The next step for CFOs is to assess whether they have the in-house resources and expertise to digitise the finance function or whether they need outside support. The capabilities to get the most out of new technologies may be hard to find in-house but today there are more opportunities to look to managed services delivered by specialist providers with world-leading digital assets and the latest technologies.

For example, it is generally not cost effective for midsized companies with a portfolio of around 100 leases for assets such as vehicles and offices to invest in a separate leasing system. Instead, it is more efficient to outsource the work to a service provider that can leverage digital tools to manage the entire portfolio, from the initial lease assessment to the recurring monthly, quarterly or annual entries in the current accounting system.

As part of the outsourced service, digital tools (e.g. data extractor for the lease contracts, a workflow tool for the lease process and a lease engine to make the calculation of the lease contracts including recording booking entries) can also model and analyse the financial impact of the forecast leasing period by comparing the current contract terms with current market data. This analysis allows the client to decide whether it makes sense to extend the current contract.

To make the best use of managed services, CFOs need to review all aspects of the finance function from a digital perspective. A key issue to consider is whether increased automation means routine book-keeping, compliance and control operations can now be outsourced at lower cost, enabling staff to focus on high-value analysis and decision-making. In this context, CFOs will also need to decide whether to reduce headcount, given that a tech-enabled, outsourced approach should help the finance organisation become leaner and more agile.

Managed services can also be an interim solution during burdensome and time-consuming technology upgrades or replacements of legacy systems. Service providers can maintain data continuity and deliver up-to-date entries for the client’s records while the upgrade work is in progress.

3. Prediction and analytics – how digitised finance can deliver forward-looking data to seize future opportunities

In the digital age, data has become a company’s most valuable asset. Furthermore, the pandemic has accelerated the implementation of new technologies by businesses worldwide. Against this dynamic, transformational background there are growing opportunities across the finance function to use data to develop digital solutions that can improve strategic decision-making and planning.

CFOs need to work with internal and external data specialists to determine how information held by the finance function can help set the company’s strategic direction. Digital cash predictors which estimate the foreign exchange differences between various currencies are just one of the tools that are now available to help businesses anticipate the future with increasing accuracy and confidence.

This type of tool can reduce a company’s foreign exchange risk and hedging exposure by combining historical internal financial data with readily available public currency data, often generating savings beyond the expense associated with its use. It’s important to stress that these predictive tools also have some very down-to-earth applications. For example, ahead of the busiest part of its business cycle, a confectionery manufacturer recently combined internal company data with weather data in key markets to improve sales forecasts and liquidity by modelling.

The list of potential ways that these predictive tools can add value increases every day, but the digitised future is already upon us. Finance leaders should seize the moment now to leverage the digital revolution in the finance function and support company-wide transformation.

Act now to realise the potential