Fast-Tracking the Route to Strategy: How the Role of the CFO Is Evolving

Trintech is a Business Reporter client.

Accounting has historically been seen as a cost center and a reporting function to meet the demands of regulatory reporting, rather than a function focused on adding strategic value to the business. The finance function helped with monetary resources and reporting, but it rarely had a strategic role to play.

Over the past year and a half, a greater responsibility has been placed on the CFO to add value to the organization with rapid, accurate data and to support commercial operations with greater insight. However, the tyranny of tedious work combined with manual processes continues to be a challenge for many finance and accounting teams. While there is a demand for data to be produced quickly—even in real time—it is locked in silos. Ineffective tools such as spreadsheets limit the CFO’s view to a snapshot of the current financial situation. Currently, finance professionals spend 80% of their time producing the data and only 20% of their time analyzing it.

New processes are needed to meet this demand. Sadly, accounting and finance professionals are rarely empowered with the right technology to provide the timely and relevant insights that are essential for business stakeholders to guide critical business decisions. Strong change management across the finance office as well as the organization as a whole will be needed as the role of the CFO continues to evolve and a digital transformation strategy is embraced.

The evolving role of the finance function

Business is an ever-more challenging environment. Global competition increases as many processes move online, while technology lowers barriers to entry in many industries and facilitates a wave of new startups. In addition, the labor shortage across much of the globe is causing concerns and impacting the ability to get the work done that is needed to ensure growth.

Four strategic problems are adding to the challenging times:

1. There is a need to reduce risk. Regulatory requirements, especially those around privacy and cybersecurity, are being matched by customer expectations about the security of their personal data. As regulatory compliance continues to increase in complexity, it requires more internal controls, visibility and reporting.
2. Businesses need increased flexibility. We live in a world of volatility, uncertainty, complexity and ambiguity (VUCA) where tomorrow’s threats and opportunities are often hard to detect. Businesses need to be agile and able to change direction almost overnight. Unfortunately, long finance cycles are not flexible. The data needed may be there, but all too often, it is not accessible in real time to finance professionals to equip the business with what it needs to make decisions.
3. Flexibility requires speed. The faster the month-end close period is done by the accounting team, the quicker finance teams can start their work of analyzing the data. 85% of businesses using automated finance solutions are able to close in six or fewer business days; only one-third of businesses with little or no automation can achieve this. Automation allows the timely provision of information about markets and competitors and is clearly a significant source of competitive advantage.
4. Use forecasting, not extrapolation. The majority of business planning is based on historical data. Currently, most forecasts simply extrapolate this data. For effective forecasting to be delivered, organizations need to have confidence that their data is complete and accurate. In addition, any assumptions that are built into forecasts need to be questioned and analyzed. Fortunately, forecasting can be improved with more powerful computing, including the analysis of unstructured Big Data and the use of AI.

There is a need for a new vision of the future of the finance function. Digital transformation and process automation are raising many questions in this area. For example: Can software replace accountants? This was a big concern when robotic process automation and bots were first discussed years ago. The answer is clearly no. Instead, software can be used to automate many of the routine and tedious tasks that many finance professionals must currently work through, freeing them up for more creative and strategic roles such as managing exceptions, providing insights and developing alternative scenarios. In addition, with the tight job market and the realization that there is not an ever-increasing skilled labor pool, businesses must start to leverage technology and automation to help fill the gap of an increased workload, and empower finance and accounting teams to provide the higher-value services businesses need to survive and thrive today.

There is a caveat, though: Finance professionals who are freed to focus on higher-value areas may not have the skills or mindset to do this. Alongside automation, there is a need to upskill the current talent pool so they can take full advantage of the opportunities available in their evolving roles.

Why automate now?

The costs of manual processing

Financial processes can be profoundly transformed by leveraging technology solutions that enable automation today because there are many costs to delaying this change. Perhaps the most obvious is the risk of inaccuracy: Manual data transcription has an average error rate of around 1%. Even if your organization only performs 1,000 transactions a year, those errors could be very costly, and at the very least, time-consuming.

In addition, there is the cost to your employer reputation. Businesses that force their financial professionals to work long hours on tedious tasks governed by tight deadlines will quickly lose talent, and replacements will be hard to find; this is compounded by the current talent shortage that is already making it harder to find people needed to grow the business.

“The benefits and ROI of financial automation are immediate and evergreen,” says Omar Choucair, CFO of Trintech, the leading global provider of integrated record to report (R2R) software solutions for the office of finance. “Whether you have 500 or 500,000 transactions per day, if automation can match 95% without human intervention, that can free up our talent for more strategic initiatives, eliminate errors and remove the drudgery aspect of accounting for improved job satisfaction and career growth.”

Most importantly, a failure to automate means that finance teams will constantly be focused on routine tasks; they will be putting out fires in the organization rather than preventing fires before they happen. Constantly being in a reactive state leaves them no time to support the business through strategy development and revenue optimization.

These cost benefits can be quantified. For example, one organization that implemented the financial transformation process reduced close time from nine to seven business days, and the solution resulted in a reduction of almost 50% in cash specialist headcount and a growth in revenues of 3,711%; at the same time, their financial shared services center headcount was kept flat.

The pandemic has accelerated the path to process automation. Due to remote working, it has been harder for finance teams to question things in spreadsheets on a face-to-face basis and collaborate effectively on projects. However, as we come out of the pandemic, there is wide acceptance of the benefit of automation as a way of improving accuracy, highlighting exceptions and enabling collaboration.

Companies that don’t expand their linear thinking and try to go back to the way things were pre-pandemic are setting themselves up for failure. Today’s companies will not survive unless they make bold changes and digitally transform themselves.

Changing regulations

Driven by increased concerns around cybersecurity, privacy and artificial intelligence, regulations are changing and the work associated with them is increasing. MiFID II, GDPR, Dodd-Frank and many more are adding to workloads, not least because of the requirement to understand them. Automation can make the chore of dealing with frequently changing regulations a lot easier.

In addition, finance regulators are making increased demands such as ESEF, ESG reporting and the pending proposals for a U.K. version of the Sarbanes-Oxley Act (UK SOX). These all create additional demands on the finance teams of global organizations.

Finding the right partner

Evolving the finance function to a more strategic role will never be simple. Most businesses cannot expect to have the necessary resources of knowledge and skills within their existing finance teams. They may not even be aware of the various technology solutions available to make their work more efficient and effective.

For this reason, working with a trusted partner makes sense. Specialists can advise on the best ways to transform finance processes, with many benefits:

• They bring financial expertise and appropriately certified professionals who can ensure that any technical solutions are optimized for compliance.
• There is an element of flexibility and a recognition that one size does not fit all. Businesses should be able to choose from a variety of different solutions that fit the way they operate. A large enterprise with very high transaction volumes will require a more robust record-to-report solution than will be required by a smaller mid-market company just looking to speed up its close process.
• The ability to deal with compliance issues—for example, by embedding a compliance framework into the controls process, with reconciliations, transaction-matching and real-time dashboards for key performance indicators—is important. Compliance with all relevant regulations and standards should be built in.
• It can be risky to be tied into one vendor, and the best partners will be technology-agnostic. They should be capable of integrating with the ecosystem of the finance function and the overall organization; this means, for example, preserving the ERP as a system of record, as well as working effectively with other technology solutions. Being technology-agnostic is also beneficial for M&A, as it enables the finance function to rapidly gain control and insight when integrating new businesses into existing business. It is also essential for any significant restructuring of businesses.
• Many new technology opportunities are emerging, and even the largest enterprise may struggle to make the most of augmented reality or artificial intelligence. Any partner assisting with the transformation of finance processes should be capable of recognizing the potential of emerging technology and where to integrate it within the transformation program.
• It is important for any organization to be confident that major links in the supply chain are secure. This is true of partners in the financial transformation process, as well. Partners must enable appropriate access controls and facilitate technical defenses, such as end-to-end encryption. Where appropriate, data should be segregated with single-tenancy agreements.

With the assistance of an appropriate technology partner, businesses will be well equipped for a successful financial transformation process, enabling them to thrive in an increasingly complex business environment.

—Industry view from Trintech

How does your use of financial close automation compare to your peers? Download Trintech’s Global Financial Close Benchmark Report to learn how your company can benefit from tailored automated financial close solutions that fit the way you do business.

This article originally appeared on Business Reporter. Image credit: iStock id1024533982