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Digital Transformation is Driving Change in the Role of the CFO,
and the Strategic Impact of Finance Teams

July 24, 2018

For many CFOs, digital transformation represents an enormous opportunity to go beyond improving operations and reducing costs to putting finance in the driver’s seat when it comes to strategies that will take their organizations to the next level of growth and profitability.

“The role of the CFO is changing,” says a recent report from the APQC, “The shift is bringing data analytics to the forefront. But many CFOs regard transitioning from reporting data to generating insights as an enormous challenge”.

Overcoming that challenge is more critical than ever, and according to Ernst and Young, time is wasting. According to a recent Ernst & Young report, “Digital is disrupting financial models, operations and valuations, and the overall capital agenda at an accelerating pace. If CFOs want to fulfill their agenda of growing, protecting and transforming their organizations, they need to address their organization’s digital readiness and the gaps that exist. And they need to do it with a sense of urgency.”

There are lots of good reasons that firms are looking at digital transformation, particularly when it comes to finance. Here are four key drivers that are prompting CFOs and finance teams to put the pedal to the metal when it comes to process automation and financial operations transformation.

One: Back office financial processes are the poster children for automation opportunities

There is a well-established precedent for cost savings and return on investment from procure to pay (P2P) processes. Because back office processes like vendor invoice processing are often repetitive and high volume, with fairly predictable requirements, organizations can achieve a quick ROI without having to invest in lengthy and costly implementations that require a ton of customization.

Until recently, the cost of software to manage accounting documents and automate how they are processed was beyond the reach of all but the largest organizations. Now, middle market companies have access to flexible, configurable smart process platforms to extract data from their procurement documents and cost effective cloud-based systems to manage their data and documents.

Two – Automation Continues to Out-performs Outsourcing

APQC estimates that, on average, 58% of invoices are manually keyed in the financial system and 61% of the cost to process accounts payable is in people. Since the beginning of the new millennium, the democratization of technologies and the global spread of internet connectivity opened up opportunities to offshore these repetitive and people-intensive processes like manually keying invoices into a financial system.

Scott Madden Management Consultants estimates traditional on-shore labor costs at $100K/year per FTE. Offshoring, according to SMMC costs $38K/year per FTE.

Digital processes, by comparison, can reduce costs even further to $13K/year, while providing far greater scalability to manage an increase in transaction volume due to mergers, acquisitions or organic growth.

Three - Manual financial processes negatively impact other core processes. Financial processes generate data and documents that are relied upon by countless other processes and departments, including sales and customer service. APQC notes, “Most companies are losing as much as 1% of sales due to poor planning and decision making. Why? Business decision makers misinterpret or discard financial analysis.” Organizations with poor financial processes typically have an error rate of 3.3% in their sales forecasts, compared to less than half that at leading-edge organizations. The same is true for monitoring and managing cash flow. Companies that lack systems to automatically extract data from vendor invoices to create transactions in ERP systems, automate approvals and report on process flow lack visibility to their general ledger accruals and struggle to maintain an accurate view of their cash flow.

Four – P2P Automation dramatically improves the auditability of financial processes and strengthens compliance. Organizations are increasingly focused not only on the potential value of getting poorly managed data, documents and processes under control, but also on the growing risks associated with securing and maintaining increasing volumes of information. Just about every week, there is a significant information breach that makes the news. In addition to the immediate crisis management and public relations embarrassment created by the breach, security and privacy lapses also translate into serious risk management issues that are – or should be – a concern of every CFO.

Automating P2P results in well-defined processes that are driven by business rules in a way that are predictable, repeatable and enforceable, reducing instances of fraud, while reducing the time and effort required to fulfill audit requirements and demonstrate compliance.

Laggards are Being Left Behind

Respondents to the APQC Survey indicated that nearly 3 in 4 organizations have an active financial process transformation project underway—meaning that those who do NOT have an initiative underway will be left behind in terms of process efficiency, control and competitiveness.

When exploring the top reasons that firms have NOT yet automated their accounts payable processes, most cited budget concerns as their primary barrier, followed by lack of technical resources to manage the project, as well as lack of executive sponsorship.

With corporate executives increasingly onboard with P2P automation and business process automation; with reduced costs and complexity for integrated, automated P2P processes and with well-established data to support a business case for change, it is time for CFOs and finance teams to take command.

To explore how to make the case for your organization, contact your Artsyl Technologies representative. They can help to map out your business processes, define opportunities for improvement and define specific metrics to make the case for change.

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