Technological adoption by the finance function
Digital transformation dominated our interview and roundtable discussions. The race to the latest technology adoption is not a new concept, but it has increased rapidly and shifted focus over the past few years. Digital transformation is not limited to automating certain processes or installing a new infrastructure. A successful transformation aims to affect the entire organisation and its culture. Every finance function needs a mindset shift towards a strong digital culture, one where technology best supports people in the journey to find new and better ways of working and creating value.3
According to the World Economic Forum, ‘organisations with a strong digital culture use digital tools and data-powered insights to drive decisions and customer centricity while innovating and collaborating across the organisation’.4
There was a time when many believed that digital transformation initiatives were geared more towards large organisations with unlimited capital and resources. This research shows that organisations — regardless of size and industry — are racing for the latest technologies to drive growth, generate profitability, meet customers’ needs, and grow market share.
‘It’s not really a choice these days anymore. If you want to stay in any business, you have to invest in digitalisation. If you don’t, then you can wake up one morning and realise you are no longer competitive’.Contract CFO, Professional and Business sector, Europe.
From our findings, we believe that the finance function is uniquely positioned to lead a broader organisational shift into digitisation. Finance has insight into all business units and can help leaders from every area of the organisation understand what they’re finding in the financial data, as well as what it means, which will ultimately support better decision-making.5
A survey published in 2019 found that more than 40% of finance leaders say that the biggest driver behind automation within their organisations is the demand for faster, higher-quality insights from executives and operational stakeholders.6 Our new research has shown that organisations are increasingly focused on automating routine tasks across the finance function to improve efficiency and accuracy.
We are seeing that routine tasks such as data entry, invoice processing, account reconciliations, and payroll calculations are now being automated through advanced software and robotic process automation (RPA) tools. Additionally, financial reporting and analysis are being automated where data analytics and machine learning algorithms help in the interpretation of large datasets and generating insights.
Like other business units, the finance function has benefited from automation. By reducing time spent on nonvalue activities, automation allows finance professionals to focus on more strategic and value-add activities. This helps expand their roles to finance business partnering, for example, to generate organisational value. Automation also minimises the risk of human error, which improves accuracy. Automated systems can perform calculations and data analysis with precision, minimising mistakes that could lead to financial inaccuracies or compliance issues.
When data is spread across different systems and sources, automation can enable a centralised approach to the integration and consolidation of data to improve its accuracy. With automation, reconciling accounts, generating financial reports, and customising dashboards is faster and easier, and it enables real-time visibility to financial information to facilitate better decision-making through timely and reliable insights.
The challenge of sustainable automation in the finance function lies in finding the right balance between leveraging technology to streamline processes and maintaining the necessary human oversight and expertise. Automation, for example, can introduce new risks and challenges related to data security, privacy, and compliance. Proper controls need to be put in place to mitigate risks, meet regulatory requirements, and ensure strong cybersecurity measures.
Business cases for automation often cite a reduction in headcount. However, our research highlighted that although roles may change, the headcount might be required elsewhere along the process or workflow. As regulatory reporting, accounts payable, and other routine accounting tasks become automated, organisations will need less labour to complete these tasks. However, automation in reporting and planning, as well as other finance areas may increase the number of finance professionals leveraging automation to provide insights that influence decision-making within the business.7
Automation initiatives can create concerns amongst employees about job security or changes to their roles. The leadership teams of some organisations we spoke to were resistant to implementing automation technologies because they were concerned with job loss in areas of already high unemployment rather than the expense of capital investment. Investment in change management initiatives can help alleviate resistance and facilitate a culture of acceptance and collaboration.
Some organisations reported that there was a lack of collaborative working with other departments such as Information Technology (IT) when it came to automation, with the two departments working in silos. ‘We are in two separate worlds’. Senior Leader, Manufacturing, Canada. Finance was not being included in discussions from day one. The function was only being brought into meetings or conversations when it came to the cost of change or implementation. Finance needs to have a ‘seat at the table’ when conversations around automation occur, and it is well placed to take a broader leading role in the change.
As finance business partners, it is critically important to develop trust and close working relationships with other service providers to the business, including the IT and Human Resources (HR) teams. Driving innovation requires organisations to break down silos. Ultimately, creating value is a team sport that requires close collaboration among finance, IT, HR, and business teams across an organisation.
Poor project management and change management of an automation initiative can lead to several problems. One participant in our research shared that one of the challenges they face is that ‘my team are expecting a digital enablement team to come along, take their process, and just digitalise the whole lot’.Head of GBS Centre, Technology and IT Services, Central & Eastern Europe. Processes need to be harmonised and standardised across systems before automation can be applied. This requires the team to look end to end rather than at just parts of a process. Therefore, finance needs to be involved in all conversations to ensure that automation correctly mirrors the entire process flow. According to participants, another problem is that solutions are not always properly tested during or after implementation, so the benefits are not leveraged as much as they could be.
Another challenge is that the automation of low-level roles can have an impact on work experience. With fewer opportunities for hands-on experience performing the manual tasks, they may miss out on learning important foundational skills and understanding the practical aspects of finance operations. The traditional career path is also being affected for junior staff. With fewer low-level roles available, the progression from junior to mid-level positions can be slowed down, making upward mobility within the finance field more challenging.
To overcome these challenges, organisations should develop an automation strategy and invest in change management processes to optimise the benefits of automation in the finance function.
Automation has had a significant impact on finance shared service centres, where there is the potential for traditional finance roles to be automated.
Our research has shown that when shared services embrace automation, they are able to expand their scope so that the finance professionals take on higher ‘value-add’ activities, such as advanced analytics, to provide valuable insights for decision-making and strategic planning for their customers rather than just the traditional transactional roles.
Leadership of some organisations that we spoke with were bringing their previously outsourced finance functions back in-house. One of the reasons cited was that they want to regain control around the processes and data security, have more control over sensitive financial data, and maintain closer collaboration with internal teams. Advancements in technology and automation have made it more feasible for organisations to handle certain finance functions internally.
‘We are seeing a big change in shared services now `that less is getting offshored ... we are using the technology because it is still in our control’.Director, Business Consulting Services, Australia.
Our research has shown that as technology enables finance to move away from the data collection phase, it helps professionals take a leading role in data strategy to derive maximum value across the organisation. This is supported by Gartner’s research, which states that 63% of financial planning and analysis (FP&A) leaders are prioritising developing a finance data and analytics strategy in 2023.8
As more finance teams build up their capacity for data and analytics (D&A), finance leaders must increase their role in enterprise D&A governance and strengthen their understanding of the underlying D&A concepts. If they don’t, they may find themselves at the mercy of IT to fulfil their D&A strategy. Today, finance leaders must get familiar with key D&A concepts required to initiate advanced critical finance transformation initiatives and create a D&A strategy that meets the needs of a modern and forward-looking organisation.
The volume and breadth of financial, nonfinancial, structured, and unstructured data available to finance teams has grown exponentially with the proliferation of digital transactions, online platforms, and interconnected systems, as well as changes in regulatory and reporting requirements. Data analysis may not be a new activity for finance, but it has grown in complexity. This is due to the increase in sources, volume, and types of data both within and outside the organisation. It is also complicated by the number of tools strengthening data analytics and data visualisation.
Sustainability and ESG are becoming a mainstream focus for finance functions because stakeholders are demanding greater organisational transparency beyond the traditional financial metrics. With the development of new global standards and the ‘International Integrated Reporting Framework’,9 finance professionals have an expanding role in analysing these new data sets and driving insights as well as meeting reporting requirements. Look out for our third emerging themes paper on sustainability in business for further insights on this topic.
Our research has shown that this data is scattered all over the organisation with limited control or governance, which makes analysing, storytelling, and influencing very difficult. Participants agreed that the finance function owns the financial data and plays a significant role in data governance. However, there was not a unanimous agreement on who, between business owners and finance, should own the nonfinancial data within an organisation.
What is clear is that it is crucial for organisations to establish clear guidelines, roles, and responsibilities for data ownership to ensure data integrity, quality, and compliance.
Collaborative efforts between different stakeholders such as finance, business units, IT, data governance, and compliance/legal teams are necessary to define and enforce ownership of data effectively.
Digital transformation is a journey, and organisations are at various levels with their infrastructure adoption. Our findings highlighted that many organisations are struggling with outdated and misaligned systems. They have multiple systems operating on siloed platforms in disconnected environments. Other organisations are further along the transformation journey but still encounter many challenges throughout their transitions.
In many cases, internal and inorganic growths are the primary contributors to incompatible infrastructures. As organisations continue to grow internally, new systems are added to the technology infrastructure without considering the connectivity within the overall ecosystem. Inorganic growth also plays a big role in the disparity. When organisations acquire other businesses that already have their own systems, many times the new and acquired systems don’t align on the same platform. To realign them, it requires an additional level of investment and other considerations that the acquiring organisations might not be ready to simultaneously address.
A roundtable participant in Ireland shared the following:‘It’s our business model of acquiring other businesses and not just straight away imposing all of our processes on them and giving them a lot of autonomy where we still want some centralisation and I suppose infrastructure that goes across the business. But it leads to a lot of outdated and manual processes’.Finance Graduate Programme Manager, Wholesale, Ireland.
To address the system disparity, organisation leaders indisputably agree on the importance of having a single source of truth for reliable, consistent, and transparent processes. Businesses might have the best-in-class financial systems, but if they can’t connect with the other business units’ systems, the disparity remains. To create an environment with a single front door, there has been a greater push among finance leaders to adopt cloud-based enterprise resource planning (ERP) instead of having on-premises systems. When a state-owned multinational corporation started with its ERP implementation of SAP S4Hana, they had around 30-40 different sources and already eliminated about 70% of their legacy systems. They ‘wanted a smooth transfer, transparent and a single source front’. Former Chief Financial and Investor Relations Officer, Oil and Gas industry, Brazil.
The benefits of having systems with connected capabilities far outweigh its challenges. Integrating systems and streamlining processes promotes consistent and efficient operations across the organisation. It strengthens collaboration across business functions and consequently reduces or even eliminates silos. In turn, that fosters communication and interaction with both internal and external stakeholders. It also creates greater access to data and improves the data quality. With that comes a certain degree of trust, especially for auditors, because they tend to place greater reliance on data that is properly embedded into the accounting system. For service organisations, it not only improves customer experience through personalised services, but it also allows vertical solutions with different offerings through that single front door.While technology infrastructure comes with a variety of enhanced offerings, it is critically important for organisations to find the right balance between what the business needs, what the systems offer, and how they can add value.
Regardless of the size of the organisations, interviewees agreed that transitioning to the cloud comes with its own set of challenges. Early adopters confirmed that having the right cloud infrastructure is a major investment. Even larger organisations with financial backbones acknowledged the weight that such an investment can have on resources. The associated costs largely depend on the services needed and the amount of customisation required. It might be less expensive for smaller organisations with less complex structures to rely on the standard features already packaged in the cloud platforms. Larger organisations with multiple layers might need a certain degree of customisation to effectively support their business needs. ‘Companies engaged on big digital transformation are pouring out significant resources to enable one way of doing things, one way of looking at things globally’. Vice President, Global Transaction Services, Retail Sector, Americas.
Interviewees also highlighted that rolling out these systems is not a ’one and done’ exercise. It is a continuous process of improvement done in phases for which each stage is deployed over a certain period. It might take many tries because no one knows first-hand how things will work. To mitigate its impact, some organisations started in a specific business unit before deploying the new systems at an organisation-wide level.
‘When you implement a new ERP system or replace one, you start by defining the requirements before actually doing it. Then, you realise that there is this exception or there is that exception. There are all kinds of things that the client or end users want to have, but you did not think about them beforehand’. Contract Chief Financial Officer, Professional and Business Sector, Europe.
Another challenge shared by organisations is the associated risks that come with implementation. The ‘single front door’ approach does not eliminate exposure to risk, but risk can be managed better with the right security measures in place.
