CFOs and their teams are increasingly expected to advise the business units on innovative approaches to value creation. They are also expected to use sophisticated analytical methods to measure and manage business performance to better support complex decisions.
Will this also create new opportunities for CFOs and their teams?
A recent McKinsey survey showed, that only thirteen per cent of CFOs and other top managers said that they use automated processes and artificial intelligence in their financial management. And when asked how much return on investment the financial organisation has achieved in the last twelve months through digitisation and automation, only just five per cent were able to state that it was a significant return.
Why the limited progress? CFOs usually attribute this to the fact that they do not have a clear understanding of the opportunities offered by digitisation. And the organisational silos and lack of digital capabilities within the finance organisation are often cited as the main obstacles.
To keep up with the changing expectations and opportunities in a digital world, finance professionals must address two fundamental changes. First, they need to replace traditional operating models for financial functions with more flexible models that use the most critical resources to address the biggest business challenges. Second, they must build new leadership and talent management capabilities within the finance function. Only then can finance departments use the time freed up by automation and other digital technologies to gain meaningful insights that can improve the financial performance of the business. We therefore see two shifts.
Shift 1: Introducing an agile financial management model
Most companies still follow a traditional financial management model in which dedicated finance and controlling experts support specific areas of the business. The focus here is on management reporting, budgeting and planning, and ad hoc analyses. While it is possible to ensure coverage of these areas of business, such financial experts rarely have time to detach themselves from their division-specific tasks and participate in shaping the financial strategy for the company as a whole. Agile financial organisations, on the other hand, consist of a core team, problem solvers, specialists and value managers.
Shift 2: Building financial capacity for the digital age
Despite the delay in digitisation in financial processes, these trends cannot be stopped: About forty percent of financial activities (such as cash management, revenue management and general accounting) can be fully automated. The skills required to build a highly effective financial system are changing. Traditional quantitative skills will of course always play a role, but finance professionals will also need to improve their skills in the following qualitative areas:
- shaping economic value creation.
- Monitoring the financial performance of the organisation.
- Managing stakeholders outside the formal hierarchy.
These are not new skills, but they are often neglected because priorities compete with each other. Financial organisations therefore need specific processes to define, measure and assess the functional leadership skills of individuals in digital environments with formal and informal development paths to keep up with the new needs.
Companies have started the path of new technologies, but often they are still considering how to create value from them. Regardless, we clearly believe that financial professionals should think about how these technologies will affect the way they run their businesses, how their work is structured and completed, and the type of talent required to use the digital tools.
How can we help?
We know the new digital tools that optimize corporate finance and financial management. We are happy to support you and your team on the path of less routine work and more added value from the finance department. We are convinced that automation frees up capacities that you can use profitably for the company and thus bring more transparency, more knowledge and smart profitability to your business.