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Finance and Accounting

Why CFOs need to adopt digital transformation

Tighter margins, stronger competition, and increasingly stringent regulatory policies are some of the major challenges that have culminated in a situation where any forward-thinking CFO would see the need to evolve.

Archaic practices conducted with the aid of legacy systems can no longer support businesses in the current real-time ecosystem. In a world where every percentage point counts and the competition is making constant progress, CFOs cannot afford to ignore the need for digital finance transformation.


What is digital finance transformation?

It is a holistic approach to financial management that relies on the digital landscape and innovative technology. If executed effectively, financial transformation can offer benefits, such as:

  • Improved efficiencies
  • Reduced errors
  • Accelerated processes
  • Optimised workforce allocation
  • Tangible financial gains

With benefits as wide ranging and significant as these, it is no wonder why CFOs worldwide are adopting finance process transformations. Since digital finance transformation is an end-to-end augmentation of processes, methodologies, and business practices as a whole, it is a substantially challenging venture. Even though the scale of work required to execute finance transformation effectively can be a deterrent, not taking the next step may cause your company to lose valuable ground — a risk you cannot afford in today’s competitive and unforgiving markets.


Digital finance transformation: everything you need to know

Yes, the future of finance is digital transformation. But what does this makeover entail? What sort of digital technologies does it employ? And how do they work to deliver the benefits? All of these are pertinent questions that we answered here.
First, it is imperative to understand the salient tools and technologies that help upgrade and transform financial practices:

Blockchain:

It is a technology solution that uses distributed ledgers to make transactions secure and data reliable. Blockchain enables digital, real-time contracts, faster operations, and reduced costs of maintaining a central database. With better integration and governance, blockchain is transforming F&A processes.

Real-time data visualisation:

 It involves the use of cloud-based data lake and intuitive software architecture to allow the sharing of data and trends in real-time between key stakeholders. This eliminates guesswork and enables critical decisions without having to worry about the relevance of the information.

Robotic process automation (RPA) in finance:

It is a system in which mundane and repetitive tasks with preset variables are executed by software robots instead of relying on people. Simple activities such as data entry can be converted to RPA, allowing users to utilise their talent in more dynamic avenues that require human intelligence and flexibility.

AI-supported analytics for business and finance decisions:

Strategies can only be effective if crucial and logical data support them. Conducting analytics based on data mining can be a tedious process with lots of room for error if artificial intelligence (AI) technologies do not aid it. AI can help identify gaps, measureing expenses, and make forecasts based on numbers to further optimise entire business processes.

Finance transformation use case:  

What if non-banking enterprises could offer their own debit cards for loyalty or loans on products at your website? Banking as a service (BaaS) is a big opportunity for non-banking companies to deliver uninterrupted customer journeys and achieve multiple customer touchpoints. From payment solutions for fintechs to retail banking services, BaaS is an example of digital finance transformation with positive disruption.


Real-world scenarios of financial transformation

These technologies form the backbone of digital finance transformation, and there are various benefits that can be derived from their usage. Here are some specific real-world scenarios of financiale transformation that deliver significant value over traditional methodologies:

  • Digital dashboards with real-time data visualisations can identify the impact that the performance of an MVP in team sports like football or basketball has on jersey sales, week-on-week. This allows retail chains to alter stock availability of a specific player’s replica jersey, based on their performances.
  • Onboarding in financial institutions such as banks is an important yet mundane and repetitive process that usually requires tedious data entries for every new customer. RPA can be used to completely automate the onboarding process. This can make the process quicker, reduce issues stemming from human errors, and free up the workforce to perform more meaningful and analytical tasks.
  • A logistics and transportation firm with international dealings can use powerful analytics to identify changes in foreign currency patterns and budget these changes in for the entire year at the beginning. Analytics can help account for these fluctuations and predict financials accordingly, resulting in a more streamlined business assessment and the inclusion of safety valves to counteract extreme volatility in currency exchange rates.
  • Compliance is a huge concern today for corporations across practices. Regulations are stricter and penalties are greater; accounting errors can snowball into major issues if they aren’t nipped in the bud. This is where digital solutions can help. A control system that is entirely automated can eliminate the risk of human error. Strong algorithms ensure that data is not just processed but validated as well. This further improves transparency levels and ensures integrity in a quicker timeframe and with substantially lesser resources.
  • AI provides predictive analysis that uses patterns and processes to identify outliers. This, in conjunction with machine learning, can help identify patterns and automatically eliminate nonpayers or fraudulent parties — be it for the customers of an online retail site or for some unsavoury elements trying to open up a fraudulent bank account. Using digital tools, you can pick out patterns that mark these nonpayers and pre-emptively avoid transactions, ensuring that disagreeable entrants don’t dilute your customer base.

The role of technology and people in digital finance

Among the flurry of new technology solutions and the mounting pressure to deliver, it can be easy to forget an essential truth — the future of finance functions will be a synergy between relevant technologies and suitably skilled teams. Finance transformation in 2021 and beyond will depend on this fine interplay between digital finance technology trends and people willing to adapt and achieve forward-looking goals.

While there are plenty of advantages of adopting a digital finance transformation system, they can bear fruit only if you approach the process wholeheartedly. It all comes down to taking that first step and embracing the process without reservations.

For successful digital transformation, executives need to collaborate and create a shared space where ideas can be incubated and findings from other industries and practices can be applied without reservations. Only then will such initiatives come into its own and truly showcase its effectiveness.