Today’s chief financial officers (CFOs) are driven to improve company results and challenge the status quo. And that means embracing digital transformation to be more accessible to clients, potential customers, and employees, say experts.
Increasingly, CFOs are moving beyond traditional roles to focus on everything from investing in automation, innovation, and collaboration. More functions now report to CFOs, according to McKinsey, which means finance executives now oversee more tasks that were once beyond their remit.
Now the changing role of the CFO requires they lead digital transformation efforts too. For example, Hewlett-Packard CFO Marie Myers was recently appointed chief transformation officer and tasked with preparing more than 50,000 people to work remotely and getting data to business users more swiftly.
What digitalization means for CFOs
Digitizing finance functions can pay off for CFOs’ own roles and within their own teams too. A recent DataRails study shows how much this is needed, revealing many CFOs perform the most intensive daily manual work of any other role in the C-suite.
A Trintech report showed digital transformation can ease these burdens, through standardized processes that provide an opportunity for collaboration between leadership teams and the CFO. Optimized processes, like automation, can also help finance teams manage the financial close process.
Digital transformation post-acquisition
Amy Spurling is the chief executive officer (CEO) and founder of employee perk stipend software provider Compt, and a three-time former CFO who was named Boston’s CFO of the Year in 2016 by Boston Business Journal. Spurling saw the need for digital transformation when a prior company before Compt was acquired by a larger one.
“That organization had built its own accounting software, and nothing was truly automated. Because [our company] had implemented scalable software solutions, we could more effectively manage our business with a finance team of three, when they needed a team of 35,” she said.
“If you do not invest in software, you have to add many more people to the team. And, even with more people, you will still not have the visibility and clarity a CFO needs that the right tools provide,” she added.
Digital transformation projects can be difficult to achieve, however. Just less than 90% of financial services respondents in the Trintech report said a lack of prioritization and “constant firefighting” had delayed their digital transformation objectives.
How can CFOs claim some wins around digital transformation? Here are five suggestions.
1. Find efficiencies around manual work
Amy Morrison, a certified public accountant (CPA) and finance vice president (VP) at recruiting firm JCSI, suggests finding efficiencies through cloud-based products that give teams time to focus on innovation and improving services. “Much of what our team and our clients are looking for is accessibility to shared data, immediate project updates, and the ability to measure key performance indicators in real-time,” she said.
2. Identify opportunities and risks
A close partnership with the CEO helps too. “CEOs expect their CFOs to help them see around corners,” said Spurling. “With the right CFO, you get alarm bells if things aren't going well much earlier than waiting for an actual market trend. You can also get early indications when something new and exciting is happening."
By sounding the alarm or spotting business opportunities, CFOs can drive experimentation and adjustments across the organization, according to Spurling.
3. Collaborate beyond the finance function
Morrison said digitally focused CFOs are collaborative, adaptive, and focused on continuous improvement. “CFOs should be meeting and collaborating with those throughout the organization and keying in on how any problems impact the overall financial results of the company,” she said.
“Good CFOs should be gathering data, collaborating, evaluating, and problem solving with leadership with the goals of achieving better operational results, finding efficiencies in the service delivery, reducing costs, and generating revenue to achieve better financial results.”
4. Fund digital transformation carefully
With a growing field of digital transformation vendors promising big things, CFOs and their teams need to carefully assess potential partners. CFOs estimate their organizations' overall IT spend at 3.1% of annual revenue, according to a Deloitte CFO Signals survey. And 52% of that spend is on maintaining day-to-day operations.
Gartner VP Randeep Rathindran said a CFO must dissect their organization’s digital strategy to guard against misplaced digital spending and poor returns on investment later.
When weighing up digital transformation vendors, Morrison suggests considering the challenges facing the organization and then rating each one before identifying what is an imperative investment. “Solutions vary greatly for different-sized organizations so it’s important to evaluate if something is a ‘need-to-have- or a ‘nice-to-have’ option,” she said.
In some cases, adopting new technology may not provide enough efficiency to offset the added cost and administrative burden. CFOs should:
- Consider services that integrate with current systems, such as accounts payable, accounts receivable, and treasury management software.
- Start with product or service trials as a risk-averse way to try out a new process before fully committing.
As a recent MIT article explained, digital transformation is not a sprint, and CFOs and their companies should adopt a mindset of moving incrementally towards their goals.
5. Accept the imperfections
Spurling said a missed close is preferable to a finance team that collapses because it doesn’t implement software to scale the business. “Upgrading your accounting system, automating compensation tax compliance, and automating payables all can help your team stay ahead of the company growth curve,” she said.
“Pushing pause and delaying some work so you can actually get software in place to help is a hard decision to make — and it's difficult to communicate to the leadership team and the board — but it is a critical one if the company is going to scale,” added Spurling.