How can the finance function seize digital opportunities?

Whether it’s robotics, artificial intelligence or the cloud, advances in technology present a golden opportunity for the finance function. But what’s the best way to maximise potential gains: an enterprise-wide solution, or a more targeted approach?

Few would deny that investing in up-to-date technology can bring competitive advantage and first-rate connectivity. But many firms are held back by a lack of knowledge or willingness to invest in digital transformation even though we live in a world shaped by cloud and wireless technologies.

There is little doubt that a new wave of back-office technologies is upon us. As Fernando Mora, Director at Grant Thornton Spain, says: “Robotic process automation (RPA) and machine learning are enabling automation and scale opportunities that have not necessarily been there before.

“In addition, analytics and artificial intelligence (AI) are creating scenarios where a virtual finance platform can be built on top of core systems without having to change or update them. This gives finance the freedom to improve without moving or changing the core essential systems that typically have a large overhead to change.”

Is finance behind the curve?

Grant Thornton Spain partner Luis Pastor says there are two main challenges for finance: “It is often not as forward as other functions in seeking investment in the latest systems,” he says. “Resources tend to be focused on operational and customer-facing technology. The payback on finance systems investment can be extremely rapid but is rarely well articulated.” 

The second challenge is capacity. “We often see high levels of capability within mid-sized businesses with entrepreneurial, innovative team members. However, they simply don’t have the time to focus on technology projects due to ‘business as usual’ commitments taking precedence.” 

Fernando agrees that finance departments don’t always have time for major transformations but says that to complement these major shifts, teaching continuous improvement across the organisation can make a huge impact in a short time.

“Challenge every accountant to find one hour of efficiency and, while the individual wins will be small, the overall time freed up will be significant,” he says.

Don’t introduce tech for the sake of it

Luis makes a similar point in the advice he always gives to any mid-sized business before spending any money on technology. First, they should engage with their current systems and look at capabilities to see if they could extract more from them.

“The one mistake I see companies of all sizes making, but particularly smaller and mid-sized businesses, is a lack of planning and engagement with their teams to define the requirements. So many are sat on existing enterprise resource planning (ERP) or finance systems that give them the capability to do so much more than they currently do.

“Take the purchase-to-pay process as an example. Many companies can optimise their existing systems to deliver greater automation, rather than investing in new robotics and RPA tools.”

“Too many people see adding more technology as a magic bullet. You can implement technological solutions but if the adoption is poor because they haven’t engaged users and explained why it’s beneficial, they just wither and die, which leads to frustration and reticence to engage in these types of projects in the future.”

Targeted approach or enterprise wide?

The approach companies should take depends on the organisation. One of the challenges Luis sees around an enterprise solution is a lack of clear business case for the change. “I do a lot of work with mid-sized private-equity backed businesses and when I meet the backers they consistently tell me they’re frustrated. All too often a group IT director will come to them with a large investment in ‘end-to-end digital transformation’. However, when asked about the return on investment (ROI) very few are able to provide a robust analysis of the business benefits.”

In some cases enterprise-wide digital transformation is exactly what is needed. For example, Luis is currently working with a mid-sized business where the connectivity between the warehouse management, e-commerce platform and finance systems necessitates an enterprise wide change because investment in technology will enable a business-wide transformation.

Alternatively, says Luis, a discrete business case that delivers a clear ROI is sometimes a better, more affordable option. “One process that often breaks down in finance is receipt of supplier invoices with no purchase order (PO) number on them. I worked with a business recently and we could see that there was a huge backlog of supplier invoices waiting to be reconciled to original purchase orders.

“This was driving a huge amount of manual effort with a dedicated, full-time team to work through and ensure suppliers were being paid in a timely fashion. It was also driving lack of predictability and control over cash outflows.”

“We worked with a technology partner that provides robotic process automation solutions to create a tool that imitated the activity of a human in reconciling the invoice to the PO. Automating that specific activity alone released the equivalent of five full-time finance heads to focus on more value added finance activity.”

Plan ahead to avoid mistakes

Luis says that the lack of a strong business case is the area where most businesses have fallen down when he’s been called in to a work with a client after something has gone wrong in terms of technological disruption. “Progressive businesses use us right from the start and acknowledge the capability and the experience that we can support them with,” he says.

“But, if we are brought in when things have gone wrong, the first thing I ask for is the original business case. Sometimes you get a shrug of the shoulders. It is rare that people have put together a proper business case that articulates not only the financial benefits but also the improvements in the ways of working and how they’re going to put a project delivery structure around it.”

The situation frustrates Luis as finance functions are often sitting on massive amounts of interesting data but they have no time to do anything with it “because they’re manually downloading data out of one system, manipulating it in Excel, reviewing it manually in printout form and then reloading it into an accounting system in the form of general accounting journals.”

Nor should cost always be a blocker. He refers to a mid-size retailer’s CFO who mentioned it was difficult to make the case for a new finance system because, “Every time I bring it up I get shouted down and told that the money could be spent setting up five new stores.”

“However, when we looked at the business case, because they were only looking at the cost aspect of it, when we were able to factor in the ROI, the return was better than they had achieved on some recent stores.”

Overcome the scars of the past

Technological advances should be embraced, says Luis. “We always say to people who are considering any kind of digital project to try to ignore the scars of the past and to understand that the rules have changed around what a technology project looks like these days and it can be done much more quickly and cost-effectively.

“We’re talking to a lot of companies about how to do this. The quality of application program interfaces (APIs) these days is phenomenal – you can have a best-of-breed Oracle planning tool sat alongside an SAP general ledger, for example.

“Privately owned firms should be talking to somebody like Grant Thornton. The opportunities are so vast and if they’re not engaged with it then they risk falling behind their competitors.”

“We’re finding that technology is taking a stronger hold on business with Saas models that are broad enough to cover different requirements and business cases, standard and compliant processes, and stronger audit trails.”

Fernando feels these solutions require a new way to address IT projects: “Businesses need to be more agile, change management-driven, with a continuous improvement philosophy.

“The main priorities for today’s CEO are innovation, proactive performance management and digital processes that are compliant with regulation. On the latter, the big challenge is to identify sustainable solutions that quickly add value at the right cost.”