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Dive in with digitalisation: advice for the modern CFO

David Williams, CFO of Tungsten Networks, explains how the CFOs that are embracing digital disruption are reaping the rewards, and why more need to get on board with fintech…

The modern CFO need to embrace fintech and dive in with digitalisation

Digital technologies have already changed the way we live and work – and the pace of change is accelerating. A new era of artificial intelligence and machine learning awaits us. The technology is really beginning to prove itself: Google’s DeepMind AlphaGo machine recently defeated the world’s number one Go player, even though he felt that he had played “perfectly”. What can you do against the power of pure tech intelligence?

Financial transactions are rapidly evolving too. Digital currencies are on the rise. There are now over 330,000 trades in bitcoin every day in the UK, when at the start of 2013 there were just 40,000. It is not only about Bitcoin either. An alternative currency – ethereum – has also been growing rapidly, and now has a market capitalisation of around $15 billion.

New digital innovators

At the same time, there’s no doubt that our world has become more complex and uncertain. Brexit, wider political and macroeconomic complexity, unpredictable elections – these could all understandably lead businesses to take a more cautious approach.

But in fact, the evidence is that many business leaders see the need to become more flexible and agile to deal with uncertainty, rather than more defensive. A survey of nearly 4,500 CIOs and tech leaders published by Harvey Nash and KPMG, for example, found that 89% of respondents are maintaining or ramping up their investment in innovation, including in digital labour. More than half are investing in more nimble technology platforms.

A national ambition

This comes against the backdrop of the government publishing its long-awaited digital strategy, setting out its stall to create a world-leading digital economy here in the UK. Recognising the need for a digital strategy for an increasingly digital economy, the paper underscores the need to create world-class digital infrastructure, address the digital skills shortage, and encourage entrepreneurship and long term digital investment.

The strategy has been welcomed by many industries, fintech included. Indeed, the paper recognises the importance of fintech here in the UK, noting that more people work in the UK fintech industry than in Singapore, Hong Kong and Australia’s combined.

What about the CFO?

So where does all this put the CFO? Should they leave digital innovation to the IT team and the marketeers, or get truly involved and drive a transformation of the finance function that creates greater synergies and efficiencies?

You can probably tell which side of the fence I am sitting on. The fact is that finance is particularly ripe for digital improvement. In an area traditionally full of manual processes and spreadsheets, the potential to join things up and introduce greater automation is significant.

This doesn’t necessarily have to mean migrating to a new ERP system or moving everything to the cloud – although that may feature. It’s also about using data analytics technology to analyse your own data more deeply and find the patterns and linkages that may surprise you. After all, this is what the big auditing firms are doing – hugely ramping up their investment in data analytics to examine ever wider data sets within companies’ financial data to drive out more ‘meaningful’ findings.

Two areas that strongly lend themselves to digitalisation are accounts payable (AP) and accounts receivable (AR) processes. These are Tungsten Networks’ speciality – both for our clients and for ourselves. Significant amounts of time and resource can be tied up in managing purchase orders, producing and sending invoices by AR teams on one side of trade, manually checking invoices, processing and storing them, dealing with errors or exceptions, and then getting them paid. But turning the process digital can speed things up, removing unnecessary friction and reducing costs.

For example, calculations using data from the latest Billentis report show that a business processing 10,000 inbound invoices a year could save over £95,000 by going digital. Not only that, but the analytics available through e-invoicing can give greater visibility into invoices, making finance teams smarter. For example, it can improve procurement controls, ensure contract compliance and provide the benefits of a unified view of company spend.

It can also be popular with AR teams – giving them guaranteed invoice delivery, full visibility of their invoice status online and, with some service providers, early payment options too.

Into the future

My message to CFOs would be to embrace digitalisation. The world’s largest companies to SME are increasing the adoption of digital solutions, as are providers of these solutions themselves. But embracing this doesn’t mean just rushing blindly in. It’s a marathon, not a sprint. Every organisation will have its own pace that it is comfortable operating at, so what really matters is to introduce changes and innovations that work for the company, rather than making change for change’s sake.

The traditional skills of the CFO – financial management and analytical skills, a strong grasp of governance and compliance issues – will remain key. But in today’s evolving market, a wider skillset is becoming essential.

Today’s CFO simply has to get to grips with digitalisation. They need to understand how digitalisation is affecting the organisation across the piece, and to understand what it means for the finance function within that. This will mean collaborating and integrating more with the rest of the business than has perhaps been the case in the past.

But the effort will be worth it. There are significant benefits to be claimed for the business that truly embraces digitalisation and leverages it to make itself faster, more agile and more customer-responsive.

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