The need for digital transformation is a strategic ‘must’ for CFOs looking to steer their organizations through future uncertainties, foster resilience, and remain competitive in an increasingly digital world. We discuss the ongoing digital transformation of the finance function and its importance in making organizations more forward-looking and resilient. We’ll explore how digital advancements can redefine the finance function, moving it beyond traditional reporting to a more strategic role within the organization.

The need for digital transformation in finance

Changing role of the finance function

Traditionally, the finance function has been synonymous with backward-looking tasks—generating financial reports, managing transactions, and ensuring compliance. However, in today’s fast-paced and data-driven business environment, this role is undergoing a profound transformation.

The finance function is evolving from focusing on past reporting to steering organizations through future uncertainties. This shift requires reducing manual tasks and leveraging technology to improve efficiency and decision-making. It’s not just about crunching numbers; it’s about using those numbers to inform strategic decisions and drive growth.

Current state of digitization

While all finance functions use digital tools to some extent, the full potential of digital transformation has not been reached. The goal is to automate 95% of repetitive tasks, but most are far from this target. Many finance teams still grapple with outdated systems, manual data entry, and fragmented processes.

The barriers to digitization are diverse, ranging from legacy systems that are resistant to change to a lack of digital skills within the finance team. Addressing these challenges requires a multi-faceted approach, from upgrading technology infrastructure to upskilling the workforce.

Overcoming barriers to digitization

Setting ambitious goals

Success in digital transformation starts with setting clear, ambitious goals and aligning the organization towards achieving them. It involves a focused approach to drive value and measure progress. CFOs should articulate a compelling vision of what a fully digitized finance function can achieve, from faster decision-making to improved risk management.

Leveraging investment waves

A significant wave of investment is being directed towards modernizing enterprise resource planning (ERP) systems, which presents an opportunity to also modernize the finance function. However, this potential is often not fully realized. CFOs must collaborate with IT leaders to ensure that digital investments translate into tangible improvements in finance operations.

The CFO’s role in digital transformation

Leadership and vision

CFOs play a crucial role in driving digital transformation, not just in finance but across the enterprise. Their leadership is key to setting high standards and being role models in the digital journey. They should foster a culture of innovation and data-driven decision-making within the finance team and the entire organization.

Strategic timing for transformation

The timing of digital transformation can be critical, with certain events (like mergers and acquisitions) providing unique opportunities to rethink and accelerate change. CFOs must be vigilant in identifying these opportunities and capitalizing on them to propel the finance function forward.

Architectures and technologies for a digital finance function

Core technologies and analytics tools

Transitioning to a digitized finance function involves integrating core ERP technologies, reporting layers, and advanced analytics tools. This integration is essential for improving data accuracy and decision-making capabilities. By streamlining data flow and automating routine tasks, finance teams can focus on value-added activities and strategic analysis.

Enhancing capabilities and workflows

Digital transformation also means adopting new capabilities and workflows that can handle volatility and uncertainty more effectively. This emphasizes the need for a single source of truth and consistent data handling. CFOs should champion data governance initiatives to ensure data quality and integrity.

Benefits of digital transformation

Tangible improvements

Organizations can expect tangible improvements in key performance indicators (KPIs) through digital transformation. This includes faster closing times, better credit risk management, and reductions in resource use and transactional costs. These improvements not only enhance operational efficiency but also contribute to the bottom line.

Strategic advantages

Beyond measurable gains, digitizing the finance function enhances strategic insight, decision-making, and organizational agility. This enables better responses to market changes and opportunities for innovation. CFOs should emphasize the strategic advantages of digital transformation when garnering support from the C-suite and board.

Starting the digital transformation journey

Defining ambitions and aligning strategy

Initiating digital transformation requires a clear understanding of the organization’s needs and strategic goals. It’s about linking digital ambitions to the broader objectives of the company and overcoming barriers to success. CFOs should collaborate with other department heads to ensure alignment and a shared vision.

Seizing opportunities for change

Companies should look for catalytic events that can accelerate transformation, using these as opportunities to rethink and realign the finance function with the organization’s future needs. Whether it’s a merger, a new market opportunity, or a regulatory change, CFOs should be prepared to seize these moments and drive change effectively.

Tim Boesen

February 1, 2024

4 Min