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F(d)igital: Disrupting finance with digital

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Finance functions are changing as they build on digital opportunities. It’s gone so far, in fact, that you might think of finance as a function of digital. We call this F(d)igital—and we predict that the way we evaluate the speed, efficiency, and accuracy of core operations will change. Our work here explores how digital technologies are shaping the financial close and reporting process. In addition, we look at the three catalysts helping finance transformation realize its potential.

Digital technologies are disrupting industry, catapulting startups into the spotlight, and challenging traditional organizations to reinvent themselves from the shadows. Most CFOs, too, believe digital technologies will have a significant—even disruptive—impact on their functions.

Certainly, digital technologies that limit the need for human intervention are driving improvements in core finance and accounting processes. In fact, we see finance as a function of digital—let’s call it F(d)igital. And we predict the following changes:

  • An increase of about 200% in transaction-processing automation
  • The cost of finance reduced by half
  • At least 70% of finance activities delivered through integrated, hybrid centers of excellence (CoEs)
  • A 200% increase in finance professionals’ productivity as finance becomes more integrated with business strategy goals
  • Analytics and pattern studies will cause a tectonic shift in the user experience, as people delight in the ease and convenience of accessing finance services

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The revolution in finance

Finance functions in leading organizations are no longer restricted to bookkeeping and statutory compliance but are considered strategic partners. Yet many firms still measure the success of a finance operation by its speed, efficiency, and accuracy. Digital technologies have created a new yardstick. They’re remodelling finance by pumping insights rather than raw data into the business. Over time, these technologies can even learn which insights are most effective. And that means the key measures of core finance operations—speed, efficiency, and accuracy—must also change.

  • Speed: Not faster but just-in-time
  • Efficiency: Processes that are not just automated but well-designed and organized
  • Accuracy: Not highly accurate but effectively reliable

Figure 1: The future financial close and reporting process

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Digital technologies already on the market are driving the shift in core finance accounting and reporting processes. They include:

Figure 2: Digital technologies in the market

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Cloud computing, mobility, and visualization tools, for example, are already making a difference to finance. For some time, they’ve been delivering efficiency, agility, and effective control through EPRs and point solutions like Blackline and Workday. But now, more advanced technologies—such as robotic process automation and machine learning—are coming on stream.

Many CFOs know about these technologies, but have yet to embrace them fully. They would do well to, if they want to compete with startups around the world that are using them to grow at an exponential rate. And the new technologies are just getting started. They’re going to keep creating meaningful solutions. For example, robotics, embedded with cognitive intelligence or big data analytics with natural language processing and generation will create greater efficiencies and better insights.

As the market matures, early adopters will generate significant ROI, become industry leaders, and disrupt or eliminate traditional organizations. 

It’s clear that digital technologies will propel finance transformation. However, three catalysts will bring out their full potential: advanced analytics, hybrid centers of excellence, and process alignment.

Advanced analytics—supporting business strategy

Many digital innovations in analytics tap into new, varied, and large pools of data sources, such as social media and the internet of things. As a result, finance professionals often feel they have too much data. Data scientists are creating ways to spot trends across diverse portfolios, linking them back to business strategy. And the development of self-service analysis tools can reduce the business’ dependence on finance for information.

Manage disruption with centers of excellence

Centers of excellence bundle together finance activities. These CoEs create integrated operating models that manage process peaks and troughs and modernize finance roles. 

They create agile, scalable, efficient, and cost-effective organizational models that deliver core finance and accounting services across the globe.

In the future, these CoEs will produce even more value and bigger outcomes. In fact, that’s already happening. For example, a leading global snack company set up an internal control hub for Sarbanes–Oxley testing, access-rights monitoring, and remediation. It saved the company about 40% of the cost of an internal audit.

The key to creating value? Process alignment

So there’s no question that digital technologies and analytics create game-changing opportunities. Yet the Genpact Research Institute estimates that companies are spending nearly $400 billion per year on digital efforts that don’t meet ROI expectations. And that delays digital transformation.

Many companies don’t fully harness the power of these tools because they don’t put enough energy and talent into aligning data-to-insight processes. These processes are not linear. Each cycle exploits the last and builds on it. That’s the foundation of an intelligent operation. It can sense environmental context, act appropriately, and learn—at scale.

Lean management principles are an effective way to harness digital technologies. Lean aligns end-to-end processes and when coupled with design thinking it can re-frame challenges and improve the chances that your solution will succeed. Domain knowledge, of course, is also at the heart of all digital solutions. We call this approach Lean Digital.

Are you ready to disrupt?

The world is moving at breakneck speed. The finance function can lead the charge instead of lagging behind. Forward-thinking CFOs are embracing digital’s role in disruption. They also recognize its organizational and process implications. What’s more, they make full use of their domain expertise—and that of their partners—to make digital work. The time to start is right now.

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