Five Areas CFOs Should Focus On When Undertaking Digital Transformation Initiatives
The roles and responsibilities of Chief Financial Officers (CFOs) have evolved significantly over the last decade. Where the CFO’s major duty in the past often centred around the financial gatekeeping of a company, in addition to playing a key role in charting an organisation’s strategic decision making, modern-day CFOs in the digital age on the other hand are finding themselves increasingly in positions to make decisions centring on operations and information technology (IT).
The rapid growth of the digital economy has thrust CFOs alongside Chief Technology Officers (CTOs) or Chief Information Officers (CIOs) as critical decision-makers in a company. The Covid-19 pandemic may have turbocharged the digital transformation of many companies, however, its enduring ability to wreak havoc to the economy is what stands out as both a worrying sign and an opportunity for CFOs to swiftly decide and undertake digital transformation efforts of their companies. In short, a CFOs role in a digital transformation initiative is crucial.
The stop-start nature of businesses as Covid-19 numbers rise and fall – which is often ensued by lockdowns – has served to highlight how businesses that took the leap and went digital earliest reaped the benefits their actions richly deserved. However, undertaking a digital transformation effort is not a fad, and without proper planning could end up becoming a costly mistake.
A CFO Research/Grant Thornton study indicates that 69% of CFOs foresee investing more in digital transformation in 2021, with 66% from that figure saying they expect to “manage substantially more technology” this year.
Below we examine a CFOs role in a digital transformation initiative:
1. Focus On Operations, Especially Areas Concerning Efficiency
Return on investment (ROI) may seem like the catch-all for CFOs, and rightly so. However undertaking a digital transformation effort by moving to the cloud for instance, may not seem like a palatable choice in terms of immediate ROI.
The digital transformation process should be seen by CFOs as a long-term investment. The amount of time saved by automating key but complex IT processes and the elimination of human errors from manual data entry will eventually translate into significant savings for the organisation.
2. Focus On Consolidation Of Data, Especially If You Have Subsidiaries
Businesses are often in a rush to get their financial statements out on time. This then results in pressure from senior leaders on the finance team to produce finance statements fast.
The members of the finance team on the other hand have to balance the need for the swift delivery of reports with the importance of getting it right. Sometimes errors can result in costly fines from regulators and a dent to a company’s reputation.
The task of preparing financial reports becomes harder when you are a company with subsidiaries. To prepare financial reports you would first need to gather data from the disparate systems used by the subsidiaries before you convert them into an established format and normalise the data.
What follows is a long and painful process of reviewing account details, allocating overhead costs, identifying and eliminating intercompany transactions, adjusting balances and completing other tasks.
Cloud Enterprise Resource Planning (ERP) systems offer a solution to this problem by bringing together the different entities in organisation and offering a consolidated view cutting across all the subsidiaries.
3. Data Analytics And Unlocking New Insights
In an increasingly disruptive business environment, companies who do not have access to big data and other analytical tools risk getting left behind. In the same CFO Research study, 89% of CFOs “believe that strong data analytics is the key for success now and in the future”, and 47% of CFOs said “it was important to use data analytics collected across a company in strategic ways”.
Most cloud ERP systems come equipped with the best analytical tools based on latest technology. By having all the entities of a business under one system, cloud ERP systems deliver a diverse range of data that holds the key to unlocking new opportunities.
4. Planning And Picking The Tight System and Working With The Right Consultants
CFOs need to work closely with CTOs to ensure there is a structured plan for the migration to cloud. This is a process that involves the proper mapping of data, choosing the right system based on that, and working with highly qualified IT vendors.
The fact that modern-day systems are hosted on cloud relieves the in-house IT department of the burden of handling complex IT infrastructure. In addition to this, most cloud ERP vendors work with some of the best-qualified consultants which assures you of top-notch service.
5. Look For Integration And Scalability
The rampant growth of business in the Fourth Industrial Revolution (IR4.0) has also put businesses in a constant state of evolution. There is no place for rigid infrastructures like on-premises systems.
CFOs of respective companies need to work closely with all the entities in their company in order to fully understand the technology needs of the business. Once this is done, then the CFOs need to work closely with the CTOs to take systems that offer integrations and scalability that is suited for your business.
In A Nutshell
A CFOs role in a digital transformation initiative is a tricky one. They risk getting left behind if they fail to take the leap, and they risk bearing the brunt of shareholders if this undertaking tanks. However, having a successful digital transformation is not rocket science. The devil is in the details, and if enough time and attention are paid to the areas pointed out above, this is a success that will be savoured for years to come.
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