CFO: The Digital Transformer
As the CFO mandate extends from its traditional outline, the task of ushering change responsibly and sustainably lies with the finance function, which not only commands authority over the financial state of affairs but also possesses a bird’ eye view on resources, their utilisation, and enhancement. The breadcrumb trail to business continuity and smart processes now leads up to the alley of automation and innovation to derive greater value from rule-based activities.
From Crisis To Care:
Speaking at a CFO Roundtable, Ashish Peshawaria, Regional Director, Finance - Asia Pacific of Delta Airlines explained, “The fundamental idea of innovation has been turned upside down from something that was a choice to a necessity.” While change is often talked about, the pandemic has pushed hesitant companies towards imminent implementation. He added how the pace of change has given great pause to reconsider many things- helping business leaders find time to implement changes. He said, “One positive from the pandemic is that it has afforded more quality time to focus and implement some projects that we had placed on the back burner and low priority.”
The quality time that business leaders had owing to the pandemic also spotlighted how human the covid crisis was. Finance leaders became more actively involved in the people side of change, from employee care to customer ease and engagement. “The biggest change for the CFO was to become the chief empathy officer”, added Kalyan Chakrabarti, President, and CFO, Piramal Realty. He elaborated that the mental stress and trauma caused by the loss of life, uncertainty, and lack of mobility, conveyed how empathy and sensitivity became the order of the day; highlighting that there is more to people than processes.
Greater healthcare options, better insurance coverage, keeping employee morale high through engagement, and affording the flexibility to employees to contribute from wherever they are, are some necessary changes Chakrabarti noticed.
Nimbleness To Adapt:
As one of the first movers into automation and digitisation among other functions, the finance function serves as both a poster-boy and a controller with cross-functional knowledge. Vikas Wadhawan, Group CFO of Housing.com, PropTiger.com, and Makaan.com elucidated on how CFOs have the access to re-engineer and re-imagine cost structures, stripping to the basics, and making the company more prepared to handle crises. The latter, he believes is not just a responsibility of finance leaders but that of all business leaders to induce agility into systems and survive in a changing world.
Tuning themselves to the speed of change, Jaipal Singal, CFO iD Fresh Foods offered an anecdote from the production line to explain how supply shortages forced the company to zero in on a few SKUs to maintain business continuity. The company switched production lines at great speed and on-demand to better cater to consumer needs as it evolved. Singal explained succinctly, “The finance mindset has often taken a cost of capital approach in the past, but we now look at the trade-off between the cost of capital and loss of business.”
New Realities, Newer Possibilities:
Fully acknowledged only when the pandemic was in full effect, collaboration tools have come to constitute an integral part of daily operations. A recent Gartner survey titled ‘Digital Worker Experience Survey’, showed that there is a 44 per cent increase in the use of collaboration tools since the pandemic began. Storage/sharing and real-time mobile messaging tools also saw increased usage during the pandemic among the respondents. These figures in the light of hybrid and remote work models coupled with the increase in cloud acceptance, signal the core of the new work requirements.
Vivek Krishna, Head of finance at Rapido stated that the strengthening of collaboration tools would be critical to stitch workplaces together. He explained how the finance function has been modified forever. “There has been an enterprise-level shift from physical to digital tools. Many recent companies have fully shifted to cloud and many procure-to-pay and order-to-cash systems have been moved to SAAS based offers and SOPs too, have been modified to have no more physical invoices.” He highlighted how simple authentication measures like digital signatures can make a huge difference in hastening the speed of processes that would otherwise take time, physically in dynamic times. He further added that digitisation comes with its practical challenges of convincing banks and business clients to recognise digital signatures as valid, accept details via mail, and grant telephonic approvals.
Automation In Accounting:
The nature of transactions too has witnessed a momentous evolution. Recently, the Minister of Finance and Corporate Affairs, Nirmala Sitharaman, announced the success of the digital transaction progress in the country amounting to a figure of 355 crore digital transactions worth Rs 6 lakh crore in the first eight months of 2021. Chakrabarti noted that while smaller retail level transactions are evolving, institutional level changes are much slower with different banks having different processes, signalling the need for standardisation.
Looking inwards into the digitisation in the finance function, he explained how accounts payable (AP) has evolved considerably from a manual to an automated process, reaping benefits of lower cost, faster processing, increased accuracy, decreased errors, easier auditing and greater controllership for the CFO.
Another Gartner survey published pre-pandemic noted that finance departments can save their teams from 25,000 hours of avoidable rework caused by human errors by deploying robotic process automation (RPA) in their financial reporting processes. It found that the average amount of avoidable rework in accounting departments can take up to 30% of a full-time employee’s overall time.
On accounts payables, Peshawaria adds, “The AP function has been the earliest to embrace automation and this is due to the predictability of detailed processes. Automation works well with repetitive nature and predictability of AP transactions.”
The scope for digitisation extends beyond AP transactions too. Singal notes how digitisation has helped his company process 30,000 invoices in the pandemic time and further analysed the data to afford timely credit details and demand forecasting. The speed of processing and analytics helps pinpoint the customer demand and further feeds the production needs. It also serves as a cue for digital marketing, making the brand more customer-sensitive and demand-conscious.
Milan Sheth, EVP for the IMEA region of Automation Anywhere remarked how the rule-based nature of operations in the finance function makes it ideal for automation, as all it requires is to embed the rules in the AI engine for bots to process the transactions, significantly saving time and human effort.
He envisions the possibilities for end-to-end automation at scale within the finance function and believes it could be taken further to internal interactions too. “Digitisation need not just happen on the customer interface but can happen internally in the interaction between finance and supply chain, finance and HR or operations. And CFOs can play a huge role in automating internal processes and deploying cloud from day 1 as it makes better financial sense in the long run,” he said.
Automation And Manpower:
At a time when the remote-work model has redefined the boundaries of work that don’t need a physical presence, the larger question of which kind of work can be in-house and outsourced becomes important.
Wadhawan remarked, “non-core functions are outsourced to off-shore and on-shore partners increasingly, and I see the trend continuing. Larger organisations possess greater expertise in automation and smaller companies can benefit from their thinking to adopt next level digitisation and efficiency.”
Krishna notes that many start-ups already outsource the finance function to boutique firms and mid-size firms that specialise in the field, who not just define SOPs but also take controllership responsibilities. “If at all the company develops its own finance function later, then they will focus on business partnering, financial planning, and insights more specifically”, he said.
Automation is another solution for companies besides outsourcing their non-core functions. “About 20-30 per cent of processes will soon be eliminated. Activities and transactions of AP, bank reconciliation, and other account reconciliation which used to be outsourced by the dozens in the past are now passing. Humans don’t need to do this work; bots can do this faster and better. What will be outsourced will be the secondary-level data that need human interpretation and application of knowledge.”
With bots improving in sophistication and the digitisation mandate becoming inescapable, perhaps the larger question for business leaders is to understand how much of their future manpower will be digitally wired and how to better upskill their human counterparts.
The Possible Roadblocks:
The option of fully onboarding digital options and automation may seem enticing, but the benefits can be more elusive without a clear understanding of the level of automation required and the kinds of activities that can be automated. Budgetary concerns, the challenge of execution, internal buy-in, cost overruns, and system-to-system synergy are real challenges companies encounter in the implementation journey.
Sandeep Sodhani, Director of Finance, Licious, remarked, “Technical glitches, system outages, and data breaches can bring businesses to a halt and/or delay functioning. Companies must focus on data security, recovery plans along with backups and train their employees in the digital environment. This needs to be included in the study curriculum itself.”
As brands cater to changing customers' habits and attitudes, customers are also more conscious, vocal, and participative. Therefore, being digital can determine how companies retain brand loyalty with the emerging breed of customers. Sodhani continued, “Being digital not only means in terms of processes and systems but also having an online presence which is important as that’s where the future looks towards.”
It is clear that automation and digitisation present infinite possibilities and opportunities that only increase in sophistication with time. To take full advantage of the opportunity, the need of the hour is for business leaders to rethink processes and organisations around technology in an elementary way, accounting for more future disruptions- pandemic or not.
