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F(d)igital – Disrupting finance in a digitally enabled world

The development of digital technologies has disrupted organizations across industries by remodeling their fundamental business operations. It has catapulted small start-ups to unanticipated fame, and challenged large organizations to re-invent themselves. Finance organizations will not escape the upheaval, especially as most CFOs see digital technologies as having a significant or even disruptive impact on their functions.

As improvements in core finance and accounting processes will be driven through digital technologies and limited human intervention, we see finance as a function of digital – F(d)igital –  and predict the following changes:

  1. An increase of around 200% in transaction-processing automation
  2. The cost of finance to reduce by half
  3. At least 70% of finance activities to be delivered through integrated, hybrid centers of excellence
  4. A 200% increase in productivity among finance professionals as finance becomes more integrated with business strategy goals
  5. A tectonic shift in user experience – through the use of embedded analytics and pattern studies of connected devices, people experience ease, convenience and delight when delivering or using finance services

Before F(d)igital: Let’s look at the heart of finance

It is important to understand the role of finance to imagine a F(d)igitally-enabled finance organization. The core of finance – book-keeping and statutory compliance – has evolved into a close business ally and strategic partner. An effective finance operation is a function of speed, efficiency and accuracy. We can depict this mathematically as:

Welcome to the world of F(d)igital: Disrupting finance

In the future, finance will be remodeled through digital technologies that pump insights rather than raw data into the business. For this to happen, the key elements of core finance operations – speed, efficiency and accuracy – will also change

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

The future financial close and reporting process

The shift in core accounting and reporting processes will be dictated by digital technologies that are already available in the market and include:

Cloud computing, mobility, and visualization tools, for example, are already delivering operational efficiencies, agility and effective controllership through ERPs and point solutions like BlackLine and Workday. The focus is now on more advanced and nascent technologies like robotic process automation and machine learning.

While CFOs are aware of these technologies, there are also serious apprehensions. The digital technology market is in flux with tech startups growing exponentially around the world. This fluidity will take some time to solidify. In the meantime, they will continue to collide and create meaningful solutions. For example, robotics embedded with cognitive intelligence or big data analytics leveraging NLP/ NLG can deliver higher efficiencies and better insights.

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

Technology alone is not enough

While digital will be the core driver of the digital finance transformation, there are three catalysts that will help realize its full potential.

  • Hybrid centers of excellence – key to dealing with disruption
    Centers of excellence bundle together finance activities to create integrated operating models, managing process peaks and troughs, and remodeled finance roles. They create agile, scalable, efficient and cost-effective operating models to deliver core finance and accounting services across the globe. In the future, these centers of excellence will attain higher value and directly impact bigger outcomes. For example, one of the world’s leading snacks companies set up an internal control testing hub for Sarbanes Oxley testing, access rights monitoring and remediation, which generated savings of around 40% in the cost of internal audit
  • Advanced analytics –accelerating the journey to strategic business enablement
    Many of the digital innovations in analytics aim to tap into new, varied and large pools of data sources, such as social media, and the internet of things, which enable data-driven organizational structures. As a result, finance professionals feel they have more data than they can work with. Data scientists are taking over these jobs by creating niche capabilities that spot trends across diverse portfolios and link them back to the business. Self-service analysis tools will reduce the stakeholder dependency on finance for information
  • Process alignment – the biggest opportunity for value creation
    Estimates from the Genpact Research Institute, based on multiple industry sources, indicate that nearly $400 billion per year could be spent on digital efforts that do not meet return-on-investment expectations and delay companies’ digital transformations. Aligning end-to-end processes, and design and control frameworks with newer digital interventions, rather than silo implementations, is key. Domain knowledge should be at heart of all digital solutions. We call this the Lean DigitalSM approach

Companies that adapt to a digitally enabled world will not only survive, but thrive. While the world moves ahead at breakneck pace, the accounting industry cannot be left behind.

 

Written by

Vivek Saxena is Genpact's Senior Vice President and F&A Service Line Leader, responsible for developing domain expertise, designing process solutions, and implementing transformation projects. He is a Chartered Accountant from India, and passed CPA and CISA exams in the US. He has over 20 years of experience in closing, consolidation, business planning, and software designing. He joined Genpact in 2006 from Oracle Corporation, where he led product management for Oracle planning and budgeting applications.