By Deepal Shah, Group CFO, Allcargo Logistics Ltd
Finance holds the key to a successful business, and technology is the key to the future of finance. As the world transforms with data analytics, cloud computing, artificial intelligence (AI) and machine learning (ML) — technology that is permeating all walks of life — chief financial officers (CFOs) have their work cut out. Finance verticals in companies are still found to be mired in complex, legacy methods and it is up to the CFO to navigate the adoption of technology that can improve decision-making with relevant insights, drive ease of use, spark innovation, bring cost-effectiveness, and unlock competitive advantage and efficiency for their business.
On the cloud
We began with migrating our on-premises data to cloud storage, a move that helped us tremendously during the pandemic to stay functional. Untethering our data and online operations has granted secure access to our employees from anywhere and played a key role in automating our processes. Cloud platforms form the core of tech solutions and companies are moving to the cloud for major finance applications such as financial planning, analysis, and other financial value chain solutions. The cloud makes it simple to scale up quickly and add more functions when needed. We are leaner, and more agile because of cloud computing.
Single source of data
For a concerted tech-forward approach, consolidating siloed legacy systems and fragmented information nodes is crucial. Earlier, we lacked a global master and had dated ERPs. Our digital overhaul was led by the establishment of a single source of data, in contrast to multiple data points that would jeopardise the quality and authenticity of information used. No amount of technology can make up for poor-quality data and can only be used to the hilt with iron-clad information.
To our common data link, we have added a state-of-the-art business intelligence application that parses the information gathered and even layers its analysis with curated external metrics, such as macroeconomics and industry-wide comparisons for a well-rounded understanding.
The umbrella access to advanced analytics and business intelligence is what helps us uncover important patterns in unstructured information and lets data drive our decisions, lessening risks from lack of knowledge. Automating work and computing vast amounts of data are two other tasks that have become easier with our cloud-native central data link.
The single point for data collation and analysis, across 300 offices in 180 countries, has meant we can meld financial planning and analysis (FP&A) with the organisation’s business planning. The finance team can tap into the knowledge base across functions, products, and businesses to inform its projections and decision-making. For example, when assessing price competitiveness, we can gauge if it is just the end pricing that needs work or if it is our cost structure along the supply chain that needs a rethink.
Automation
Global management consultant, McKinsey, estimated nearly 60 percent of FP&A activities on average could be automated to a large extent. In our financial digital transformation, we have put RPA (robotics process automation) and IA (intelligent automation) to automate routine processes.
An RPA bot can easily acquire and check transactional data from any source, automatically approve all matching records, and flag discrepancies, streamlining intercompany reconciliations. In AR (accounts receivables), RPA applications can automatically issue and email invoices, ensuring a consistent cash flow without delays caused by manual errors in invoicing. Tallying invoices has become error-free, uber-fast.
IA applications have been helping us with planning, budgeting, management, performance reporting, forecasting, and modelling in finance. IA systems are performing reconciliation, consolidation, reporting, and closure of financial and transactional processes, and using rules and patterns, can correct errors or flag them for human intervention.
Book-keeping has become lightning-fast, as IA automatically closes books using business logic rules to make correct entries the first time itself. Crunching the vast amount of data gathered on our central data link, IA can present analysis in a user-friendly format for our reports. Demand forecasting and budgeting have become insightful, due to the data-backed reports, enriching the decision-making of the organisation on the whole.
Of course, seamless banking is a concurrent benefit of digital finance automation, needing much less human intervention.
Gartner, the global finance advisory research firm, expects organisations to lower operational costs by 30 percent by combining hyper-automation tech such as RPA, IA, AI, and business logic with overhauled operational procedures by 2024.
Automation has seen a boost with the finance function’s modular application portfolio, crafted in our permanent transformation office, which allows us to acquire, assemble and configure different applications to further automate routine work as and when needed. Unlike earlier, when companies would outsource and stick with an ERP for 10 years, our modular approach is keeping us nimble in a digital-first world, allowing us to achieve operational excellence and cost savings by bolting on new applications on top of our processes without complete or costly overhaul.
Benefits of the transformation
Automation technology is now increasingly becoming a precondition for a company’s survival in a digital-native world. Organisations will have to step up their IT and business process hyper-automation by being able to readily identify, vet and automate as many business processes as possible using technology, and the finance department cannot afford to be far behind.
Traditionally finance jobs have been known to be mundane, often sending work-life balance for a toss. With automation and smart tools, not only is time saved and productivity increased, but our people are empowered to focus on the more meaningful aspects of their roles and derive greater satisfaction than what clerical tasks bring.
Digitalisation has made keeping up with evolving compliances for a large organisation, spanning multiple businesses such as ours, easier. Our tech-forward approach has seen us deploy a global compliance tool across our offices, regions, and functions.
The challenges
Finance digital transformations often come at a cost and may prove to be discouraging. But the gaps around the world, exposed by the pandemic, in the ability of the finance function to support agility that their organisations required due to a lack of investment in digitalising could put things in perspective.
The cost benefit analysis for digitalisation of finance needs to be prescient. It is not about manpower vs technology, but about scalability in the next seven to 10 years. The scope for increased efficiency and scalability will tell companies whether to invest or not.
Once the cost hurdle is down, IT transformation programs run into people resistance. Open, two-way communication about apprehensions, teething problems, and expected positive outcomes, training employees, and championing a patient change culture have helped us navigate the turbulence during the adoption.
Digitalisation and hyper-automation also present a scarcity of trained resources who know their way around such processes and can keep up with them.
The CFO’s role
The lines between IT and other functions, including finance, are blurring. Eventually, all companies will become tech-native companies, depending on how well they weave automation and intuitive technology into their functioning.
The finance function is one of the major drivers of tech adoption and if the CFO is sensitised to the relevance and nuances of such artificial smart tools, then it becomes a lot easier for other verticals to forge their own tech infrastructure.