CFO and digital transformation – The digitalization of finance

The year 2020 brought a significant boost in digitalization for a large number of companies.
This disruption caused by external factors resulted in extraordinary progress that had not been achieved for many years, for example in the areas of customer experience and scope of services.
in the areas of customer experience and scope of services and showed how important it is as a company to have the individual components of digitalization anchored in its own business model.
But what about the CFO area?
What forms of digitalization are relevant there, what potential lies hidden and how can it be leveraged?
This article provides an overview of the status quo, the possibilities of a digital CFO area and a roadmap for a successful transformation project.

Status quo and opportunities of digitalization in the financial sector

Increasing efficiency pressure among CFOs is proving to be an accelerating driver of digitalization projects.
This finding is underlined by a recent survey of CFOs as part of a study by Horvath & Partners, according to which 90% of respondents stated that they are pursuing a digital transformation strategy.
The necessity and the value proposition are therefore clearly evident, which is not surprising when you consider the potential opportunities for improving efficiency.
For example, complete financial processes such as accounts receivable and accounts payable can be automated with the help of robotics, or even more complex processes such as forecasting can be made more efficient through advanced analytics.

More far-reaching projects can focus on the integrative further development of finance in its role as a business partner in order to better align it with internal and external customers and strengthen its role in value creation.
This can be done, for example, by improving data to support operational decisions or by setting up finance processes as an end-to-end organization.

The necessary tools are therefore known and range from small-scale, one-off projects to fully comprehensive transformation projects.
However, it is often not clear in practice which measures generate which added value and how and where the theory should be implemented.
In addition, the new competence requirements for managers represent a major challenge and the lack of a mindset in the corporate culture to think about digital transformation projects holistically are also obstacles to progress.
As a result, many digitalization projects remain driven by unstructured actionism as stand-alone projects and are usually limited to the automation of existing processes without fundamentally rethinking and changing them.
A fully comprehensive strategy that is expressed in a formulated roadmap is therefore important for a successful digitalization initiative.

Roadmap for successful implementation

In order to address the aforementioned gap in managers’ knowledge and skills, it is important to understand possible digitalization initiatives.
This is not so much about training managers in finance to become Python programmers, but if the basic theory, i.e. the knowledge of possible use cases and their implementation tools, is lacking, it will be difficult to fulfill the role of business partner, for example.

It is therefore worth categorizing digitalization initiatives as a first step:

  • By definition, digitization describes the use of digital tools instead of analogue tools in certain process areas.
  • Intelligent process automation describes the replacement of human process handling by automation, for example with the help of machine learning.
  • Advanced analytics describes the support of decision-making processes through intelligent data analysis, which can efficiently guide more complex issues with insights and recommendations.
  • Business process outsourcing describes the use of resources outside the company for certain manual and rather simple processing procedures, often in the back office.
  • Lean process redesign describes the restructuring and realignment of existing processes to make them leaner, more agile and more resilient.

1. from vision to pragmatic implementation

The risk of having too many singular, not far-reaching digitalization initiatives reduces the prospect of success.
It can lead to companies losing sight of the big picture and forgetting to focus on the really effective projects.
For this reason, it is important to prioritize all digitization opportunities in your own company, i.e. which projects will bring the most concrete benefits to the company, which are scalable and have lasting added value.
This avoids getting bogged down in the implementation process and tying up unnecessary capacity.
It is equally important to maintain a healthy balance between an ambitious vision and a pragmatic approach to implementation.
On their own, these two forces can hinder the digitalization process if there is too much overhang, but together they form a balance that ensures that the focus and feasibility of the project are not lost despite the high level of ambition that many initiatives bring with them.

2. structuring the implementation

As already mentioned, it is important to maintain a holistic view when implementing digitalization projects, especially in the CFO area, i.e. to think in terms of complete “journeys”.
In order to reap the full benefits, inter-functional implementation is essential, especially as the finance area runs horizontally through the company.
One example of this would be agile budgeting, i.e. where previously budget approval in long processes tended to hinder other business areas, these can now be implemented more quickly, thereby strengthening the business partner role of the finance area.
Another example would be “advanced data analytics” with an inter-functional link between strategy and finance in order to identify loss-making areas in the company’s income streams and realign the operating business.

3. the correct implementation sequence

Once the structure has been established, the individual implementation steps need to be prioritized.
Even if it is tempting and most prestigious to tackle the biggest digitalization project first, this is simply not possible for many companies.
It always depends on where the company already stands.
The best results can be achieved if the various initiatives build on each other and this requires a precise analysis of the extent to which the data input is already digitized, for example, in order to implement “Advanced Data Analytics” on this basis.
For this reason, the individual sequences that build on each other must be adapted to the company’s requirements and the order in which they are to be implemented must be determined.

4 The role of the implementers

The acting senior executive has an important role to play in this entire project.
They must carry out far-reaching persuasion work and prepare the affected areas for the implementation and demonstrate the potential.
This is all the more important the more functional boundaries are crossed in a holistic digitalization approach.
It must determine the prioritization in order to assess which approaches can be implemented by internal capacities and which require outsourcing.
The final step is to carry out the implementation itself, combined with constant monitoring of progress and, if necessary, agile readjustment.

A bottleneck will be suitable managers who can work at the intersection of strategy, M&A, restructuring, corporate finance and operations and implement digitalization projects.
The aim of management should be to orchestrate the transformation project in a strategically smart way, to always keep an eye on the status of progress in order to ultimately align all areas with the new digital reality in good time.

Share post in the network:

Scroll to Top