Digital transformation is the most pressing priority for companies today – especially within the finance function. That’s why EXL partnered with Harvard Business Review Analytic Services to interview F&A professionals at all levels on digital transformation, from managers to the C-suite. By examining their responses, finance leaders can benchmark their own digital progress, predict future transformation trends, and see what challenges prevent transformation success. 

The finance function is critical for achieving digital transformation success throughout a company as a whole. With access to data throughout the organization, F&A teams can identify transformation opportunities where they could have the most impact, track and predict outcomes, and produce actionable insights.

This is especially important as most businesses are currently struggling with digital transformation. Fewer than 40% of companies reported achieving significant results from their transformation initiatives, a critical gap to bridge as digital leaders see revenues rising faster than those unable to transform. 

However, the gap between digital expectations and outcomes for businesses also exists in the finance function. Though 77% of those working in F&A stated they were achieving positive outcomes from digital transformation, only 23% said those outcomes were significant. 

F&A’s Key Priorities and Challenges

Based on data from the survey, finance teams are looking to digitally transform in order to accomplish three priorities. 

Key Priorities of the Finance Function: 

  1. Drive sustained growth and profitability
  2. Transform SG&A cost structures
  3. Ensuring finance excellence and compliance management 

However, few have been able to make significant progress on these priorities due to three challenges.

Key Impediments to Implementing Digital

  1. The drag of legacy platforms 
  2. A digital talent gap 
  3. Complex, inconsistent, and broken processes

Closing the divide between digital expectations and outcomes will take a new approach to transformation: Digital Intelligence.

Key Priorities of the Finance Function

Finance is hoping step into a more strategic role and help chart the course of their companies. Accomplishing the three following priorities will position the finance department to generate the insights and predictions needed to guide the rest of the business as a whole.

Driving sustained growth and profitability

Every organization is under pressure to improve its bottom line and market share, with just over half of all respondents stating that finding new markets for growth is a main reason for transforming their company. This was about equal with F&A, where 54% of respondents also provided this answer. 

Finance teams are naturally suited to helping companies identify opportunities for growing revenues. By using their access to data from across the organization, F&A departments can analyze past performance, monitor current performance, and predict future performance to discover potential areas for growth. 

However, this is not possible without putting that data in context. Using data to help a company define its strategy for growing revenue takes more than just the finance knowledge needed to keep the books – it takes deep domain experience and advanced analytics. Achieving the former takes a holistic understanding of a business beyond where money is coming in and going out. Accomplishing the latter can require overhauling outdated platforms and systems in order to get the most out of a company’s data, which is why 63% of respondents stated building new revenue channels through technology is a key factor for digital transformation. 

Transform SG&A cost structures and reduce expenses

Companies want to do more, cheaper, with 77% of respondents noting cost effectiveness was a main driver for digital transformation. Finance teams are aiming to reduce expenses by changing their approach to SG&A cost structures. 

Implementing RPA will cut out many of the rote tasks that bog down F&A team members and let fewer people accomplish more work. Additionally, removing this busywork will let them focus their time on value-creating, strategic analysis, which can be further enhanced using AI and cloud platforms.   

Drive finance excellence and compliance management

Digital transformation is not just about adding new capabilities for the finance departments. It’s also about improving core F&A processes and offering high-end integrated services. The data from the survey bears out this claim, with 80% of respondents stating that improving efficiency is the main focus of their transformation agenda for 2018. 

Some of this will come from building on finance’s preexisting expertise in regulatory, tax, treasury, and industry-specific F&A issues. By doing so, F&A can take a more consultative approach to the rest of the business, using this knowledge to put data in context and find opportunities for increasing revenue and growth while ensuring compliance with all relevant regulations.

Key Impediments to Implementing Digital

To succeed at digital transformation, finance teams must focus on outcomes. Not having a clear plan for achieving and measuring digital results is the cause of almost every problem within a transformation program. However, only 48% of F&A departments believe their organization has developed and communicated a formal strategy outlining their digital future, while only 29% of organizations can measure digital outcomes. This can lead to a host of issues. 

The drag of legacy platforms

Fragmented legacy systems frequently hobble F&A teams. Outdated technology can lead to poor data quality that makes it difficult to generate actionable insights, while a lack of digital tools can make completing mundane tasks to take up an unnecessarily large amount of time.

The answer to these issues is, of course, updating, enhancing, or replacing these legacy systems. This is frequently a difficult task due to the time and resources needed to complete these projects, especially if there is no IT roadmap or planning to integrate new systems with the old ones. 34% of respondents identified legacy information systems not easily meshing with new technology as the largest reason why digital transformation initiatives fail.

A widening talent gap

A lack of talent with skills in analytics, data science, and other important areas is a major reason why transformation initiatives don’t produce results, with 26% of survey participants stating that a lack of internal expertise had hobbled their transformation agenda. F&A teams must recruit new talent or upskill existing employees with the analytics, controls, systems, and finance knowledge necessary for F&A digital success. 

Finance teams must also examine how they use their existing employees. In most F&A departments, 80% of FTEs are focused on transactional activities, time that could be better spent on value-generating work. Soft skills in managing change, relationships, and projects are also more needed than ever in order for finance teams to take a consultative approach to other departments and navigate transformation-related changes. 

Complex, inconsistent, and broken processes

Digital transformation is a tool for enhancing processes that already work, not fixing those that are broken. Automating a defective process just means getting the wrong results faster; data captured from a defective process will be defective itself. F&A departments must ensure that their current processes are functioning optimally before digitally transforming them. 

How Finance Can Drive Transformation

The priorities and challenges facing finance teams are urgent. In order to turn digital expectations into real results, F&A must use Digital Intelligence. 

Digital Intelligence drives the right business outcomes by creating the context from a customer perspective by combining business domain knowledge with deep insights from data. It enhances human capabilities by orchestrating advanced technologies like robotics, analytics, and artificial intelligence. By applying Digital Intelligence to these different goals and challenges, the finance function can digitally transform itself and enable the entire company to successfully transform. 

Based on data from the survey, EXL predicts that finance will drive transformation in four key ways. 

Predictions:

  1. An increased focus on customer experience
  2. Accounting becomes automated and straight-through
  3. Contextualizing finance data becomes essential, and competition for analytics talent will rise
  4. Move from managing processes to managing outcomes

These trends are already beginning to shape how finance approaches its role within a company. 

 F&A’s Digital Future

Overcoming present challenges and achieving current goals are only part of the equation for finance teams – they must also prepare for the future of driving transformation. This will take expanding F&A’s responsibilities and capabilities. 

A focus on customer experience

Customer experience is only increasing in its importance as a competitive differentiator, and F&A departments are taking notice. Improving communications with customers was a main transformation driver for 57% of organizations, while enhancing customer value was a priority for 69%.  

To assist with creating excellent experiences for both internal and external customers, finance teams should use design thinking to create agile, customer-focused processes. Analytics can also provide proactive monitoring for early warning indicators of a poor experience, enabling the problem to be stopped before it even starts. 

An omnichannel approach to customer engagement will also be an important part of providing outstanding customer experiences. Interestingly, this did not rank high as a priority for most finance teams. Only 29% said that customer and digital engagement were a major part of their transformation focus. 

Accounting becomes automated and straight-through

Moving from keeping the books to helping set strategy will require finance departments to spend less time on rote tasks and more time on high-level, value-generating work. Many F&A teams have begun this shift by optimizing their accounting processes using advanced platforms, automation, and other technologies. For instance, 49% of companies have implemented cloud technologies and 46% mobile solutions, both of which can augment existing ERP systems. 

By moving to real-time accounting, finance teams spend less time on reconciliations and more time on strategic tasks. Getting there will take implementing automation and analytics. This is a current priority among companies, with 66% of respondents stating automating back-office processes is a main focus area and 46% planning on implementing advanced analytics by the end of 2018. 

RPA and AI will be used to simplify processes and eliminate exceptions. This is driving 46% of respondents to focus on developing pilots and proof of concepts for these technologies. Currently, 31% of organizations are planning on implementing RPA and 23% AI by the end of 2018. 

These focuses are eclipsing other much-hyped technologies. For instance, less than 10% of F&A teams are planning on implementing blockchain by the end of 2018. 

Contextualizing finance data
Data is an essential component of digital transformation success, but only if it‘s properly used and analyzed. F&A departments must take a digitally intelligent approach to their data to put it in context with domain experience and use it for developing benchmarks, predictions, and forecasts. 54% of organizations are focused on reorganizing and better utilizing data to achieve just that. 

Analyzing and generating insights from data also takes the right tools. F&A teams should look to implement self-service analytics and data visualization programs to gain a real-time single source of truth.

This will naturally take significant use of analytics. Because finance teams will be leveraging analytics more, they should expect a significant uptick in competition for analytics and data science talent. F&A must begin considering how it will attract, hire, and maintain these increasingly essential workers. 

From managing processes to managing outcomes
The future of finance is augmenting human workers with digital technologies. Employees will need a new set of skills, requiring a change in how finance departments manage and train their teams. F&A will require workers with capabilities in analytics, automation, and other digital areas. Additionally, taking a consultative approach towards the rest of the business will require employees with “soft skills” in areas including relationship management.

Roughly half of finance teams are looking within their organization to solve this issue, with 57% planning on retraining their current workforce for digital skills. Less than 33% of companies plan on hiring digital natives. Many companies aren’t averse to seeking external help, however. 54% plan on partnering with digital technology vendors to lessen this problem. 

Successfully Transforming F&A Using Digital Intelligence

Digital transformation isn’t an easy task in any department, and the unique challenges for F&A create their own difficulties. Overcoming these roadblocks, accomplishing current priorities, and preparing for an increasingly competitive future will require digital intelligence. By starting with the outcomes to be achieved, combining domain knowledge with data to create context and generate insights, and orchestrating advanced technologies, finance department can successfully bridge the gap between digital expectations and results.  

DIGITAL INTELLIGENCE IN FINANCE AND ACCOUNTING

Context

  • Identify new opportunities for growing revenue
  • Reduce costs and transform SG&A cost structures
  • Improve core processes and offer high-end integrated services

Orchestration

  • Advanced analytics for data-driven insights
  • Automation to streamline processes
  • Combine domain experience with data

Outcomes
Bringing Human X Digital Together for Real Results
Domain Experience X Data and Automation 
Ensuring M&A deals create value by standardizing and digitally transforming the F&A function for newly acquired companies

  • 22% productivity improvement for invoice processing
  • 20% cycle time reduction for accounts payable
  • 18% reduction in time to close

Changing Processes X Advanced Platforms
Reducing costs and accelerating time-to-close with platforms, automation, and process changes

  • 40% reduction in cost of operations
  • 2 days required for monthly closing cycle time after interventions
  • 1,750+ account reconciliations automated

Streamlined Operations X Predictive Models
Transforming accounts payable with customer scorecards, analytics, and automation 

  • 42% productivity improvement
  • 75% reduction in exception processing
  • $1MM working capital impact by reducing invoicing errors 

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