CFO & Digital Transformation: 5 Processes to automate for your Finance Function

Introduction

The roles and responsibilities of CFOs have changed drastically in recent years. The common assumption is that CFOs handle treasury, audit, tax, and investor relations, as well as traditional finance functions such as accounting, controlling, budgeting, planning, and analysis. This assumption is similar to the Iceberg Illusion. However, we seem to have missed the recent shift in the expected duties of CFOs.

In fact, a McKinsey Global Survey confirms that in addition to the range of activities that CFOs already take care of, there are now new demands on their time. These demands include, but are not limited to, automating critical business activities and managing cybersecurity.

CFOs who are able to embrace information technology for their functions are more likely to succeed than their risk-averse counterparts. Additionally, digitally transforming the CFO’s office contributes to a better customer experience by streamlining payment processes.

The CFOs who initiate digital transformation within their teams and companies are the ones who will outperform industry peers and meet stakeholder expectations. Below are five processes that can leverage digital transformation at a CFO’s office:

1. Customer credit risk analysis

One way companies woo customers is by offering them lenient credit terms (e.g. higher credit limits and longer credit periods). This helps clients extend their payments and manage cash. But you also have the responsibility to ensure that your cash flows are optimized without damaging customer relationships. This requires you to assess the creditworthiness of customers before offering them extended payment periods or higher credit limits. Determining the creditworthiness of clients can be a challenge. It requires you to collect customers’ financial data from multiple sources such as credit reports, financial statements, and third-party credit scores.

• As the head of the finance department, you must ensure that a thorough check of the customer’s financial health is done before extending or renewing credit terms. Furthermore, you need real-time credit data to monitor the credit scores of customers to avoid delinquencies in shifting economic scenarios.
• CFOs also need access to a single view of their portfolio risk to monitor exposure across various industries and geographies.

CFOs can digitally transform these two processes by investing in credit risk software. Credit risk software solutions provide real-time visibility into finance risks and help predict bad debt scenarios. Credit risk software solutions can enable the office of CFO to implement comprehensive workflows to manage global portfolios. Read more about how it works here.

2. Streamline collection of accounts receivable

Cash flow is critical for any firm and the CFO is responsible for assuring the availability of working capital. Money not paid by clients for your services or products is money lost. As a result, ensuring that account receivables are paid on time is critical to drive business growth. Here are a few collections techniques that can help reduce days sales outstanding (DSO):

• Use AI-powered credit intelligence models to identify high-risk customers to prioritize collections.
• Real-time identification of critical customers to apply accurate dunning strategies.
• Touchless dunning strategies for low-risk customers, e.g. through an automated correspondence template with embedded payments links.

Cloud-based software to manage collections can help automate your process and improve collectors’ efficiency.  Check our Collections Cloud solution here.

3. Cash application management

Adoption of technology for automation of labor-intensive and error-prone manual processes such as cash application and claims or exception management is a key focus area for digitally transforming the office of CFO. Automating repetitive cash application tasks help free up time and let your brightest minds work on high-value functions such as credit analysis, collections, and customer management. Some ways technology helps improve cash application management processes include:

• AI-based solutions can automate cash application across different payment methods and remittance formats while cutting lockbox charges.
• AI-based cash posting and exception handling for verifying payments and posting them to ERP or CRM systems saves time and reduces errors
• Email templates for dunning, deduction denials, and credit memos save analysts’ time and reduce the chances of error.

4. Dashboard to evaluate account receivables team’s performance

A CFO needs to stay on top of account receivables to ensure optimal cash flows and identify areas of improvement in collections and dispute management.

To do so, a CFO will have to juggle between multiple systems to gather the relevant data. This requires extra time and effort. Using a centralized dashboard that is updated with real-time data can help to:

• Track metrics such as DSO, working capital availability, average days delinquent, etc
• Manage KPIs for teams and define targets around collection effectiveness, credit risks, etc. for teams and individual team members.
• Analyze how customers have been performing from the point of collections, deductions, payments, and credit.
• Leaderboards to motivate team members and analyze their performance.

By looking at these metrics, a CFO can not only set goals and benchmark performance but also promote a high-performance culture within teams. Checkout a dashboard from HighRadius that helps CFOs and their teams deliver dotONE performance.

5. Digital Transformation of Processes for CFO’s teams and customers

While we are talking about the automation of processes for the CFO’s team, it is also important to delight your customers to gain an edge over competitors. Digitally enabling your team as well as your customers can help automate invoicing, credit management, and collections, as well as, enable customers to pay using links, raise disputes and submit claims easily. Having all information in a centralized location also helps improve team collaboration and productivity, and enhances customer experience.

Next steps

If you are looking for the right partner to help lead the digital transformation for finance function, HighRadius is here to help! At HighRadius, we believe whatever processes can be automated should be automated. We offer AI-based solutions to optimize accounts receivables and treasury operations and save you time to work on high-value strategic tasks. We help CFOs put a part of their responsibilities on auto-pilot mode and level-up the performance of your finance team. If you’d like to learn how the suite of products at HighRadius can help your business, submit a demo request here.