The Future of Finance: How to Prepare for It

Data is the foundation on which modern CFOs are building their finance function. While the finance team is generally considered number-crunchers, their role as keepers of the company’s data is growing in prominence as the volume of business data increases and more technology tools become available for complex data analysis.

The amount of data generated each second by the financial industry will grow by 700% in 2022. This exponential increase in the volume of data generated poses both benefits and challenges.

Finance teams need robust data management strategies and tools to enable the mining, storage, and use of this growing volume of data. CFOs also need to enhance finance’s role in managing data by consolidating, simplifying, and managing the flow of data across the organization. They’ll also have to strengthen decision-making through the widespread adoption of data visualization, advanced analytics, and debiasing techniques.

Why is data going to be central to the future of finance?

The reasons why data is becoming the bed-rock of the finance team include:

• Better planning and forecasting: The use of advanced data analytics enables you to make better decisions using tools such as scenario planning, predictive analytics models, and variance analysis.
• Process improvement: Studying data patterns such as average transaction amounts per minute, number of confidential data access requests, etc. can help you identify areas of improvement within the different processes. 
• Regulatory reporting & compliance: Real-time data access and analytics are critical to keep up with the latest reporting & compliance trends such as on-demand reporting, the latest regulations, etc. 

Key data issues CFOs will be working on:

Below we look at areas where CFOs will be investing time and resources to make the function more data-driven.

Data strategy: Having a clear approach to how you plan to use, measure, and report data is critical as you build a data-driven function. CFOs will look to identify key performance indicators (KPIs) and reporting frameworks to define how to use data and measure its value. Evaluating and spearheading investments in data management tools including storage centers, dashboards, and analytics tools will be central to finance teams’ data strategy.

Data technologies: How data was stored and used a decade ago is much different to how it is done today. Data centers have given way to data lakes and warehouses. CFOs will be working more closely with the IT teams to define data requirements, technology selection, and IT architecture design changes. 

Digital skills: The CFO needs to bring in a culture and workplace skill change to drive transformation initiatives. They’ll work closely with HR business partners to redefine job roles, identify fintech talent, and upskill existing employees.

Data governance: CFOs will also work with the CIO and other business leaders to develop a data ownership framework to ensure data integrity, confidentiality, and authenticity. It will also encompass the necessary regulatory compliance needs.

The way finance teams are structured is being fundamentally altered by the widespread adoption of RPA and AI bots. The path to autonomous finance, wherein the finance function would perform all its workflows with minimal human intervention will see a further shift in the way finance teams hire and retain people.

Here’re some ways the finance organization will change in the future.

1. Bots + humans: Like in most other industries, bots will be working alongside knowledge workers in finance teams to complete workflows quickly and more efficiently. But these bots aren’t like the large ones that you see in a manufacturing unit or retail shop. These are often invisible algorithms or software programs that sit within data centers or computer systems and help human workers complete mundane tasks such as cash reconciliation and invoice delivery. This will enable knowledge workers to focus on strategic tasks such as customer relationship management, accounts receivable forecasting, and decision-making.
2. The increased need for digital expertise in finance teams: The next generation of finance workers will bring in both financial knowledge and digital prowess. They’ll be adept at using digital tools like accounting software, accounts receivable solutions, data visualization platforms, etc. They’ll be more aware of how technologies such as AI and intelligent automation can be used to complete tasks without detrimentally affecting the workforce. 

The next generation of finance workers would even be able to handle simple IT jobs such as integration of SaaS products using ready-to-use connectors, deployment of weekly/monthly reports, etc. Finance teams may also have their own set of technical personnel to help with quick troubleshooting and innovative ways of using finance technologies.



3. Continuous upskilling of workers: So far, the finance teams have mostly held a traditional outlook with little or no changes being made in the way numbers are presented or accounting books closed. But with the finance function transforming into a more strategic unit and going digital, accountants, AR analysts, FP&A analysts, and other finance executives will need to continuously upskill themselves to be relevant in the hierarchy. The emphasis on environment, social, and governance (ESG) metrics, on-demand reporting, etc. will lead to newer, fully-functional teams emerging within the finance function.



 

4. Lean teams: The finance function of the future will be leaner and fitter. Powered by autonomous finance technologies, the department will be able to optimize costs and improve agility as they build an efficient and lean workforce. Despite a small size, the workforce will be able to handle a breadth of tasks with ease, supported by RPA, AI, and other autonomous technologies.

The finance department is no longer a back-office team. They are actively involved in interacting with customers, partners, investors, and other stakeholders. Their views are sought after not just for budgeting and financial planning but also for hiring, talent management, driving sustainability, and improving overall business efficiency.

Here’re some other areas other than accounting and bookkeeping the future finance teams will be playing a key role in:

ESG reporting & sustainability: There is a growing call for increased focus on sustainability, governance, and transparency in reporting. The finance teams are going to play a huge role in ensuring that their investments meet the required ESG metrics and standards and are profitable while being environmentally sustainable. They’ll be involved in measuring the impact of different business operations and projecting the company as a sustainable organization.

Reporting & compliance management: Reporting and compliance management have been nuanced with several challenges as governments and regulatory bodies add new layers to the existing regulatory requirements. The finance teams will need to grapple with these ever-changing regulations and negotiate with the concerned bodies to help their businesses navigate the regulatory changes.

Cybersecurity & data management: While cybersecurity will continue to remain predominantly a responsibility of the IT team, the finance team will see themselves get more involved in cybersecurity and data management as spending in these areas grow. With the finance function trying to build its foundation on a strong data strategy, their involvement in choosing data centers, data partners, and IT vendors will be stronger.

Talent retention: Finance teams will play a crucial role in talent management that will not be limited to compensation and payroll. CFOs along with other C-suite executives will need to draft talent retention strategies and packages, as well as focus on upskilling and realigning the workforce. 

Marketing & brand building: The CFO’s and the finance team’s role in investor relations management, analyst relations, and customer-partner relationships will grow as they embrace new roles. For example, the payment process where an accounts receivable(AR) executive interacts with the customer is a critical point of customer contact. 

According to a survey we did earlier in the year, more than 40% of CFOs mention AR automation gives them a competitive edge by enabling superior customer experiences. Next-gen CFOs won’t shy from being the face of the company as they handle more press meets, take on analyst questions, and build the brand of the company as a data-focused, data-accurate, and sustainable business.

Successful CFOs and finance leaders of the future will differentiate themselves by spending a greater portion of their time on value-added activities such as financial planning and analysis, operational risk management, policy setting, treasury management, and strategic planning.

Prioritizing such high-value tasks enable finance leaders to build deeper and broader capabilities and establish themselves as business leaders than just accounting officers.

In our recent survey, we asked 150+ finance leaders in the US how their focus on some key areas will change in 2022, and this is what they replied.

A survey by McKinsey revealed that today’s leaders spend 19% more of their total finance-staff bandwidth on value-added activities than the average company did ten years ago.

In the next chapter we’ll look at how CFOs are freeing up time and resources on their plate for high-value tasks by automating transactional activities. 

Finance executives have generally been viewed as accountants and bookkeepers. But as the role of the finance team expands, finance team members need to look beyond transactional activities and routine jobs that can be automated. Many leading organizations have increased automation in transactional functions such as accounts payable, accounts receivable, and core accounting by 39% or more.

Here’re some transaction finance functions that modern CFOs will look to automate and eliminate from a finance worker’s daily schedule.

1. Invoicing: Preparing invoices accurately after collecting data from multiple documents such as purchase orders, sales records, trade management portals, etc. is tedious. RPA and AI tools can seamlessly do this job and complete the whole process efficiently. You’ll only need to randomly check the documents for accuracy, thus saving man hours.
2. Cash application: Recording data from one document to another and then re-entering the same data to a third system is tedious and error-prone. Automating the process using AI and rule-based algorithms saves much time and reduces errors, improving financial close timelines.
3. Cash management: Treasury operations are mundane yet require careful attention and meticulous handling. This high-stress job can be eased by automating the transactional activities within it such as reconciliation, target balance matching, and data gathering.
4. Accounting entries: Data entry takes up the majority of an accountant’s time. Yet, at the end of a financial close, many F&A teams are forced to re-do/repeat some of the activities due to erroneous entries. Automating this transactional job by having bots input and output data automatically from relevant documents streamlines the whole process and makes it more accurate and efficient.
5. Credit risk management: Managing customer credit risk is key to ensuring minimum bad debt and revenue loss. For superior credit risk management, you need data from multiple sources, but manually sourcing them would take much time and reduce the relevancy of the data collected. Automation solutions such as HighRadius Credit Risk App source data from 40+ credit agencies and offer customizable credit risk models that help to automatically set credit limits for customers.

Preparing for the future of finance is key to acing the challenges and changes it will bring. Most businesses have already replaced their paper-based processes with some form of automation – be it spreadsheets or basic accounting tools. But to jump ahead to the next phase of finance transformation, often referred to as Finance 4.0, finance leaders need to do much more than move to spreadsheets or other tools.

Embracing and preparing for an autonomous finance future powered by a combination of technologies that include RPA, AI, IoT, and intelligent automation will help finance teams be more streamlined and efficient. It will also enable them to take on more strategic roles as well as expand their presence to other areas such as ESG, data management & strategy, and compliance and policy management.

Here’re some tips to help prepare your business to face the future of finance:

A shift in mindset: Finance professionals need to keep up with the technological and operational changes around them to navigate the changing market scenarios. Accepting the fact that the old normal is no longer a competitive position is crucial to becoming more open in accepting innovation, and sometimes even failures that accompany digital transformation attempts.

Hire the right talent: Having the right people with the right skills is critical for success. You can no longer afford to simply look at accounting degrees but need to ensure that they have experience using cutting-edge technology along with a base in finance concepts. They should be quick to adapt and learn and should have an innovative, digital-first mindset.

Do not hesitate to make investments: Many CFOs are hesitant to invest in cutting-edge technology because they do not understand it well. As finance leaders, you should discuss with other relevant leaders and help prepare roadmaps for digital transformation that provide better ROI.

Partner with the right tech vendors: Technology solutions and vendors play a key role in developing your digital transformation plans. Choosing the right partners is essential for the successful implementation of automation tools and connecting systems together for building an autonomous finance function. 

How HighRadius Helps You Prepare for the Future of Finance

HighRadius is a leading provider of autonomous finance solutions for the office of the CFO. More than 700 of the world’s leading companies have transformed their order-to-cash, treasury, and record-to-report processes with HighRadius. Our customers include 3M, Unilever, Anheuser-Busch InBev, Sanofi, Kellogg Company, Danone, Hershey’s and many more.

We help businesses use AI and RPA-based technologies to reduce DSO, optimize working capital, lower bad debt, reduce month-end close timelines, and improve productivity. Our suite of solutions include – Autonomous Receivables, Autonomous Treasury, Autonomous Accounting, and RadiusOne.

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