The Technological Evolution in Finance

  • CHIP MAURI
  • OCTOBER 10, 2018

Building a business is hard.

If only there was a formula, an algorithm so to speak, that we could ardently stick to – an unfailing ‘truth’ to which the only variable of its effectiveness was determined by our own will and determination.

One way in which business is hard is the impermanence of structure and order.  That is, change is ever afoot. You can manage to securely affix the fitted sheet on one corner of your bed – and moderate skill can possibly lead to all four corners secured at the same time – but once people start sleeping in the bed, the sheet is bound to become untucked and dirty, and will require realignment.

Similarly, the astonishing pace of technological change is seeping into every functional area of business, no more so than the arenas of finance and accounting.  This disruption can be a boon to those who embrace it, or become a serious competitive disadvantage for those who resist it, but in either case, a re-alignment will be necessary at some point.

To further this point: Leaders in the corporate finance industry wholeheartedly agree that the way tax, finance and accounting functions are executed will evolve radically over the next five years, and that the majority of accountants and tax professionals are ill-equipped for this impending paradigm shift.

Without doubt, organizational leaders must play their part in smoothing that evolution by ‘setting the tone at the top.’

Rethinking traditional views of accounting, finance and tax

Accountants can no longer be the number crunchers that they are pictured to be.  Now, they are expected to provide recommendations, facilitate new processes, and forecast future outcomes that a computer cannot (yet) do.  If you frown upon your finance staff as ‘a necessary evil,’ you would be well-suited to undergo an attitude adjustment. In the International Federation of Accountants discussion paper, The Role and Expectations of a CFO,

“In forward-looking organizations, the CFO and the FP&A function are evolving from a transactional and cost efficiency focus to an increasingly value-adding strategic focus.”

Your finance and accounting teams must make sure vendors are paid and invoices are collected – certainly this is a fundamental function that cannot be undervalued.  However, companies that aim upward are deploying their number-crunching teams to speed decision support and unearth hidden opportunities.

Employing enhanced data management techniques

Focus on data management in business has reached supernova proportions (and despite such a strong assertion, it may still be an understatement).  It’s not necessarily that we appreciate data more now than in the past, but rather advanced technologies can accelerate transformational insights and outcomes.

But even leading edge technologies are ‘dumbed down’ when plagued with ‘garbage in, garbage out’ datasets.  Organizational leaders must encourage a ‘data-driven culture,’ according to Bloomberg Professional Services:

“As companies become more comfortable with data, building a competitive edge will come down to the organizations with the best data cultures.”

Leaders must embrace the investment into systems, people and processes that yield data-driven decisions and outcomes, to avoid sinking into a ‘competitively-challenged’ hole.

Deploying automation and data visualization

To reiterate, your finance and accounting teams must make sure vendors are paid and invoices are collected.  The old pen and paper approach is prohibitively expensive and terribly slow; new tools are proliferating the market that can greatly speed transactional processing, provided your team has the skills to learn and operate them as designed.

In the McKinsey & Company article, “Memo to the CFO: Get in front of digital finance—or get left back,” automation can speed financial processes, and accompanying data visualization can be game-changer across the organization:

“The CFO and other business leaders will need to collaborate with the CEO, chief information officer, and IT organization to integrate data-visualization tools with a company’s established systems. They will need to draw on expertise from data scientists and data analysts who might work in IT or directly with the finance function. Such experts can help the CFO rethink end-to-end finance processes (such as data-to-report, purchase-to-pay, and order-to-cash processes) and rebuild them using a visual, user-focused approach.”

Automation brings staff capacity gains, flipping the 80/20 rule (gather data / analyze and report) to something approaching 20/80.  This gives the team more time to recognize evolving trends, produce metrics and participate in strategy formulation.

Next steps

It’s time to take stock and evaluate.  How would you and your leadership team view data and technology across the organization?

  • Is it a priority?
  • Is it a set of handcuffs?
  • Are you proud of how you make optimal decisions, based on a blend of experience, intuition AND clear, insightful data?

You may like the conclusions you reach.  If not, it’s not too late to facilitate the transition from ‘old school accounting’ to ‘value-added and insightful finance.’

The Calculation Bar is an organization driven to creatively transform corporate finance through compelling data visualization, technology and responsive customer service.

We partner with mid-tier corporations to design, apply and automate business functions and reporting.  Our goal is to optimize how business leaders use data effectively, improve profitability and engender deeper conversations with lenders and investors.

For more information, please visit calculationbar.com.

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