Finance function of the future: opportunity is digital

September 2021
Read time: 6 minutes


Ian McBane, Business Services and Outsourcing Partner at BDO, talks about the future of the finance function and how digitisation is paving the way to a post-COVID world. 



How has the finance function changed over the last five years?

The biggest shift in the finance function has been the transition from manual to automated working and the drive for technology enabled processes. We can see this in everything from data capture, processing and reporting to risk management, all of which support an increasingly productive and efficient way for finance teams to operate and add value. 

There are a number of reasons for this shift, the first and most obvious being the huge leaps taken within the technological landscape. Think cloud computing, IoT, AI, machine learning, block chain, robotics and 5G. Only a short while ago, none of these things existed. However, used right, these technologies now have the power to improve performance across the finance functions, supporting strategic priorities to help streamline output, maximise profits and harness growth potential. 

Of course, there are other factors at play. Open banking and innovation in the fintech space, particularly in the payments sector, are all providing businesses with faster insights and more integrated ways to transact. We’ve also seen the move to more digital and real time tax systems such as Making Tax Digital. These add pressure on UK businesses to digitise the way they work – a feat that has been transformative, even in the tech industry. And then there’s COVID, which has seen a number of tech businesses adapt even further to almost fully remote working models, and the different anxieties and pressures that has caused.

For many organisations, using the finance function in this way is long overdue, and businesses will quickly realise how valuable an automated access-to-all data flow is to their strategic direction. With tech businesses being arguably the most digital-first sector, it won't come as a surprise to realise how valuable an automated access-to-all-data finance function would be to strategic direction. 

The value add of a finance team as a true business partner comes from joining the dots of financial and non-financial data, analytics and insight across every area of the business to help provide a future lens to support strategic decision making. This could be the impact of sales and marketing activity, people plans, real-time analysis of trends in the market, supply chain, potential or existing customer base and aligning these to improve performance.

"This kind-of immediate, strategic approach to finance data will enable businesses to act faster, plan and forecast better and remain competitive."

Why is digitisation essential for a forward-thinking tech business?

In today’s fast-paced tech environment, the biggest part of staying competitive is being able to adapt quickly. Businesses need to be more reactive to the changing landscape, using real-time information and data in order to keep up to speed and formulate successful strategies. 

A top-level example of this is the use of AI and Robotic Process Automation (RPA) in the Accounts Receivable area to prepare, send and follow up invoices. The removal of manual touch points reduces risk, as well as the reducing the end-to-end processing time it takes to bill and collect payments. 

Conversely in the Accounts Payable area, OCR technology is now widely used to scan, read and populate transactions in real time to ensure a business has full visibility over its costs and liabilities. Being able to access core financial data continuously in real time is the foundation to technology-driven financial planning and analysis.   

Predictive analytics are now common place in many tech businesses and notably in media, entertainment and e-commerce in areas such as consumer behaviour. As we move further into the world of AI and machine learning in finance, a digital finance team will be using this type of data and applying these techniques to its planning and analysis in order to drive forward the strategic direction of the business. Digital finance teams can really bridge the gap between strategic and operational decision-making in order to progress the company’s digital transformation as a whole. 

However, this adaptability isn’t simply about future planning or streamlining operations. It’s also about keeping up with regulatory environments and quickly identifying business risks in order to build more robust systems. AI is now being used to predict expense, tax or potential reporting fraud, for example. 

To this end, new technologies such as AI and machine learning can be real gamechangers in formulating digital transformation strategies. Armed with new powers of analytics, finance teams now have more intelligent insights and a centralised awareness of operations. 

The changing role of internal finance teams 

The adoption of more automated processes will undoubtably have an impact on the way finance teams are structured internally and the focus of their role within the business. With manual processing tasks being adopted by technology, the role of the finance function is now elevated to a more strategic level. 

In other words, the future finance team will be less focused on transactional processing and reporting, and more involved in innovation and insight. They will become part of a wider conversation within an organisation, looking for improved ways to manage risk and add value, and using their up-to-date insights to enable better conversations with stakeholders. 

People are naturally nervous of change. Changing the way finance teams operate doesn’t necessarily mean less finance people. However, digitising operations does mean different roles for finance. It’s more likely to be about redeploying and reskilling in process design, analysing financial data, and gaining a better understanding of the key business drivers. It will be more focused on stronger relationships with stakeholders in order to create a finance function that adds value to a company as a whole. 

Finance leaders will need to bring their finance team members on the company’s new journey, and explain the benefits of this evolved finance function. It’s likely that it wil be welcomed – almost nobody enjoys manually keying in data, performing reconciliations, or compiling Excel spreadsheets!

Finance teams will have the opportunity to be a part of the bigger picture of the business, making them an integral, forward-thinking part of the strategic direction. It might be a change, but it will also be exciting. 

Are tech businesses more up-to-date than most businesses in terms of digitisation?

Digitisation within the tech sector is slightly different than in the average business, in the sense that internal teams are likely already tech experts. They understand data, but in most cases they’re so focused on digitising and delivering products and services that the finance function tends to get overlooked.

At BDO, we've worked with a number of tech scaleups that didn't have the right systems and processes in place from the start. This meant that when they did scale, there was a huge degree of catching up for the back office to do, and a period in which they did not have full visibility and clarity over the numbers. This made it extremely difficult for them to manage the business and to plan.  

For any high growth tech business, digitising finance functions is about making sure systems are professionalised and ready to scale. It’s about ensuring they can cope with growth not only in terms of transaction volume, working capital management or foreign currency exposures, but also in terms of any investor reporting or regulatory requirements. This is particularly true when thinking about international expansion. 

We’ve also worked with mid-market tech businesses that have grown through acquisition, and where disparate or legacy finance systems remain in place. Quite often, only a small number of people are still able to operate these systems. In these instances, there is always a strong business case to transform, integrate and modernise all or specific elements of the finance system and process to gain  efficiency and to remain competitive. 

The opportunity for tech businesses then, in terms of digitisation, is directly linked to the complexity of their systems. Scaling up and expanding market reach calls for more complex systems that can handle increasing volumes of data and effectively analyse trends within that data. Established and larger tech businesses have an opportunity to review and transform how the finance team operates. In both instances, process mapping is key. 

Has COVID accelerated the need to digitise finance functions?

COVID has absolutely had an impact in terms of digitisation. Going into a world of remote working has required more functions to be operated and shared digitally, highlighting where manual processes and workflows are slowing down operations. It’s also highlighted where a lack of real-time insight and data puts a stopper on decision making – exposing where businesses need to have exact, up-to-date figures in order to keep end-to-end production moving and profitable. 

During COVID, a lot of businesses have rethought the way their internal systems are structured and managed. In some cases, this has meant outsourcing certain tasks and activities. For example, we saw previously that founders and management teams preferred their finance teams to be in the office, particularly in fast-moving environments where quick questions and ideas could be bounced around. 

Now, with the shift to even more remote working, everyone has had to adapt as finance teams are no longer sitting across from one another. Cloud-based accounting and finance systems, tools and communication technologies are enabling businesses to envision different ways of working. Many businesses have been looking at alternative finance operating models over the last 12 months to build greater resilience into their finance function.  

Why is now not the time to play it safe when it comes to innovation?

Today, in order to gain any sort of competitive advantage, businesses need to make decisions quickly based on clear, reliable information. Otherwise, they give competitors a chance to get ahead. Knowing the right places to invest not only requires being able to spot trends and opportunities quickly, but also those pinch points that can cause problems. Businesses that haven't got a handle on their working capital can be exposed really quickly, meaning it’s important that they stay as informed as possible if they intend to grow.

There are so many options for tech businesses as we come through this pandemic. We’re seeing a lot of Merger and Acquisition (M&A) activity, for example. But now more than ever before, if businesses are about to go through a transaction or a fundraise, it’s vital that they’re able to demonstrate the ability to produce robust, reliable, up-to-date management information (MI). 

Businesses must be able to analyse current and historic MI in multiple ways and across multiple dimensions, whilst simultaneously demonstrating they are focussed on the future. Forecasts must be able to withstand scrutiny in terms of future earnings, profit and operational cash generation, for example. Delays in building the processes that allow this to be achieved and delivered could be the difference in securing the desired outcome and failure.

How big an investment is needed to bring finance functions up to date?

Businesses should remember that they don't have to do everything all in one go. If there is a particular pain point - for example in order to cash then they can start by focusing on the CRM, billing and that aspect of the accounting platform. Working to automate and streamline that particular process first eliminates a pain point and makes the wider processes easier. Companies don’t have to do everything at once, and some mid-market solutions are quite minimal in terms of investment. 

The key thing to remember is that every business is different, and they need a solution that's right for their future ambitions and growth plans. Obviously, if they choose to go the whole way, large ERP systems can be a sizable investment in terms of resources and must be properly scoped, planned and project managed throughout. But at the same time, the value they can add in terms of automation, insights and analytics - particularly for a growing international business - could benefit in ways that outweigh the initial implementation costs. 

"When it comes to creating a digital strategy, requirement-gathering and process-mapping is essential. If a business hasn’t fully mapped what the process flow looks like from a finance perspective, then it’s impossible to know which digital implementations are most worthy of the investment. Businesses need to understand how it connects to other parts of the business and how it will fulfil stakeholder needs before investing in a solution."

It’s important to really understand the ultimate goals and objectives for that investment, and it can be difficult for businesses to have a broad enough perspective to do this themselves. This is where it can be handy to bring in an advisor who can provide that key insight into the finance and technology opportunities available. They can help to curate that process map, advise on system specifications and selection, and in some instances, oversee the implementation. An advisor can also act as a project manager, supporting the finance team while they go through these changes. That way, the finance team can be freed from some of their day-to-day work while they train, learn and get up to speed on a new way of working that will ultimately be more efficient.

Do you need support with digital strategy? Get in touch with your local BDO advisor at [email protected].



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