Digital transformation is now a major priority in almost every industry. IDC predicts that by 2020, at least 55% of organisations will be “digitally determined”, transforming markets through new business models and digitally enabled products. But the digital transformation journey is never finished. Technologies are constantly changing, and to stay competitive your business needs to stay at the forefront of innovation.
This means that digitalisation is only growing to grow in strategic importance. And that’s going to have a huge impact on CFOs. It will change the tools they use to do their jobs, put pressure on them to fund IT projects, and possibly change their entire business model. Not only do CFOs need to keep up; they should be leading the transformation to maintain their influence within the wider organisation. But are CFOs currently doing enough?
CFOs have a long way to go to become change leaders. A recent report by McKinsey found that, while 48% of companies had undergone an enterprise-wide transformation in the past three years, only 23% of these were CFO-initiated². CFOs still spend most of their time — around 60% of it — on traditional or specialist finance tasks, such as budgeting and accounting². Many are leaving digital transformation initiatives to the rest of the C-Suite and their colleagues in marketing and IT. That could represent a problem for them, and their businesses.
CFOs still spend around 60% of their time on traditional finance tasks, such as budgeting and accounting².
Why CFOs must drive digital transformation
There are several reasons why CFOs must strive to play a leading role in their company’s digital transformation. Firstly, the CFO has the best visibility of many critical data flows — not just finance information, but also sales, supply chain, marketing and business performance. Understanding this data and how to access it is vital to making the right choices with digital transformation.
Secondly, CFOs are likely to be involved in digital transformation conversations anyway, due to their financial planning and capital allocation responsibilities. They’ll inevitably be dealing with requests from different parts of the business to help fund new technologies. And the more strategically involved and informed they are, the better they can balance IT requests with the need to drive overall business performance.
Thirdly, and perhaps most importantly, staying involved in digital transformation will help to ensure the CFO’s future relevance. By leading these initiatives, the CFO will be in a better position to influence all strategic-level decision making. And they’ll maintain greater control over the future of the finance team and the treasury.
6 ways CFOs can take the lead
It’s easy to say that CFOs should take the lead on digital transformation — but all C-suite members are vying to make their voices heard. And there are still the day-to-day responsibilities of finance and strategy that can’t be pushed aside. Here are our recommendations to help CFOs take the lead.
1: Understand what you need
Have discussions with leaders in your own and other departments to identify finance pain points, such as slow reporting or a lack of data-driven insights. Then move beyond finance and assess the wider company’s pain points. You’ll need to create a strategic roadmap to address these points with digitalisation and new technologies.
2: Think beyond finance
It’s important that you break down the traditional walls between IT and finance. You’ll need to work closely with the Chief Information Office (CIO) to prioritise digital transformation initiatives and measure the performance of new technologies. You should also be proactively supplying the CEO with insights about how digital transformation can support your company’s long-term strategy, and how costs can be managed.
3: Recruit the right skill sets
Review the existing skill sets in finance; you may need to attract more digital natives to your workforce and involve them with digital transformation projects. Over a third (34%) of the treasurers we surveyed last year said that adding new skills through training and/or recruitment will be key to ensuring the treasury’s future strategic relevance³.
(34%) of Nordic treasurers say that adding new skills through training and/or recruitment will be key to the treasury’s future relevance³.
4: Lead by example
Digital transformation is an unstoppable force. Whatever you do, don’t let it happen to finance last. It’s important that you champion the digitalisation and automation of critical tasks in your department, then lead the roll out of these initiatives across the wider business. Making an early move will improve your chances of having control over the solutions that are deployed in your own department further down the line.
5: Investigate different funding options
When it comes to funding your company’s investment in new technologies, there are many options. An effective receivables finance solution can help your treasury to save money and produce additional liquidity. Dynamic discounting can also be effective when you’re dealing with large numbers of smaller suppliers — and these could include IT vendors or technology suppliers. Read more about freeing up funds for digital transformation.
6: Don’t stand still
Although there are challenges involved in digital transformation, the biggest risk you face is standing still. Companies that don’t embrace new technologies are likely to be left behind, and those CFOs and CEOs will have to live with the consequences of inaction. Learn more about how treasuries can capitalise on the opportunities of digitalisation, before your competitors do.