UK businesses face challenging times this year, fuelled by tightening financial conditions, trade conflicts and political instability. In the UK the British Chambers of Commerce (BCC) has lowered its GDP growth forecast from 1.4% to 1.3% in 2019.
In fact, the business environment looks so challenging, that according to a recent survey by Deloitte, finance directors (FDs) are adopting their most defensive strategic stances in nine years. Against this backdrop, businesses still have to make money and, ideally, grow.
For organisations to do this, and FDs, to facilitate it, it is time for them to recognise that embracing a digital approach will be a critical part of any strategy.
The question for many FDs, however, is: “How do I embrace, and take advantage of, the digital culture to enhance and future-proof my business?” The reality is there is no singular way to make the best of digital that will work for every company. However, I’ve been working with many of our global customers, their Chief Financial Officers and FDs, on how to use digital to overcome challenges. Here is what I’ve learned.
Managing risk through data analysis
In an uncertain economic environment, it’s more important than ever that finance leaders have the most up to date real-time data on hand to help them make quick and most importantly correct, decisions. This ability to access relevant data and react quickly is crucial to mitigating and managing risk, and ultimately delivering business resilience.
The importance of capturing data, and metrics, across the enterprise will continue to increase and will fuel a need for better analysis of the data. Cloud Enterprise Resource Planning (ERP) technology, which is capable of seamlessly combining finance and operational data and automating traditionally admin heavy tasks, can play a crucial role here.
ERP can, for example, rid FDs of the time-consuming practice of aggregating and reconciling data from different departments such as Finance and HR — while providing both parties access to critical data outcomes.
This means FDs, and their counterparts can focus on identifying trends in the combined data, which in turn helps them predict risk and confidently find solutions. All using the same data they had access to before, without the admin and while limiting the risk of error.
Overcoming the digital disconnect
ERP and automation can also be extended to incorporate emerging technologies, such as artificial intelligence (AI) and the Internet of Things (IoT), which can more effectively handle business processes. For example, adding AI to an ERP system can free up employees’ time, which has traditionally been spent on important but routine tasks such as forecasting, to instead focus on more creative and analytical jobs.
However, in spite of awareness of the benefits of these emerging technologies, real-world adoption is limited. In fact, according to PwC, 90% of finance leaders see a direct need to transform and shift to digital, yet many feel paralysed by a digital disconnect — a widening gap between the needs of digital leaders, and the ability of core business systems to support digital transformation programmes.
To navigate these challenging times, it’s imperative for FDs to overcome the digital disconnect in their own organisation if they’re to propel the finance function and business growth forward. This can be done by building a comprehensive view of relevant use cases for emerging technologies.
This will allow FDs, to focus on the solutions that are most relevant to their priorities and allow the business to understand the cost-benefit pay-off and implementation journey.
Approaching technology and talent differently
Being aware of, and implementing, leading technologies to gain a competitive advantage is essential for business, but having the right technology is ultimately worthless if FDs don’t have the right talent in place to use it. We acknowledge that the shift to a digital-first, data-driven, finance team will not happen overnight but it will require a rethink of what types of talent need to be attracted into the finance function.
As technology and the need for increased data analysis comes to the forefront, FDs will need to consider how they will attract and recruit candidates from a data science and analysis background. These will need to be candidates who hail from a business rather than traditional finance background and can understand the technology, and data all while translating this into meaningful information for the business. In addition to recruitment, existing teams need to be reskilled and reengaged in the digital aspects of their current and future roles.
Once you have the right technology and teams in place, the next most important aspect is collaboration. For a business to succeed in the digital-first age, the collaboration between Finance, HR and IT is paramount. Research by IDC and Workday revealed that 73% of digital leaders, from organisations that have recently undergone successful digital transformations, highlighted strong relationships with Finance and HR.
This is due to the positive correlation between open data flow between departments and the success of digital-first approaches. ERP solutions are a key way the data gap between departments can be bridged.
In addition to this, businesses should look at getting FDs and CIOs to speak the same language to encourage digital innovation. According to Workday’s recent Longitude study, over half of respondents consider the difference in Finance and IT terminology a major barrier. Breaking this down could, therefore, unlock growth.
2019 will undoubtedly hold many challenges that will need FDs to make fast, and accurate decisions. While it is natural to want to be defensive and conservative in uncertain times, FDs will need to be brave in their actions to realise a digital-first future.
This means implementing the right technologies, building out teams and embracing collaboration between departments. By doing so they will be able to support both the changes they choose to make and those they’re required to by the changing markets they operate in.