Digital technology is disrupting the finance department. Will your business thrive or sink?

There has been a lot talk in recent years about the supposedly uncertain future of the finance department.

Technologies including automation and artificial intelligence (AI) will create massive job losses in finance departments, the argument goes, as tasks ranging from data collection, analysis and accounting, will be done my machines rather than humans.

We think that reports of the death of the finance department have been greatly exaggerated.

Automation and workflow software are automating menial, repetitive tasks in finance including processing invoices, collating financial data from different company subsidiaries into a single general ledger and gathering data for compliance with accounting standards and corporate regulations.

The automation of traditional finance tasks means that a much larger amount of transactions can be processed in less time.

Robotic efficiency

By 2020, robotic process automation (RPA) – bots and software that can be programmed to do basic tasks previously done by humans – will eliminate 20% of repetitive “non-value-added tasks” within the finance department, research company Gartner has predicted.

This could help cut costs for finance departments and increase their efficiency and reduce errors, according to research by accounting firm, KPMG.

It’s part of perhaps the biggest tech trend today: digitalisation.

According to global research published by the Economist Intelligence Unit, 83% of large companies said they expected to spend more on digital technologies in 2019.

Finance departments are often at the forefront of this trend, working closely with IT and risk management departments.

Finance staff are spending more time understanding the vast amount of financial data their business churns out. Technology is finally enabling finance staff to become business partners and analysts, analysing financial data in far more detail and explaining how it can be utilised to improve a company’s performance.

Making sense of Big Data

Company boards want faster analysis of financial data. They want better forecasting, such as for cashflow and the pros and cons of launching new products or expanding into new markets.

Meanwhile, consumers, shareholders and regulators are demanding that companies disclose more information about non-financial metrics, such as their environmental and social impact and how they are governed.

The tax system is also changing, most notably, Making Tax Digital ? a plan to make the UK’s tax system online, including a digital tax account for each taxpayer.

Trends in corporate finance are also changing expectations for finance departments.

For example, private equity firms are typically demanding more financial data than corporate buyers had. Providing that data is the responsibility of the finance department.

The future finance department

All these trends are good news for finance departments ? more interesting work and more influence within companies – but only if they embrace the technological changes and new business models.

As delegates heard at our recent conference in London (The Future of Finance in a Digital World), finance departments are expected to do more than ever before – and quicker.

Company finance departments that don’t adapt to new technology will be left behind,

Shamus Rae, CEO of Engine B, a technology consultancy, told delegates.

Most finance departments are currently not fit for purpose. They focus on historical financial data – what has happened in a business in the past six months or year –  rather than what’s happening now and the likelihood of future risks and opportunities.

Many finance directors admit that there is a disconnect in what businesses want finance departments want to do and what they can deliver.

Nearly half (47%) of 769 CFOs and finance leaders worldwide said their current function does not have the right mix of capabilities to meet its future priorities, according to research earlier this year by accounting firm EY.

Seven in ten (69%) said that the role of a finance leader is changing fundamentally as traditional finance tasks are automated or managed in shared services centres, the research also found.

Finance departments that take a “wait-and-see” approach” to technology, risk of being at a “severe competitive disadvantage”, says Tony Klimas, EY’s global performance improvement finance leader.

Most finance departments also have shortages of key skills, including technology and digitalisation.

Future finance skills will include business optimisation, a chief data officer

and providing advice on strategic decisions, according to Rae. 

Digital skill plan

If they’re not already doing so, finance departments should start to train their staff in new technologies such Big Data and AI.

They should also try to recruit a more diverse workforce (by gender, age, class and race), which has been shown to improve the performance of organisations.

Yet despite the digitalisation of the tax system and much of modern finance and business, people skills, such as experience, empathy and good communication are more important than ever.

Machines can’t do everything. And it will be quite some time until artificial intelligence technology can use its instinct to spot potential holes in accounts, flaws in business models or gaps in the market.

As Steven Cox, IRIS’s chief evangelist, noted at our Future of Finance event, technological advances are creating risks as well as rewards for finance departments.

The risk of fraud is at an all-time high, as criminals and hackers use bots, “phishing” attacks and ever-more sophisticated malware to target the treasure trove of data in finance departments and accounts.

Technology is simultaneously part of the solution and problem. The mission for finance directors and their staff is adapting to digital challenges and new ways of working, while retaining the timeless skills and qualities of analysis, financial rigour and integrity.

Doing these things can’t guarantee that your finance department won’t face new cyber-security risks or disruption from new technologies that could automate some finance work. But it will mean that your department is more likely to thrive, rather than sink in these exciting but challenging times.

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IRIS Software

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