Digitisation in the finance function

Digitisation in the finance function

Wed 07 Oct 2020

Many companies have already embarked upon digital transformation projects; an initiative where the finance function plays a major role more than ever.

In the true sense of the term, digitalisation means transforming a physical element (paper, PDF, e-mail) into an IT workflow. Once created, this IT workflow can circulate more easily and quickly between management, systems, etc. Other uses have subsequently emerged, most often from IT since they’re a major contributor of new features and concepts.

Digitalisation working for the finance function

In fact, nowadays, this concept also applies to companies when with partners. It consists of digitalising certain tasks and workflows and transferring them to partners and employees, if possible in a win-win relationship. “In many sectors, customer portals are now the point of entry for claims, customer situations and requests,” explained Caroline Couesnon, a partner at Mazars. Employee portals allow staff members to get real-time information on their leave days or to request training, for example. Supplier portals allow suppliers to respond to invitations to tender, receive orders, submit invoices, view payment progress and quickly handle possible disputes.

The finance function is central to digitalisation projects

Finance departments haven’t lagged behind in this area. However, they need to adequately understand the challenges, uses and value so that they can then free up the funds needed for projects in this area. “They also have to digitalise finance as much as possible with an eye to improve performance, service quality and workflow security as well as define new processes and ways of working for the employees of the sector,” continued Caroline.

A market nearing maturity

At Mazars, we have identified three levels of maturity in companies and solution providers:

  • Electronic invoicing.
  • The digitalisation of all paper documents entering and leaving the company with external partners via electronic data interchange (EDI) directly between the companies’ management systems (ERPs).
  • Digitalisation as a service, which consists of increasingly simplifying and automating practices and taking advantage of opportunities made available through a vision of processes that extends beyond the company.

“Finance therefore becomes the provider of a digital solution that brings new services related to the digitalised workflow,” commented Yann Guyomar, a partner at Mazars. Thus, on the supplier data flow, links with banking platforms enable the emergence of financing mechanisms such as supply chain finance or dynamic discounting based on data in the digitised flow that the company still has not tapped into. On the customer data flow, this provides clients with real-time access to a certain amount of data, the use of new benchmark indicators on their DSO or the adjustment, almost in real time, of their credit insurance.”

What questions do the finance department need to ask? 

As a prerequisite for such projects, the director of the finance department, working collaboratively with the IT director, needs to ask themselves several questions. They first have to make sure that they comply with regulatory aspects, such as those related to electronic certification. They also need to have a good understanding of the services provided, whether they are from the ‘historical channel’ model (i.e., digitalisation of paper documents) or from the ‘market platform’ model (i.e., from EDI networks or EDI providers). They will also have to understand the different business models. In fact, the historical channel invoices on a fee-per-item basis identically for incoming or outgoing digitisation. The market platform channel invoices differently according to the process; upon activation of providers and customers. It would also be important to step up workflow security, to determine where the validation, control and approval processes fit in. Enhancements that naturally existed in ERPs can also exist in these new solutions.

Lastly, finance management teams will have to rethink the contribution of the accounting teams whose jobs will be changing. “As with other issues such as the robotic workforce of the future and the introduction of ERP systems decades ago, accountants need to understand digital data flows, the interactions between tools and the risks and checks that have to be put in place to guarantee data flow integrity,” pointed out Yann Guyomar. This shift, which involves developing skills and attitudes, is an issue that the directors of finance and human resources need to address together so that these digitalisation projects are seen as real opportunities for development, both for the sector and its jobs.

Addressing digitalisation means being part of a phenomenon that extends much further than the company itself, but to the whole ecosystem. The paradigm change brought by digitalisation has already had an impact on the finance and IT departments and it is only going to increase. To benefit from the advantages of this digital paradigm change, we believe that the finance and IT departments need to fully integrate digital in all present and future projects.

To find out more about digitalisation and how it can enhance your organisation, please get in touch with us!