Process, tools, human capital- the finance function at the controls of the digital revolution

Process, tools, human capital- the finance function at the controls of the digital revolution

Wed 07 Oct 2020

While it is common to read that financiers are still too far removed from the effects of the digital revolution, entrenched in the foundations of another era, we consider them instead as leading prescribers, in permanent daily realities of the digital. A conviction that leads us to reflect on the very definition of a digital protean, complex, in perpetual motion.

Digital – a topic at the heart of all companies … and finance functions.

Digitalisation, in the literal sense of the term, is the transformation of any physical element (such as paper, but also a pdf file or email) into data flow. Once created, this data flow can circulate more quickly and easily between systems such as management systems, ordering systems or receiving systems. Digitalisation applies to the entire ecosystem of the company: in its relations with its customers, its employees and its suppliers. Related usages have emerged, often driven by the IT economy, creating new uses and features.

  • Customer portals are now the gateway for complaints, claims and requests. 
  • Employee portals make it possible to gather information on employees’ leave, training requirements, etc.
  • Supplier portals make it possible to submit invoices or see progress made on payments.

Beyond the employee portals mentioned below, the proliferation of corporate social networks (CSN) demonstrates the desire of companies to share best practices, bring together teams, disseminate messages without geographical or hierarchical boundaries, and create and breathe life into communities brought together by a shared interest or project.

For the CFO, mastering digital topics is no longer optional.

In an ongoing quest for better performance throughout the company, the finance function must have a good understanding of digitalisation in order to:

  • Finance digitalisation projects for other departments, such as marketing or operations. It’s important that finance departments understand digitalisation so that they can approve new businesses cases which will drive value into the business, and not simply refuse them due to upfront costs. 
  • Digitalise the finance department as much as possible. This could be in terms of data flow to improve performance, new work processes, quality of service or processes adopted by personnel from the subsidiary.

Finance and digitisation function, the three main levels of maturity

There are currently three levels of maturity in companies and solution providers:

Phase 1: Paperless invoicing

Often, this involves the digitisation of invoices followed by the transformation of these elements into data flows. This is followed by data control and enhancement, before this information is sent on the Enterprise Resource Planning (ERP) system of the company. This first phase is often completed within most large groups, but is still under construction for small and medium sized businesses.

Phase 2: Digitalisation of paper documents

This phase includes external partners and the documents they exchange with the company (ie. installation plans, purchase orders) via Electronic Data Interchange tools (ie. paperless tax returns). The scope goes beyond just invoices though, which only account for a part of the documents exchanged between the company and its ecosystem. Sectors such as retail, where purchase orders and flows are particularly dense, are ahead of the game.

Phase 3: Digitalisation as a service

This final phase consists of further simplifying and automating processes. The company becomes the provider of a solution by aggregating new services around digitised flows.

  • Supplier flows link to banking platforms which allow reverse factoring based on digitalised flows.
  • Customer flows get real-time access which allows them to view a certain amount of information via a portal.

On your marks, get set… go? 5 key questions to ask yourself before starting.

For a CFO, in collaboration with the Director of Information Systems, these projects require:

  1. First and foremost, ensure compliance regulations: This includes electronic certification, ten years’ legal archiving in safes, guarantee integrity of data and documents.
  2. Understand the services provided using two models:
  • Historical channel model: The suppliers of digitalisation solutions (scanning/going paperless) are inclined towards the digitalisation of other flows and have ambitious road maps to integrate supplier and client portals which are more open and more intuitive. This allows them to disseminate solutions on more reliable flow volumes.
  • The market platform channel model: Suppliers of digitisation solutions from networks offer services such as paperless invoicing services, but often with a partnership which means they can also offer very innovative services. These include on-boarding of suppliers and customers, supplier and customer portals rich with functionality, and creating a high degree of interoperability with other tools.
  1. Integrate invoicing models in the analysis:
  • The historical channel model is based interchangeably on incoming or outgoing invoicing.
  • The market channel platform model invoices differently, depending on the flows, when a supplier or client is activated – with offers that are extremely modular in nature (ie. electronic signatures).

The comparison work of the two models remains a complex subject when one wishes to calculate comparable Total Cost of Ownership (TCO).

  1. Deepen the flow security linked to this great interoperability, and identify associated risks.                                                                                                .  
  2. Define the place within these new solutions for validation, control, approval and enrichment processes that were naturally present in the ERP.

Human capital is at the heart of digitalisation more than ever. 

Redefining the role of accounting teams – whose job is set to change significantly – is one of the key missions for CFOs. In fact, the accountants of tomorrow will have to understand digital flows, how tools work together, anticipate risks and put controls in place to guarantee the integrity of flows and data. Their job description will therefore see major change, so as to provide room and space for a strategic vision, while at the same time reducing the relative importance of transactional entries. This evolution of skills requires CFOs and HR managers to work closely together so that digitalisation projects are seen as real opportunities for change