CFOs have been transforming themselves, beyond finance and accounting operations, to strategic roles with the mandate to meet the rapidly evolving and changing expectations of customers, vendors, investors, employees, competitors, and the Board, while also navigating the financial, economic, regulatory, and social challenges. These expectations and mandates act as a catalyst for CFOs to deliver a digital environment that can drive profitable and sustainable decisions.
It has come on finance leadership now to champion the digital transformation initiatives across the organization toward an autonomous state, with a vision to reach a Smart Manufacturing or Factories of the Future state, if the business is in an industrial segment. Alex Bant, Chief of Research for CFOs and Conference Chair Gartner CFO & Finance Executive Conference 2022 summed it up when he said “CFOs are seeking faster insights and more predictive capabilities in 2022 to build a digital finance function that helps you unlock the power of data, technology, and innovation to drive profitable growth in the years to come.”
What is an Autonomous Finance?
While the threat of disruption from the Covid-19 pandemic seems to have subsided in most parts of the world, the organizations are still brainstorming on how to become resilient against future volatile and disruptive situations and what investments could help them navigate through the uncertainty better in the future. Many organizations, particularly large and medium enterprises, had initiated the adoption of digitalization, automation, analytics, and related digital transformation initiatives even before the outset of the pandemic, but the momentum accelerated during the pandemic. The CFO offices are now flooded with requests for budget allocation from functions and departments across the business to technologically enhance workflows and processes. It is, however, the corporate finance department that a CFO should consider making autonomous immediately before anything else.
Finance as a function now works in sync with operational processes such as invoicing, accounts receivable, collections, accounts payable, financial planning and analysis (FP&A), procurement, inventory, and vendor management. All of these departments manage a large volume of back-office operations, which mostly involve tedious and intensive manual work. Making the workflows of various finance functions automatic by minimizing or eliminating the manual work and intervention is the objective of autonomous finance.
Benefits from Corporate Finance Automation
In a business environment where customer needs and expectations are changing faster than ever, and competitors are becoming innovative, companies will have to be more agile and proactive in their approach and strategies. Automated applications and analytics play a crucial role in addressing these challenges.
Moreover, the Covid-19 pandemic has accelerated the transformation of the CFO office with automation for efficient, optimized, and autonomous finance. According to Deloitte’s Q1 2022 CFO Signals Survey, which focused on pre-and post-pandemic changes, CFOs cited automat skills as the desired skill.
We have seen how automation can make a significant impact on traditional finance processes like AR which involves a great amount of time being spent on follow-up for payments and about the status of payments, receiving and applying payments, updating the client about the payment status, intelligent document processing, communication on deductions and diusputes, among many others. By adopting emerging technologies like AI, ML, and Automation, such time-consuming and mundane tasks can be automated.
Intelligent forecasting and budgeting supported by automation tools can present unbiased insight into actionable items to help improve the top line, bottom line, and cash flow. Most importantly, one of the pains that companies go through is post merger/acqisition integration mainly because of the complexities involved in integrating disparate systems. The PMI (post-merger integration) becomes much more seamless process when autonomous finance is in place.
Constellation Research founder R Ray Wang recently wrote a piece on autonomous enterprise. Wang argues what is required is not the traditional robotic process automation (RPA) which has reached its limit in terms of capability, but autonomous applications that offer intelligent automation, cognitive abilities, and artificial intelligence across the organization.
Best Practices in Finance Automation Approach
While robotic processes offer limited benefits of automation, autonomy in finance can help reap the larger benefits. Corporate finance teams should consider the following elements as they initiate their automation journey to maximize the value of the business.
- Upskilling strategies: While automation may eliminate routine jobs, it opens up new opportunities for finance professionals to contribute to business strategy rather than just performing repetitive tasks. Investment of time and resources in autonomous finance driven by automation transforms finance into a strategic function that can drive business growth and scale.
- Understand the back-office processes: As discussed elsewhere, it is not fragmented robotics automation that can make finance autonomous, but applications and tools that manage the workflows automatically. CFOs and finance leads must review the day-to-day activities throughout the finance and accounting to understand what can, or should, be automated so that the appropriate tools can be implemented.
- Automation helps the bottom line and cash flow: Let us take an example of how AR automation can help the company in multiple ways. A reduction in days sales outstanding (DSO) through automation can help businesses generate additional free cash flow to reinvest it into new business opportunities, payment of dividends, new research and development initiatives, implementation of go-to-market strategies, or entering new markets among others. A finance function can reach the state of autonomous finance when minimal or no human intervention is involved in the finance processes and it opens up a plethora of opportunities for the finance teams tied up in mundane, routine, and tedious processes to transition to focus on business strategy.
The Future Is Autonomous Finance
What comes to our mind when hearing the term autonomous finance is banking and financial institutions. While it is true that autonomous finance is widely discussed related to the financial services industry, in this discussion we focussed on autonomous finance in any corporate entity. The CFOs and finance executives who envisage an autonomous enterprise first need to transform finance into intelligent and autonomous finance to play a role that forges strategic relationships across functions in the organization.
Companies with a solid understanding of the benefits of automated applications rather than inserting automation within an ERP have the edge over their competitors. Emagia – positioned as a Visionary in the First-Ever Gartner® Magic Quadrant™ for Integrated Invoice-to-Cash Applications – is a leading tech company that offers interim invoicing, accounts receivable, and cash flow management systems through its fintech platform ‘Enterprise Receivables Management System (ERMS)’ which uses the “3A trifecta” of Automation, Analytics, and AI to drive efficiency across the Order-to-Cash (O2C) process to help maintain business continuity, sustainability, and growth.