• Mark Bodger, Director at ICit Business Intelligence


• 16.07.2021 04:15 pm
undisclosed

Digital transformation helped many UK organisations survive the unprecedented shock of COVID-19. But to thrive as they exit the pandemic there must be similar change across all departments—starting with finance. This will be a challenge: historically CFOs and their teams have been relatively reluctant to embrace more agile, digital-centric ways of working. Yet the pressure on business has never been greater. 

Digital means growth

Statistics are always open to interpretation, but there’s been some impressive data illustrating the shift to digital during the pandemic. McKinsey claimed many organisations had been pushed over a “technology tipping point” by COVID-19. Digitisation of customer and supply-chain interactions and internal operations were accelerated on average by three to four years, while the share of digital products in portfolios leaped forward seven years, it noted.

It’s easy to see why. A Google/KPMG report from a few years back claimed that digitally engaged businesses can increase profits twice as fast versus their offline competitors. Yet what does this digital transformation actually look like? In many firms it may have gone little further than the purchasing of licenses for video conferencing and collaboration tools. In others, it may also have involved redesigning business models and customer-facing services—such as hospitality businesses that were forced to embrace home delivery and takeaway to stay afloat.

The point is that in many organisations, transformation only happens in pockets, which often means finance teams and accountants are often being left behind. That’s a shame, because the function has plenty of challenges to overcome. It could do with a digital hand.

What’s failing accountants?

Many problems are the result of manual, spreadsheet-based processes characterised by human error and inefficiency, and prone to business risk. While they remain an important tool in certain circumstances, the problem is that spreadsheets are often used beyond their core capabilities. They’re sometimes misused as quasi-databases, when in fact they’re populated by static data. What does this mean in practice? That the answers you get from spreadsheets may not always be accurate and up-to-date. 

Users may believe otherwise, but spreadsheets often also contain multiple errors which could have serious consequences. These manual errors only multiply the more versions you iterate of the same spreadsheet. Errors made by Department of Transport employees nine years ago led to a botched bidding process on the West Coast Main Line rail franchise contract, which may have cost the taxpayer as much as £300 million.

There are many more examples of egregious accounting errors stemming from spreadsheets. Mistakes made by a former chief economist of the International Monetary Fund led to erroneous research used by the British government to justify austerity during the last recession. Can businesses afford to continue using systems like this that could significantly escalate business risk? 

Excessive use of spreadsheets can also have long-term strategic and shorter term operational impacts. On the one hand they eat up the time of finance employees which might be better spent on higher value tasks. On the other, they fail to provide accurate, real-time intelligence about past and present business performance, which could be used to run future scenarios.

Planning for change

Spreadsheets aren’t the only challenge facing finance directors, of course. But they’re emblematic of a digital inertia which could drive up business risk, eat into profits and limit productivity. So what’s the answer? While there’s no silver bullet solution to a business’ digital transformation challenges, a focus on people, process and technology may be a good place to start. 

Start by ensuring your staff are on board. According to McKinsey, a potential digital backlash among the finance function is a typical obstacle to change. Next, reach out to employees to understand where the key pain points are within your finance processes—such as slow reporting or incomplete data. Sit down with IT to define your requirements, work out their feasibility and ensure they meet minimum standards of cybersecurity.

Next comes the technology itself. Modern cloud-based platforms offer accountants and the wider business powerful end-to-end enterprise planning capabilities without breaking the bank. With these tools to hand, any function can drive modelling, reporting and analytics to improve strategic decision making. The benefit for the accountants is that these models will ultimately feed back into the corporate financial plan. For the finance department, it’s about budgeting with accuracy and confidence, and running scenario planning exercises to better inform strategy. 

These capabilities can be designed, configured, operated and deployed to take the strain from finance directors and optimise results. COVID has meant that the UK’s finance teams are currently the lifeblood of the economy. With smarter digital planning, they will be the ones that can help both their business and the country to bounce back post-pandemic.