CFOs today have a unique vantage point within their organizations. No longer are they merely financial controllers whose only responsibility is to manage the company’s balance sheets. Now, CFOs take an active role in the boardroom when it comes to the organization’s strategy. This perspective puts them in an ideal position to initiate change for greater efficiency, and automation is an essential ally in developing the finance efficiency required by our relentless business environment.
Recognize the criticality of automation for driving efficiency
Recently, Oxford Economics and SAP surveyed 1,500 global CFOs and other senior executives and identified six traits that qualify a company as a “finance leader.” One of the six is the ability to “improve efficiency via automation.” This survey highlights the importance of automation-enabled efficiency as a benchmark of financial business performance because, as the study explains, “an inefficient business is like a bucket with a hole at the bottom, leaking productivity and profits.” This shows the relevance and to some extent, criticality of automation to the finance function and its role in enhancing efficiency.
However, only 11.5% of companies surveyed qualified as “finance leaders.” The responses of the faster-growing companies and their finance leaders highlight the importance of automation in a “strategically focused, value-driven (finance) function.” Among respondents whose revenues grew by 5% to 10% over the past year, nearly one-third agreed that automation is improving the finance function’s efficiency; this was twice as many as those with slower growth.
Align with IT to avoid disrupting operations
Additionally, finance leaders were always on the lookout for digital tools and innovative technology to help improve the financial efficiency of their business. This is supported by the research, which says that about 95% of finance leaders, compared with 70% of non-leaders, consider cloud-based applications “critical” or “very important” to the finance function. They were also much more likely than non-leaders to see Big Data and mobile technology in the same way.
The survey confirms that many CFOs are reluctant to use technology to enhance the efficiency of their finance functions because they fear it will result in the disruption of daily operations. That’s why it was named the number-one obstacle by responders. This is a valid concern, but one for which there is also a clear and available solution. To avoid this form of disruption, finance must work with IT to create a finance innovation plan that aligns flexibility in deployment with improvement in efficiency.
Start with the low-hanging fruit
The roadmap to successfully marry efficiency and technology is to invest in automation. Supporting this point, the Oxford Economics survey results suggest a key takeaway: Businesses should look for the low-hanging fruit and go for those first before going in for large-scale automation-related changes. This includes activities such as identifying where automation and technology will relieve staff of repetitive tasks and focusing on areas that can be streamlined to enhance the finance department’s efficiency, thereby improving service to the rest of the organization.
The survey also brings in the aspect of employee hiring; the fastest-growing and most profitable companies surveyed are continuing to hire. The reason for this is that while the finance function becomes more efficient, CFOs are redeploying employees in more productive ways.
Free up people and cash for more productive purposes
The other notable finding from the survey is that there seems to be a correlation between efficiency and cost control. The survey found that companies with 5%-10% profit margins (for the past year) were twice as likely as less-profitable firms to rate themselves as “very effective” at managing T&E expenses. They also found T&E spending analytics and supply chain analytics “extremely” or “very” useful.
These numbers tell us that for businesses, efficiency is about freeing up people as well as cash that is tied down in less-efficient ways, so that it can be invested in long-term growth. Most importantly, the survey shows how leaders in our profession are using technology to make it happen.
Register today for our August 30 Webinar, “The Road to Strategic Finance: Characteristics of a Highly Effective Finance Function.”