Finance digital transformation: 5 key rules for 2023

Transformation has become one of the most popular terms in business: the approach to productivity, to the functionality of departments, and even to what role in society a company and its employees should play is changing. 

Paradigms are also changing in one of the most conservative areas - the financial departments of big business. 

According to McKinsey, finance departments have cut their operating costs by 29% over the past 10 years and have become involved not only in transaction processing but also in more value-added activities: advising other departments, working with big data, implementing sustainability standards, and so on. 

In this article, we want to discuss 5 key rules for successful finance digital transformation in 2023. 

Necessarily automate routine processes in finance​

The role of the finance department has never been the main one. It has always been supportive, and it still is. Estimates and reports have remained in our routine, and there are no fewer employees responsible for different areas of work. But thanks to digitalization in finance, they are spending at least 10-15% less time on all processes.

The demand for automation of routine processes related to payment functions has long matured within large companies and is actively forming in medium-sized businesses.

According to a McKinsey study, 42% of financial department processes can be fully automated, and 19% can be highly automated. It's not about shrinking teams but about freeing up people's time for more complex, intelligent tasks. 

There are quite a few of them: financial departments may be responsible not only for payments, payroll, taxation, financial control, and accounting but also, depending on the specifics of the business, for investor relations, diversification of purchases and partner channels, or macroeconomic risks. 

Go from reporting to consulting​

 Successful companies have long understood that finance departments should not only deal with transactions but also with data management. With it, the CFO can make decisions and rethink the financial operating model so that it contributes to opening up new opportunities. 81% of CFOs believe their main responsibility is to create additional value in all business units.

This trend intensified during the pandemic as CFOs had to react instantly to the changing business environment and decide what spending needed to be rethought. Finance departments had to take on more responsibility and play a more proactive role than even two years before when sales and marketing people were the most influential in the company.

Use AI and ML for finance digital transformation

For companies, the key tool in financial planning is analytics of big data on real-time cash flows. In addition, CFOs demand high-quality cash flows analytics, the dynamics of receipts from counterparties, and the status of accounts for all companies in the group.

The traditional functions of finance departments also thrive thanks to this rule. According to McKinsey, machine learning and artificial intelligence technologies can increasingly be used to solve complex problems and monitor financial risks associated with business continuity. In one of the companies whose case study is described by McKinsey experts, these technologies allowed the company's auditors to focus on the departments that pose the most significant risks and reduce the time required for each audit. 

As a result, the company reduced the total cost of internal audits by 15-20%. 

Use common approaches to finance digital transformation

Finance departments are entrusted with control functions. Regardless of the industry, 95% of the problems faced by finance departments are the same. That means they need similar solutions. IT companies and banks can automate any payment process, even the most complicated.

Even before the pandemic, there was a demand for ease and simplicity of corporate banking services that companies were used to. 

Banks were actively introducing new tools like Prompt Payments. As a result, they created many promising tools that allow companies to save on acquiring commission fees. 

Digitize paperwork

Document digitization is the first and most crucial step in establishing a digital finance department. To acquire accurate insights from your payment data, it must be converted to digital format rather than residing on paper and maintained in a physical file cabinet. At many companies, banking services are integrated into internal ERP systems.

As a result, the company can manage documents in electronic form. This reduces the time for payments and receiving bank documents. 

This also allows for automatically receiving information related to company account balances and optimizing time for paying salaries. 

Final note

 Large companies automate processes by using their own IT departments, but many turn to partner banks. 

Many banks provide ready-made payment automation services based on Open API and develop customized solutions for different needs. 

Companies get several advantages: reduced errors in payments, higher operational efficiency due to lower costs of such errors, and more time for the finance department employees to focus on more important tasks.