CFOs accelerate the pace of finance tech investments

CFOs must ensure that the pace and scale of finance technology investments align with their strategy.

Global market intelligence firm the International Data Corporation (IDC) estimates that between 2018 and 2021, companies will have spent nearly $6 trillion on digital transformation projects. This estimation is from before the Covid-19 pandemic, which has accelerated the urgency for digital transformation strategies.

While finance has been slower to embrace digital transformation than some other areas of the business, the pandemic has become both a catalyst and imperative for change. According to Gerhard Hartman, Vice President: Medium Business for Sage in Africa and the Middle East, CFOs are more interested in digital transformation.

“Although they recognised IT was important, most CFOs thought of digital transformation as a technology play, a channel strategy or a customer experience concern. That picture is changing fast as digital technology pulls finance in exciting new directions as a real-time, digitally fuelled and data-driven competence.”

In the finance department, finance digital transformation is the implementation and use of digital technologies — the cloud, artificial intelligence (AI) machine learning, robotic process automation (RPA) and augmented analytics — for finance processes, to improve efficacy, insight, and agility.

Local adoption accelerates
Gartner has suggested that South Africa will finish the year as the fourth fastest-growing major IT market in the world. According to the research firm, the country’s exceptional performance is being driven largely by the increasing adoption of cloud computing by local companies.

“Initially technology adoption started out slow. If we take cloud solutions as an example, initially business was concerned about security, and regulation in this regard was unclear. However, these fears have mostly dissipated. Now everyone is looking into the cloud to gain greater flexibility and scalability, while reducing upfront investment,” comments Philip Hetcher, the finance and enterprise performance leader at Deloitte Consulting Africa.

Sage recently commissioned a study surveying 311 South African senior financial decision makers on the evolution of the CFO, in its CFO 3.0 Digital Transformation Beyond Financial Management report. The age of CFO 3.0 is an era where the amalgamation of RPA, AI, and machine learning has created a new breed of trailblazing senior financial decision makers who use data and emerging technology to create a vision for the future.

According to the report, AI holds no fear for senior financial decision makers: more than two-thirds are not at all concerned about it, and only one in 10 believes it will destroy jobs. In fact, 90 percent of CFOs welcome automation performing more of their day-to-day accounting tasks in future, and 40 percent believe that AI and machine learning will improve forecasting and financial planning even further.

The survey findings challenge the myth of CFOs as barriers to progress. For example, 15 percent of CFOs are fully responsible for digital transformation agendas, and 87 percent of CFOs play a role in digital transformation.

“South African CFOs are embracing technology in the finance function as a lever for improving performance. According to our research, some 90 percent  of senior financial decision makers have adopted emerging technologies in some form. Many report that they are hands-on with their company’s digital transformation strategy – and approve the spend,” says Gerhard.

The evolving CFO role
The Sage research highlights how the role of the CFO has shifted from managing compliance and accounting activities to providing strategic leadership and driving digital transformation. “As finance enters the CFO 3.0 era, CFOs need tools to enable them to deliver on their core competencies, and to be confident in driving the digital agenda throughout their organisation. CFOs have taken on new job responsibilities including driving business strategy and objectives, managing government affairs and taking on digital transformation related activities,” comments Gerhard.

For Philip, the greatest change to the CFO role is that technology enables greater partnership between finance and other departments.

“Technology is at a point where machines can monitor process, costing and highlight patterns of efficiency on their own. This is allowing the finance function to refocus its energy on revenue and value creation. This will move finance from working in isolation to working in partnership with others across the organisation and management.”

Solenta Aviation’s financial director, Bright Amisi, knows that technology is critical to his team’s performance. The company has already invested in finance technology to reduce headcount and Bright expects this trend to continue. He anticipates a faster adoption of RPA and sees automation and data analytics as being the major game changers for finance. “I expect a decimation of entry-level positions. This will change how we train accountants in the future. Covid-19 will accelerate this evolution.”
Bright also sees how smartphone technology and social media tools have shaped users’ expectations. “Everybody is extremely demanding of information. The ideal situation is that end users pull their own data and update their own dashboards.”

Obstacles to investment
According to the Sage research, nine out of 10 South African CFOs today play a role in their organisation’s digital strategy, with 15 percent being fully responsible for digital transformation. Where they don’t take the lead, CFOs are key partners with other members of the C-suite.

“There are many reasons why some companies have held back from investing in technology – perceptions that software is expensive, reluctance among older employees or business owners to adopt new systems, and a lingering belief that you need to be an accountant to use these tools,” comments Gerhard.

For Philip, many finance executives don’t promote the rationale for finance technology investments well enough. Translating the value of financial transformation to achieve buy-in from the C-level boils down to maximising efficiency and return on investment (ROI). “We see finance struggle to articulate the value case for its digital transformation. It is generally perceived that more value can often be achieved from modernising client facing platforms, thus leaving the core, middle and back office systems in legacy mode. However, it is critical to remember that finance is a catalyst for the business and if it is not able to keep pace with the rest of the business, the organisation’s overall performance will suffer,” he comments.

The business case for digital transformation is clear. Put simply, organisations that fail to understand and keep pace with rapid technological advancements will be outstripped by their competitors. As digitisation becomes a business imperative, CFOs are increasingly involved in decisions regarding technology investments.