Digital Transformation in CFO's role

Driving Digital Transformation: The CFO’s Role

Understanding the significance of digital transformation by CFOs is the key in the radical reshaping of companies.

Today’s CFOs are under the scanner due to constant pressure being raised on the need to decide funding requests to prioritise how much to invest in digital transformation efforts.

According to a report by IDC, between 2018 and 2021, companies worldwide will have collectively spent nearly $6 trillion on digital transformation initiatives. The numbers are staggering and indicate sizable internal funding requests reaching the desks of CFO.

The challenge for the CFO lies in deciding which funding requests deserve attention and how much financial investment should they get in terms of short-term and long-term.

Magnitude of Decisions

The debate on the CFO’s role has gained more traction in recent times with industry experts terming digital initiatives as a key factor under the CFO’s umbrella.

Treasury team is still unable to do away with crushing volumes of manual activities as it is difficult to change that. However, they are still focussed on processing and repetitive tasks. The decisions of the treasury department depend on a few factors like the needs of the company, the department’s maturity, and the level of investment made in treasury.

The inability of the treasury to be strategic on its own is a roadblock and hence the management must offer support and resources to achieve it.

Modern Treasury Has More Responsibilities

Today, the treasury department has to be advanced to handle debt, cash, risk, and investment. Accordingly, policies should be transparent with interactive communications, integrated functions and systems, and performance metrics to exhibit value.

The modern treasury must move from the basic functions of processing, primarily cash accounting to the middle tier—cash management, with a focus on investment, cash, and debt, to advanced goals and planning, including risk management. Which is tough to attain.

The first move to fix this would be to automate manual processes.

The attempt to adopt a robotic process for the treasury team can be unnerving. Convincing the employees to understand the purpose of implementing the above to save time and perform more high-end activities is a task cut-out.

Budgeting Constraints For Automation

CFO plays an important role in pushing to the advanced level that treasury seeks along with the consent of other departments to develop new processes and outsource some of the existing work.

Management must commit to investing the necessary financial resources for new systems and learning opportunities for the treasury team.

It’s, therefore, necessary for the treasury to prepare analyses that depict the efficiencies and cost savings that could flow from modernising the department.

A modern treasury department can provide additional value by shifting its workload towards strategic analysis and decision-making, focusing more on forecasting and centralising funding.

Budgeting need not be prioritised for a company where treasury acts to reduce interest expense, lower risk, and improve cash flow management, there is less need to borrow.

An often-overlooked benefit associated with a modern treasury is by employing more sophisticated banking services or restructuring existing bank networks which can lower bank fees.

CFO: Promoter of Cross-Functional Digital Innovation

CFOs can envision the assistance of big digital transformation to heads of functional areas as they invariably sit at the centre of the leadership teams of their companies. They are the guardians of the strategic planning process and financial disciplines, the combination of which can facilitate the digital transformation. CFOs help and influence CIOs to make a rigorous economic case for keeping or shifting computing applications, IT-enabled business processes, IT infrastructure, and more. However, it should have the ability to provide exceptional but data-intensive customer experiences and whole digital products online. A machine-first initiative doesn’t mean replacing every employee with a robot. It means converting manual, paper-laden and low-value work to computers, and positioning finance staff in higher-value strategic roles. In effect, it serves them with data and analytics software so they drive product, marketing, sales, and other managers to make more optimal decisions. Finally, the CFOs can encourage digital transformation by transforming their own department.

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