The world continues to digitize at an accelerating pace, pressuring finance departments to follow suit. This presents both opportunities and challenges for Chief Financial Officers (CFOs), who must navigate the complexities of financial digital transformation in order to lead their organizations toward success. In this blog, we explore the key issues and trends that CFOs must tackle, and offer practical advice on how to prepare for these challenges in order to capitalize on the opportunities of financial digital transformation.
What is Financial Digital Transformation?
Financial digital transformation is the process of leveraging technology to improve financial operations. This includes automating processes and streamlining data collection, storage, and reporting. It also involves developing more advanced financial analytics tools to gain insights into performance and trends. By embracing digital transformation in finance, organizations can increase operational efficiency and improve financial decision-making to better guide their entire business strategy, especially with an economic downturn looming.
Why is Financial Digital Transformation Important?
Financial digital transformation is important for a number of reasons. First off, this type of transformation helps finance teams better serve their customers by staying competitive in an increasingly digital market. It also improves the security protections of finance systems to mitigate fraud risks. Additionally, financial digital transformation allows finance departments to gain real-time insights into their organization’s financial performance and trends. This ensures that finance teams can anticipate and respond quickly to changes in the financial landscape, and improve cash flow management. Below is more information on the key benefits of financial digital transformation.
The Ability to Be More Strategic
As financial digital transformation continues to evolve, CFOs are increasingly expected to play a more strategic role within their organizations. According to Finance 2030, finance leaders are spending up to 19% more time on value-added activities than they did 10 years ago. Rather than focusing exclusively on financial management, CFOs are now asked to help shape the strategic direction of their organizations and provide guidance on how to capitalize on the opportunities of financial digital transformation. In addition, the shift towards a more strategic CFO role is also driving greater collaboration and coordination between different business functions, such as IT, operations, and marketing.
Finance departments can use digital transformation projects to become more strategic by unlocking new financial data analytics and predictive financial models. For example, teams with AP automation can schedule payments in advance, in order to maximize their DPO without impacting supplier relationships. AP teams can also determine how to better optimize the payment mix to take advantage of early payment discounts and virtual card rebates. This can lead to improved financial health and better financial performance.
More Accurate Cash Forecasting
Nearly 3 out of 4 financial leaders (74%) noted that the pandemic underscored the need for more accurate forecasting. In fact, over 50% of CFOs surveyed want to enhance the accuracy of cash flow forecasts with advanced analytics. Yet only 12% of companies have their AP and AR functions fully automated. Without the right technology and automation, outdated or erroneous data will continue to hinder finance teams and limit their ability to accurately forecast their cash flow.
Alternatively, world-class finance teams embrace financial analytics and predictive models to identify problems early. This improved visibility into financial performance enables organizations to make more accurate predictions about cash flow, helping them manage their finances more effectively.
Easier to Scale the Business
Financial digital transformation also enables organizations to scale up their operations faster and more efficiently. Automating processes helps organizations reduce manual tasks, while improving productivity across the finance department. As a result, AP teams can process more invoices without increasing headcount. Companies looking to expand their office size should embrace digital processes to ensure their finance team continues to run smoothly as the business grows.
Many companies in the mid-market and enterprise sectors grow through acquisition. In this case, they need to seamlessly integrate disparate teams and processes. Digital transformation that includes the adoption of tools like MineralTree can help simplify and streamline these types of projects.
Real-Time Insights
According to Deloitte, finance will increasingly rely on real-time reporting (Finance 2025). Real-time insights can shift the financial landscape by enabling institutions to make more informed and timely decisions. Furthermore, this increased visibility helps organizations identify financial risks and opportunities more quickly, allowing them to be more agile and responsive. This is especially crucial in the midst of an economic downturn, helping leaders to quickly pivot their strategy as needed.
In a recent survey, 56% of respondents indicated that they are confident that their data is both accurate and complete. However, only 22% of those surveyed can gain access to this data without manual efforts from their team. This indicates that several gaps remain in how companies organize their data today. Thankfully, there are ample options for software that automate financial reports to showcase important metrics and KPIs for CFOs. Tools like MineralTree even allow data to be used immediately upon invoice capture, giving finance teams a more complete visual of their financial health.
4 Ways CFOs Can Prepare for Financial Digital Transformation
CFOs have a unique role in financial digital transformation; they lead the mission and must inspire their teams to follow. Here are five best practices that CFOs should use to prepare a successful digital transformation in their organizations:
1. Take an Inventory of Financial Processes
Before looking into financial technologies that will help their team, finance leaders must first identify the biggest challenges associated with their current processes. Start by taking an inventory of your current financial processes, paying special attention to workflow areas that cause significant friction or errors. This will help to identify quick wins —ways to improve procedures that don’t require significant investments —as well as bottlenecks that require more nuanced and technical solutions.
2. Analyze Financial Data
Aside from looking into their current processes, CFOs must also understand their financial data – and where it comes from. Once you take an inventory of your financial processes, your next step should be to analyze your team’s financial data to see if your data system needs some TLC. Ask yourself: is our data accurate? Is it up-to-date? If not, your team should prioritize some updates to your data system and processes onto your roadmap.
3. Create a Financial Digital Transformation Roadmap
Digital transformation isn’t just technology. Change management is critical for success. To ensure successful financial digital transformation, CFOs should create a detailed roadmap that outlines the steps needed to achieve their goals and objectives. This plan must prioritize the various digital transformation projects, and include information about the projected timeline and technologies needed for each project. It should also detail how each project will be implemented into financial operations and how leaders plan to secure buy-in from internal users.
4. Invest in the Right Technology and Automation Tools
Once teams map out their digital transformation roadmap, they can then move onto purchasing the tools necessary for their upcoming initiatives. Investing in the right financial technology is essential for financial digital transformation, but CFOs should make sure to research new technologies before committing to any tools. This due diligence is the best way to find the right fit for their organization’s needs.
Why AP Automation is Key for Financial Digital Transformation
In the 2022 State of AP report, survey respondents indicated that AP automation was the leading priority for back-office digitization. It should then come as no surprise that automating accounts payable processes is an important part of financial digital transformation. This is because it helps finance teams increase operational efficiencies, reduce manual tasks and improve financial accuracy. AP automation can also provide organizations with real-time insights to help inform better financial decisions.
Reduce Human Error
Automating AP helps financial teams reduce the risk of human errors throughout the AP workflow. Automation eliminates the need for manual data entry for tasks like invoice capture and coding, so that teams don’t have to worry about human errors creating issues throughout the AP workflow.
Embrace the Remote Environment
The 2022 State of AP report found that over two-thirds (68.6%) of AP departments are now working hybrid or fully remote. This shift pushes teams away from manual finance processes, in favor of new tools and systems. In order to empower a hybrid or remote team, leaders should embrace digital technologies that simplify digital collaboration and communication to make work easier for their staff.
Streamline Accruals
AP automation simplifies financial operations, making it easier for finance teams to calculate accruals. This helps finance departments get a better understanding of operations and performance.
Expand Electronic Payments
AP automation enables organizations to easily make electronic payments which save the company both time and money. ePayments also benefits suppliers by providing more timely payments, increasing processing inefficiencies, and improving remittances.
Simplify Audits
Lastly, automating financial processes helps finance departments speed up financial audits by automating traditionally-manual and time-consuming tasks. With all invoices and related documents onto a single system of record, AP automation tools save time and money for teams completing a financial audit.
Prepare for the Financial Digital Transformation with MineralTree
Financial digital transformation is revolutionizing financial processes and operations across the business landscape. In order to keep up, CFOs should create a financial digital transformation roadmap that visualizes their financial objectives, timeline, and strategy. Utilizing automation tools such as AP automation is essential for financial digital transformation as it helps financial organizations to reduce manual tasks, increase operational efficiency, provide real-time data, scale financial operations, reduce human errors, and make more strategic financial decisions.
MineralTree offers an end-to-end AP automation solution that digitizes and automates the entire invoice-to-pay process. Not only does this support financial digital transformation, but it makes paying your suppliers easy, impactful and profitable. Request a free demo today to learn more.
