In the digital era, finance is taking on new importance.
No longer is finance concerned primarily with analyzing and reporting past results; in this environment, finance is becoming an equal partner with the different lines of business.
This means guiding the future of the business as well as reporting on the past.
Data, from both internal and external sources, is the central element of this reinvention. More and more, chief financial officers (CFOs) are taking primary responsibility for collecting and organizing this data and using it as the basis for insights to support growth.
Armed with insights from this data – along with new technologies such as artificial intelligence (AI), robotic process automation (RPA) and distributed ledger technology (blockchain), the modern CFO often heads an enterprise-wide effort to increase value, improve efficiency and enable strategy.
Our research inside and outside China has found CFOs involved in automating routine control, accounting and reporting tasks.
We have also found, however, that, due to the experience and expertise gained in digitizing and automating the finance function, CFOs in China often play a key role in overseeing digitalization initiatives at the enterprise level.
Chinese CFOs are dealing with the same issues as their counterparts around the globe.
To address these changes, Chinese CFOs are enhancing their analytical skills and looking for other ways to support strategic decision-making. We have found that CFOs are pushing hard to expand their ability to capture, structure and make better use of data.
In our global CFO survey, we found that 74% of finance functions are already using predictive analytics to improve their interpretation of data, while 61% are already using AI to some extent.
Companies including banks, insurers and capital markets firms are, for example, using analytics to gain a better understanding of their cash flows. One company told us it used analytics to chart the future impact of weather events in specific regions.
Enhancing Analytical Skills and Supporting Decision-Making
If there’s a broad consensus among Chinese CFOs as to the importance of new growth initiatives, there is also agreement on the capabilities most needed to support growth.
Like CFOs in other parts of the globe, Chinese CFOs are focused on the ability to capture, structure and make better use of data.
They want this ability both to increase the efficiency and effectiveness of their own functions but also to help the enterprise identify and pursue new sources of growth.
Three out of four (75%) of the CFOs in China interviewed in 2017 said that establishing financial data analytical and forecasting capabilities was the top item on their agenda in the next two years – more than any other item, although integration of finance and business capabilities was very close at 74%.
Interestingly, in our survey with CFOs in China early in 2019, there was added emphasis upon the use of AI in finance operations; more than eight in ten respondents said they were either already using AI in finance or were planning to do so.
And all respondents said AI was helpful for finance teams in driving predictive analytics to support strategic decision-making and risk management.
Our China CFO study shows migration to digital technology and new business are companies’ top priority, with 93% of respondents saying they wanted to expand their influence in the planning and implementation of innovative business models.
Steps to digital transformation
The benefits of digital finance transformation are great, but what should CFOs be doing to move the agenda forward? There are several immediate steps that companies should be taking now.
The first is to organize and improve data. In a digital finance environment, data is the foundation upon which other initiatives are based.
Among respondents to our China CFO research, 90% said that providing insightful data for the enterprise was a key objective.
Yet, in many organizations, data has no uniform quality, and the search for “one version of the truth” continues. Integrating internal and external data sources also remains challenging for many companies.
Second, CFOs should develop and lead a fast, smart investment process. Finance is in a uniquely strong position to lead the digitalization, not only of the finance function, but of the entire enterprise.
This is especially important in China, where, as our research found, only about 50% of CFOs engaged in monitoring the return on investment for digital technology.
Third, CFOs should build bridges within the organization. All too often, finance operated as a stand-alone function that saw its primary role as saying “no” to non-essential spending.
Now, however, finance is involved at the beginning, working with the business to set objectives, as well as at the end, evaluating whether targets were met.
This requires finance to work within the wider organizational culture and, in many cases, to change the way it has worked in the past, with other functions and with the lines of business.
This is connected to a fourth step: Get the right people in place. In our global research, CFOs recognized the need for change and understood that traditional roles in finance may soon become obsolete.
More than three-quarters (78%) of global respondents said such change must be rapid and drastic. In China, 78% of the CFOs we surveyed said they faced difficulty in attracting and retaining the desired highly-skilled people, and 76% noted a lack of skills needed for finance transformation.
The fifth step is to change the CFO culture. We have discussed how CFOs can no longer play only the negative role of blocking unnecessary spending.
Instead, CFOs should support fresh thinking, collaboration and imaginative approaches to old problems. CFOs will also need new skills; 81% of our global research participants, for example, saw data storytelling as an essential skill for finance professionals.
More and more, CFOs will need to see themselves as business partners, building relationships and working as part of the overall team. In digital finance, CFOs will be value architects and builders, rather than controllers and recorders.
Deborah Campbell is Accenture Senior Managing Director, Group Operating Officer of Greater China