July 19, 2021

Digitisation Guide - Finance and the Digital Transformation

The digitisation of finance. Find out what's coming in the next few years and what you can do now to benefit from the advantages and be prepared for this change.

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Here is the fifth part of our series "Digitalisation 2021". After looking at the areas of sales, IT security, marketing and logistics in the first four articles, in this article we take a look at the digitalisation of finance. 



The digital transformation is also moving into finance and accounting at high speed.
Digital disruption is the "new normal".

Digital technologies are changing both what businesses do and how they do it, and in a myriad of ways. New tools and features are coming faster than they have in decades, from phone apps to robots to smart machines and more.



Finance 2025 - an eye on the future

We take this pace and look directly into the near future.
So what will change in the coming years?

Insights and service

By automating repetitive and "simple" tasks, an improved customer service is possible due an increase in the time of individual employees. When properly analysed, high-quality insights can be gained from the increasing flood of data, benefiting both customers and businesses. We are talking about intelligent budgeting, planning scenarios, advanced forecasting and better visualisation to make complex commercial decisions. Information on business decisions is delivered just in time and is fully integrated into the company's management processes. Ultimately, the influence of the finance department on how and what decisions are made in the company will grow.


Real-time finance

Reporting periodically will become something of the past and will no longer determine decisions and operational processes. Today's status is available at the push of a button, and even more importantly, the forecasts for the future. Boundaries between operational and analytical data are beginning to disappear. And: there are no more monthly or quarterly forecasts - everything happens in real time.


Self-service

Self-service will become the norm. Unfortunately for accountants, technology will do 90% of the work without human assistance. From budget requests to reporting, these are all activities that can be digitised. Smart agents (similar to Siri or Alexa) will learn over time what business information is required and proactively provide it. The way information is presented will also change - it will be made more intuitive and easier to access.


Finance-as-a-Service

By blending the finance workforce with algorithms, robots and new positions, a diverse team is created - and they no longer have to work in a location-based manner either. Think of the integration of freelancers, project workers or specialists. Outsourcing via Finance-as-a-Service will also gain traction beyond the SME sector.


ERP Democratisation

As ERP (Enterprise Resource Planning) solutions steadily gain functionality in the course of digitalisation, and it goes far beyond (automated) finance as well as order, production and personnel management, a democratisation of this application area is to be expected. That means that different providers offer specialised applications and microservices for this cosmos. These integrate into existing solutions or communicate via respective interfaces (APIs). This whole area will also take place predominantly in the cloud, so you are always up to date.


Data Governance

In the age of digitalisation, data quality is the be-all and end-all. Data governance ensures that data is handled in an organised manner to maintain its quality and integrity. Data hygiene is a bit like flossing - we know it's important, but we don't do it often enough. The data quality challenge cuts across all departments. A chief data officer or data evangelist (someone who is passionate about driving continuous improvement in data) will be a necessity for most organisations in the coming years.


Workforce and workplace

Requirements are evolving rapidly and, as in many other departments of a company, Data Scientists and Business Analysts play an important role. Make sure your new employees represent the future. Important attributes of your employees will include the following: Customer focus, flexibility, collaboration skills and, of course, technical skills required for specific tasks. With new tools such as self-service reporting, predictive modelling, as well as digital assistants, your staff's ability to give better advice on strategic interventions will improve.



The power of the blockchain

Everyone is also talking about the blockchain, which offers considerable advantages, especially in the financial sector.

For your understanding: Put simply, a blockchain is a distributed, public database and stands for secure, non-manipulable and direct transactions on the internet. In this way, the blockchain closes trust gaps, the function that, for example, banks have had in this regard up to now.

 

(source: PwC –Blockchain use cases)



Blockchains are able to take time and costs out of many processes by enabling operations in real time. This significantly improves operational efficiency. Furthermore, insights are also available in real time. Another important advantage is security, because a high level of control and accuracy greatly reduces the risk of fraud.


(source: Deloitte – Use Cases Blockchain Finance)


Common use cases of the blockchain within finance and accounting are e.g. order-to-cash ( the entire process from receipt of a customer order until payment by the customer), trade finance or inter-company transactions.

The blockchain also improves processes that go beyond finance, such as regulatory compliance or warranties. Particularly interesting is the use of the blockchain in combination of finance and supply chain management - the so-called supply chain finance. There is enormous potential to be reckoned with here. It also improves the relationship between suppliers and buyers, as suppliers sometimes have to accept lengthy payment terms. 


(source: PwC – technology trends for finance)


How can I implement digitalisation in finance?

New challenges and new tools

Paperless accounting marks the start of the digital transformation. Data can now be efficiently recorded, processed and evaluated. Archiving and searching are also decisively simplified. The cloud as a place for processing and storing data brings additional advantages in the area of data backup and availability. And all of this at very moderate prices.


Cloud

In addition, the cloud as an infrastructure often has the advantage that individual areas can communicate optimally through existing interfaces (so-called APIs). Otherwise, one has to provide these APIs so that merchandise management, invoicing or payroll programmes can exchange data and operate seamlessly.


Artificial Intelligence (AI)

In the coming years, data analytics will have the greatest impact. Not only in finance. Data analysis and the evaluation of Big Data is a prime example of the use of artificial intelligence. It also helps to save costs and increase efficiency, and even helps to develop new business models. Here, it requires data science specialists who can identify data for promising use cases and evaluate them with the help of AI.



(source: PwC – Artificial intelligence for finance)



Blockchain

Blockchains are, of course, cutting edge in digital transformation. Large companies and business consultants are already actively implementing them. But that doesn't mean it is only possible for such companies. The blockchain can be scaled, which means you can also start small. And you should.


(Source: Deloitte – Blockchain for Finance)



Conclusion 

As in any field, digitalisation offers great potential as well as demanding challenges. The key to all the new technologies is qualified employees. People are at the centre of the digital transformation, because it is about finding or inventing new ways to create value.

Yet the talent crisis is real - many finance organisations do not have the expertise to make the change. Training and development can help, but the need to recruit new skills is gaining urgency. And it is precisely the talent that will drive digitalisation through innovation and creativity - and the pace is high in this transformation.

So always be on the lookout for suitable candidates in your company as well as beyond.