How can finance keep up with digital transformation in financial services?

Digital transformation is racing through the financial services industry, upending traditional business models and processes, whether in customer-facing or internal functions. Rising customer expectations, increased competition, and stricter regulatory requirements are spurring firms to adopt innovative digital-based processes – without succumbing to runaway costs or margin pressures.

But ‘digital transformation’ isn’t just the latest edition of buzzword bingo – it’s leading to real business breakthroughs in all parts of the industry. We’re seeing smart mobile apps for banking that let customers pay bills, make deposits, get alerts about unusual activity electronically, or send money to friends. Insurers are rapidly rolling out fitness apps, mobile claims-filing, microinsurance policies, and smart devices that monitor driver habits. A growing number of investment firms offer robo-advisors to help clients make smarter decisions. And many back-office functions are taking advantage of automation on an unprecedented scale.

Driven by AI and behavioral economics, machine learning, robotics, and advanced analytics, these emerging technologies are ushering in extraordinary operational efficiencies, accelerating time-to-market, and enabling superior customer experiences through personalization – all at massive scale.

But such achievements do not come out of the box. For the accounting and finance teams inside these financial services firms, digital transformation presents a significant series of challenges.

Challenges for the finance team

Whatever sector you’re in, chances are the finance team is dealing with a growing number of entities – and without automation that can translate into tedious manual efforts to perform period closes and consolidations.

In many financial firms, managing multiple entities has traditionally meant dozens of separate instances of QuickBooks and Excel-based reports with 25+ tabs of information – yielding error-prone results that can take weeks and several staff members to prepare. And, despite all that effort,  you’re still left without the consolidated financial view you need to truly know the health of  your entire business. Of course, all of that manual effort to manage your books also heightens your exposure to compliance risk, costly mistakes, and internal fraud. As a finance leader in the midst of digital transformation, how can you possibly be more strategic and deliver data-driven insights with confidence?

Real-time visibility

Today, financial services companies want to use digital transformation to tailor their offerings to individual consumers, families, or organizations, cost-effectively. With so many different business models, channels, products, and services, the traditional “one size fits all” approach to financial reporting doesn’t work.

If you’re a finance leader, you are looking for a way to manage this multi-pronged model on the back-end. You feel the pressure to stay on top of your company’s financial health, while staying agile in meeting customer demands, When your executives ask whether they can take on a new revenue stream, do you have the financial insights to provide a data-driven response in that moment – without needing several days (or a week) to gather data?

A single, consolidated system of record helps you navigate this complexity and have the latest data at your fingertips. It means gaining automated, real-time visibility so you can make more insightful decisions – with confidence – that have a greater impact on company growth and profitability. The most progressive and successful organizations use custom financial dashboards that highlight the KPIs and metrics that matter most to the executive team. Their reporting is streamlined so it only takes minutes – not weeks – to get a real-time pulse on the business.

The impact is quickly felt, as Todd Hansen, Controller of Deseret Mutual Benefit Administrators (DMBA), a private, nonprofit entity that provides third-party health and retirement benefits administration, explains:

Our executives and managers now have a real-time view into their budgets and how they’re trending, and that’s been a big impact on the business. The finance team has become a more influential partner to the business, overall, in delivering key information and data-driven insights that leadership needs.

Smart automation

Digital transformation across the organization can improve customer service, because customers get their needs met in a timely fashion while still addressing their specific preferences and requirements. For instance, with transformed and automated workflows, insurers can process claims faster and offer more personalized services.

Digital transformation also means you’ll work with data from multiple sources – email, online, mobile – so it’s critical to capture it efficiently to achieve a consolidated view of your financial health. But let’s be clear. Digital transformation isn’t about automating everything, it’s about automating the right things. How do you know where to start? Rank your repetitive, time-consuming tasks and identify the top tasks that have the biggest impact to your business, then systematically automate the top two or three to free up your time.

Anchor Loans solves nightmare of manual consolidations

Here is another real-world example of how cloud financials can transform your finance team’s efficiency and agility. Anchor Loans is one of the largest new construction and “fix-and-flip” lenders in the US, providing real estate developers with financing to renovate or build residential and commercial properties.

When Bryan Thompson joined the company in 2017, he foresaw a significant roadblock to the high-speed growth curve. The company relied on an entry-level combination of QuickBooks and Excel that could not scale as revenue and complexity increased. The finance team labored with time-consuming, manual consolidations across 43 entities – each requiring its own QuickBooks instance – in an unwieldy spreadsheet with 25 tabs. Meanwhile, the firm had no real-time insights challenging the finance team from making faster, smarter decisions.

Backed by real-time cloud financials, Anchor Loans realized powerful benefits such as saving 40 hours per month by eliminating manual bank reconciliations and reporting, cutting 16 hours monthly by automating cost of funds reports, and reducing balance sheet reconciliations by 75%. CFO Thompson says:

Sage Intacct empowers my team to provide information to management that helps us make better, more informed decisions, placing us in a better position to more effectively serve our customers and stakeholders.

In addition, the shift from mundane transactional accounting to strategic analysis has boosted the morale of the accounting team – as has a 50% reduction in overtime since Anchor adopted Sage Intacct.

Stronger compliance

Better automation also has a huge impact on the speed and accuracy of compliance processes. While some companies follow GAAP (Generally Accepted Accounting Principles), other financial-services firms (such as insurers) follow Statutory Accounting Principles (SAP) to manage changing regulatory requirements.

Naturally, the controller has a direct role in virtually every transaction that flows through the corporate accounting structure and should play a central role in identifying and minimizing risk exposures. This is especially critical for growing companies, whose regulatory compliance risks steadily increase in magnitude and quantity over time.

To help your controller steer the company clear of unnecessary risks, it’s essential to create a central review process that ensures the right financial management controls are in place. Leading financial services firms use the latest digital compliance strategies and auditing techniques – with detailed transaction logs – to minimize compliance risk. This creates an integrated “collaborative compliance” environment that’s consistent across the front-and-back office.

Why is that essential? It helps you see not only what you did and when you did it, but also why you did it and whether the transaction complies with GAAP or SAP rules. Of course, user-based and role-based access control protects confidential financial information to preserve the integrity, accessibility, and confidentiality of the information.

Regardless of the sector in financial services, digital transformation is creating greater pressure on finance leaders. They need the right systems in place to gain real-time visibility into key financial data, implement smart automation of financial processes (especially reporting), and manage a regulation-rich industry to support compliance requirements.