Real-time data isn’t enough - success in a digital future demands ‘CFO 3.0’

Profile picture for user Ian Howells By Ian Howells July 16, 2020
Summary:
Finance leaders today must harness the power of automation and real-time data analysis to anticipate change and mitigate risk. Sage Intacct's Dr Ian Howells charts the unstoppable rise of CFO 3.0

CFO 3.0 hand conjures financial charts out of tablet © PopTika - shutterstock
(© PopTika - shutterstock)

Since the start of 2020, the nature of business itself has rapidly evolved in just a few months. Today, we have a pressing need for timely data and innovative technology to help us make sense of it all and manage uncertainty. The need to look ahead and prepare for the future as best possible has never been more important. Many people I have spoken with have done more scenario planning and budget re-plans in the first few months of this year than they have done in many years.

Nowhere are these dynamics of data and technology more noticeable — and important — than in the office of the CFO. Gone are the days when the traditional CFO was merely a historian keeping records of past performance and reporting what happened. Even the second-generation CFO — who leverages real-time data to catch issues and understand why results happened — can often struggle to meet the new mandate: to reduce the time, cost, and risks of not having the tools to look forward at your business.

This isn't unfounded sentiment and hunches — it's borne out in research we've conducted to gauge where finance is headed. Our recent survey of more than 500 CFOs found nearly unanimous agreement (98%) that their job has changed significantly in the last 5 years, and 46% are facing new demands to provide a higher level of business counsel. Now factor in a deluge of data, increased regulatory-compliance demands, and heightened expectations for speed and insight, and the level of disruption can reach staggering proportions.

At Sage Intacct, we've coined a new term to encapsulate these changes: CFO 3.0. No longer using the rearview mirror to navigate the way forward, the trailblazing CFO 3.0 is a finance leader who leverages unprecedented volumes of data, artificial intelligence, financial automation, and new-breed predictive analytics to anticipate what will happen and determine the actions to take that avoid threats and mitigate risk.

Staying ahead of the curve — digital transformation

The rise of CFO 3.0 comes at a time when companies are especially eager to embrace digital transformation — the revamping and automation of processes by combining human skills and relationships with integrated technology and internal and external data. In fact, global spending on digital transformation is expected to reach a staggering $1.97 trillion in 2022 — that's a five-year CAGR of nearly 17%.

In our survey, we found that 76% of financial decision-makers are playing the lead role in their organization's adoption of digital transformation, seeking to help every aspect of their companies prosper from the many changes ahead. And increasingly, they recognize that automation should start right in their own domain — finance and accounting.

The fact is, more than 90% of finance leaders said in the survey that one of the biggest benefits to automation is simply the productivity improvements obtained from automating mundane tasks. For instance, eliminating the soul-deadening experience of multiple csv exports and Excel analysis over tens of tabs is an essential first step to digital transformation. Another core activity that has come to the fore recently is removing paper from the process as much as possible. Checks that have been posted to your locked office epitomize the need for this basic shift to digital.

Once the tactical inefficiencies have been addressed, financial leaders are viewing technology as the key to achieving higher accuracy and preventing business risks. Again, more than 90% of financial decision-makers believe that accounting and financial management technology can help businesses to discover new opportunities and risks — in other words, realize the value of digital transformation — with better forecasting, automated period-end closes, stronger data governance, and an enhanced customer experience.

With digital transformation in finance, the CFO 3.0 can move past episodic milestones. Automation, real-time data (financial and operational), and AI tools mean you're no longer confined to the traditional period close. Instead, accounts are reconciled continuously in real time. Auditing is done on not just a subset of the data, but all of the data, all of the time. And that means you can constantly surface the insights you didn't think to ask about and continuously detect hidden outliers that represent opportunities and threats.

Faster insights create opportunities

In areas hard hit by economic changes, like hospitality, being able to analyze all the data on a continuous basis provides faster insight into upturns in segments and possible opportunities. For example, capturing trends in patronage on a daily basis could allow staff to be rotated to busier areas keeping everyone employed. When this kind of information was only available at month end, it often meant decisions made too late to take full advantage of opportunities. Tammy Getschman, Director of Accounting at S&L Companies, a franchise group for the Culver's burger restaurant chain, comments:

With Sage Intacct, we are able to filter our financials by region to see trends and analyze key figures to determine which regions are able to sustain growth or need attention.

In another sector, corporate tax managers can implement robotic filing and AI-based tax planning and optimization. Similarly, many organizations are turning to AI and machine learning for their data-intensive audit and compliance processes to comb through mountains of data and uncover lurking compliance issues. Advanced analytics and machine learning can lead to more predictive accounting and enable financial managers to more closely predict how a period will close. Treasury managers can obtain real-time cash positions and predictive liquidity. Technology can also expose other areas of risk and help you build risk-mitigation strategies, even for usage-based insurance and scenario-based risk analysis.

The digitalization of finance is fundamentally changing how CFOs operate. Today, technological evolution separates successful financial leaders from the laggards. That's because emerging technologies will enable the finance organization to use their real-time financial and operational data to mitigate risk by identifying the best course of action for the business — while minimizing the impact of previously unforeseen threats.