Paper or digital? Your finance department seems out of its depth, and the events of 2020 have accentuated their difficulties in the face of a too-slow digital transformation in your company.
All your company’s “finance” functions have been at the forefront of the COVID-19 health and economic crisis. Yet digital technology is increasingly intervening with greater precision in these strategic areas. From debt collection, to simplicity and speed of implementation, to short-term financing and a clear flow of information, the benefits of digital technology seem numerous. So what are the concrete benefits of digital for corporate finance functions?
Still the same challenges, but more agility
Finance departments are faced with key challenges in terms of cash management and accounts payable & receivable management. The coronavirus crisis has shaken your company to the core. As a result, your company’s finance functions face a multitude of challenges. While performance management remains at the heart of their work, they now need to be even more vigilant in the face of various risks, while reinforcing productivity gains, cost control and optimization of cash flow and customer & supplier risk management, as well as accelerating cash inflows. According to Coface, this exacerbation of risks, linked to the post-covid era, has revealed that business failures in France could increase by 21% between 2020 and 2021.
This calls on your finance department to anticipate and adapt to better ensure your company’s financial sustainability.
Performance management
At the heart of the finance manager’s or CFO’s job, performance management and improvement remain a constant challenge. What is the aim of this management? To ensure that the company is running smoothly and to support its development. In the wake of the crisis, however, companies have deployed very short-term visibility on their business and cash position, with budget forecasts that may no longer be monthly or quarterly, but weekly. This trend is confirmed by PwC’s survey of CFOs’ 2020 priorities, 75% of whom consider that their top priority is to provide fast, accurate reporting, as well as clear, relevant analysis to anticipate reactions and facilitate decision-making. Other data revealing the adaptation of finance departments, 53% of them also want to shorten their reporting times, and 62% want to optimize their department’s forecasting processes for 2020 (compared with 70% and 58% respectively in 2019). The prioritization of performance management has indeed been impacted.
As a logical consequence, performance indicators have become indispensable. As concrete representations, these relevant, high-quality data must contribute to reinforcing precise, rapid and flexible profitability analyses to facilitate decision-making. However, in periods of profound and accelerated transformation, cost balancing and data reliability can only be achieved through agile information systems and/or open systems that can accommodate extra-financial or even external data.
Accelerating cash flow
Performance management means cash management. Controlling cash inflows requires meticulous monitoring in order to limit risks. The aim of this approach is to accelerate cash inflows, so as to preserve and/or improve cash flow and finance working capital requirements. “Accelerating cash flow is all the more important in times of crisis, as it also helps prevent the risk of overdue or late payments,” explains Valérie Konarski, Director of Financial Processes at DIMO Software, a publisher and integrator of management solutions. “To achieve this, it is essential to spread a cash culture throughout the company. It enables all functions involved in the order-to-cash chain to be brought on board: from sales representatives to accountants, from sales administration to debt collectors. So it’s important for teams to work together and stay close to the customer.
Spreading the cash culture is therefore a major challenge. And to reinforce the reliability of forecasts, ensure increasingly fine-tuned and efficient management, and adapt cash management to the current and future economic context, tools incorporating new technologies such as Artificial Intelligence are proving to be important levers.
Risk management
Increasingly exposed to risks, particularly those relating to the solvency of their business partners, companies are seeking to allocate more time to understanding and controlling their risk exposure. This trend is a response to estimates by the market’s leading credit insurers that corporate insolvencies could rise considerably, exceeding the 20% mark by the end of 2020.
At the same time, the nature of risks is becoming increasingly complex. In addition to risks linked to the solvency of customers and suppliers, companies are faced with cyber, fraud, regulatory compliance, geopolitical, environmental and societal risks. Covid-19 has exacerbated the need for management tools to anticipate and manage new types of risk.
While large companies have taken matters into their own hands and invested considerably in setting up dedicated, structured risk management teams, small and medium-sized businesses seem to be more concerned with the issue of risk management. SMEs, on the other hand, seem to be less well equipped.
Paradoxically, while companies are increasingly confronted with risks, they are still not ready to deal with them.
Process optimization
Optimizing processes and reducing costs is a key focus for CFOs, a trend that has been reinforced by the current economic climate. The PwC study supports this trend, identifying the digitization of processes as a priority for CFOs. The digital transformation of the finance function is seen as a major challenge for 85% of companies. It undeniably represents a means for the function to face up to its various challenges and meet the challenges of tomorrow.
The finance function opts for digital transformation of its processes
Transactional or decision-making, these two worlds are coming together within the finance function, thanks to the new integrated cloud ERP platforms. On the transactional side, combining administrative and accounting processes, these platforms offer automation and integration of workflows to improve productivity. Added to this are enhanced efficiency and a value proposition enhanced by the use of innovative solutions such as artificial intelligence, machine learning and deep learning. As for business intelligence, forecasts, particularly those concerning risks, are now based on data science to improve the reliability of data and analyses, and to refine their predictability.
Complete automation of the entire order-to-cash chain
To deliver tangible productivity gains, finance departments are focusing on automating Procure-to-Pay (the entire purchasing process, from order to supplier payment) and Order-to-Cash (the entire customer order processing, from order to customer payment) processes. Although 64% of CFOs consider themselves satisfied with their transactional processes in the short term, there is a real desire to make them more efficient in the medium term (PwC, CFO Priorities 2020). 32% of CFOs in 2020 (vs. 19% in 2019) say they want to implement robots to carry out a range of simple, repetitive tasks performed on a regular basis. In addition to increased productivity, dematerialization is a guarantee of more refined management of cash flow and working capital requirements.
The dematerialization of supplier invoices is becoming increasingly important
To improve invoice processing and boost productivity, dematerializing supplier invoices structures and automates validation processes. As a result, your accounting teams are better equipped to avoid payment delays and blocked invoices without validation, while maintaining a good relationship and reputation with your suppliers. For example, the benefits of dematerializing supplier invoices include automatic integration into the accounting system. This automatic integration is made possible by artificial intelligence, which also improves invoice data recognition and facilitates automatic allocation.
Cloud access democratizes new technologies for SMEs
In the face of changes brought about by digital transformation, evolutions in working methods, legislation or the market, as well as unforeseen events, it’s vital to ensure the company’s long-term viability. To promote responsiveness and continuous adaptation, we strongly recommend agile solutions hosted in the Cloud and available in Saas mode. Flexible and easy to use, Saas solutions not only offer extended storage capacities with remote data access, but also centralize information, making them accessible to SMEs, which is very useful in the age of Big Data. These Saas cloud solutions meet companies’ need to innovate and adapt, while responding to today’s increasingly widespread issues of mobility and remote working.
Artificial intelligence gains ground in debt collection
Increasingly present in companies, artificial intelligence captures and consolidates internal and external data in order to calculate your risks, create reminder scenarios and, above all, improve your debt collection tools. These AIs can incorporate Machine Learning, a behavioral reproducer that automates time-consuming tasks and self-learns based on customer behavior. This makes it possible to adjust risk thresholds, outstanding receivables levels or debt collection scenarios.
For credit management software, this means offering an “interactive reminder” module, enabling customers, for example, to update their account status by clicking on a link in their reminder e-mails. At the same time, AI refines its forecasts and analyses of receivables. There are also debt collection and receivables management solutions with integrated payment functions (by bank transfer, credit card or direct debit). We have developed an API [programming interface enabling communication between two systems] connected to online payment providers, enabling customers to pay their invoices instantly via our CashOnTime portal,” explains Valérie Konarski, Director of Financial Processes at DIMO Software, a publisher and integrator of management solutions. It’s a module that helps reduce payment times“.
Machine Learning speeds up lettering processes
Lettering, although at the end of the chain, also contributes to a more efficient dunning system. “The automation of this process means that accounting teams don’t have to follow up on customers who have already paid their invoice, and they can gain in efficiency by only following up on those who haven’t paid,” explains Valérie Konarski. If a lettering module integrates AI, and Machine Learning in particular, it will then be able to learn all customer payment habits.
“Every manual action is recorded, which is the first step towards artificial intelligence, because we avoid doing the same action twice”, explains Bertrand Marat, IT Manager for the Accounting, Finance and HR departments at Dupont Restauration, who opted for DIMO Software’s CashOnTime solution. “In less than a month, our lettering rate climbed to 90%“.
Access to financing goes paperless
New technologies are making it easier and quicker for companies to obtain financing. Banks and their factoring subsidiaries offer short-term financing solutions in less than 24 hours, thanks to the increasing use of digital tools. These solutions make funds available for regular customers, for example. In this way, suppliers can finance the increase in their working capital requirements as they emerge from a crisis or resume business.
AI, Data Sciences and Analytics strengthen risk management
New technologies are bringing further improvements in risk management, particularly with regard to customer and supplier risks, compliance risks and fraud risks. Indeed, a quarter of all business failures are linked to late payment. It’s all about analyzing the multitude of existing data. For credit managers, this translation of massive amounts of information into strategic data supports the decision-making process. Also worth noting is the development of APIs and Business Analytics, which enable different information systems, both internal and external to the company, to be pooled for better management of overdue payments.
Easy-to-read performance indicators with Business Analytics
Business Analytics brings together a multitude of performance indicators from different tools (CRM, web analytics, etc.). For finance departments, this means precise, rapid and flexible profitability analyses. This is a major challenge, as relevant, high-quality data facilitates decision-making and enables better anticipation. The strengths of Business Analytics lie in datavisualization and its organization into dashboards, which not only translate data, but also transform it into visual, easy-to-digest information. Interactive and attractive, data for finance teams improve their visibility and readability across the whole range of their activities.
The digitization of finance function processes, in constant evolution with new technologies, is becoming a reality in companies.
