Building a World-Class Digital Finance Function

How CFOs can use digital transformation to help organisations become more forward-looking and resilient. In this episode of the Inside the Strategy Room podcast, two experts on digital transformation of the finance function, Liz Fasciana and Bjørnar Jensen, discuss the necessity of digitisation and its effect on CFOs. Sean Brown: The finance function has become increasingly digital since the days of manual spreadsheets, but we still have a way to go. Why is digital transformation of the finance function still needed, and what does it mean for CFOs?

Bjørnar Jensen: The nature of the finance function is changing. Instead of reporting on the past, the finance function needs to look toward the future and be able to steer the organisation through uncertainty and volatility. It needs to create a higher sense of order and clarity around choices. You can’t do that if you’re spending 80 percent of your time reporting, or even worse, doing manual transactions with a high quality-control need. Instead, CFOs should be spending their time advising the business, being a partner to the business. It’s about using technology in its different forms to improve quality and reduce manual work. Today, that’s happening at a scale that allows us to fundamentally change the role of finance.

Sean Brown: What percentage of companies have actually digitised their finance function? Have a lot of them reached their potential for digitising the function?

Bjørnar Jensen: That depends on which metric you’re looking at. I’d say 100 percent of finance partners are using various forms of digital tools that reduce a lot of the manual labor, improve quality, and consolidate analysis. Have we reached the potential for digital transformation of the finance function? No, we have not. If you look just at automation rate, the ambition should be that 95 percent of these repetitive tasks go away because they’re taken care of by the system. In reality, it’s probably about half that, maybe a bit less. So there’s still a long way to go.

Liz Fasciana: The good news is that the tools are getting better. Some of the technologies that really help you do the kind of predictive, future-looking analytics are much easier to use now. This is also an area where you’re going to see a lot more investment, so the improvement will continue.

Sean Brown: What are some of the barriers to reaching the potential for digitising? Is there a particular window of opportunity now?

Liz Fasciana: The barrier is setting up the right program with the right ambition and having the alignment around where you’re trying to go. I always start with ambition. You want to have a plan that articulates where the value is that you’re trying to achieve, and really drive a focused program around achieving it and being able to measure progress. These are people-based programs, so while there is a lot of technology underneath, you have to bring your teams and your leadership along on the journey.

Bjørnar Jensen: We’re in a phase right now where there’s a huge wave of investment going into digitising the enterprise backbone. We talk a lot about enterprise resource planning [ERP] systems being modernised. Because these are the transactional backbones, they all touch on the finance function. Does everybody make full use of that opportunity to modernise the finance function too? I’d say the potential is not being fully realised. A third to half of companies really take this opportunity to fully rethink the role of finance. There’s still a fair amount of, “Let’s just modernise, and simplify, and standardise a little bit what we’re already doing and continue doing that.” That is a missed opportunity. Read the transcript or listen to the full podcast at McKinsey here.