Four 0s and a 1: Coding the resilient finance function

When William Gibson said, “The future is already here – it's just not evenly distributed" almost 20 years ago, he may not have realized for how long his statement would hold true. The future for all businesses is digital, especially today, as we adopt new ways of working in the face of multiple crises.

For finance and accounting (F&A) functions, technology adoption is certainly not evenly distributed. If I look at digital transformation and the opportunities it offers finance through the lens of binary code, I believe their goal should be 00001. Let me share why.

Though many finance functions were already on the digital transformation journey, COVID-19 has accelerated it and presented them with a crossroads. The pandemic has created the perfect storm, dramatically increasing the need for digital but also exposing two types of recovery. Some industries have seen growth and others have continued to be disrupted. Teams that had already invested in finance transformation have performed much better than those that had not.

There's no way to accurately predict what's coming next, but by assessing technology developments and business priorities, our forecast says that the binary code for tomorrow's F&A team will be 00001:

The month-end close process is the thread that integrates and summarizes all financial records, and impacts all reporting, analysis, and decision-making. So far, companies have focused on reducing process cycle times or resourcing at peak times during close. Having a monthlong gap before businesses can understand the accounting effect of each transaction is the biggest bottleneck preventing them from quickly identifying trends. And today, that's not acceptable.

We predict that companies will completely reimagine their close processes, shifting from a linear approach to a continuous hyperloop. They will use cloud technologies and edge accounting – that is, event-based recording – to close the gap between business transaction and accounting dates. Digital technologies will deliver touchless, intelligent automation and provide estimate-based accounting built on standardized processes.

We have reached the stage at which data is now ubiquitous and available to organizations in real time. The real competitive advantage is the ability to generate insights from this data stack. Insight generation can no longer take hours or even days when the environment companies operate in is in constant flux.

Looking ahead, we see a future in which organizations' assets, processes, systems, and products are embedded with cognitive-computing features, creating an intelligent business ecosystem with real-time access to insights.

In such a scenario, data ingestion and normalization – and the work to make insights consumable – happen in real time and are free from bias. This is the bare-minimum requirement for artificial intelligence (AI) engines to work effectively. And businesses need it now.

Touchless processing relies on both reimagined processes and intelligent automation built on an interconnected global data exchange. Many F&A operations – such as invoice processing, reconciliations, cash applications, report generation, commentary writing, and distribution – lend themselves to touchless processing and will run like utilities.

Touchless does not mean there will be zero people involved, but it does mean a limited number of people involved in the process. Success depends on effective man-machine interactions and handoffs. For example, the development of 'low/no-code automation' provides greater transparency and empowers business users with visual modeling environments and reusable automation building blocks that do away with the need to write heuristic code.

Despite a long history of standardizing policies and processes, finance teams still spend a significant amount of time dealing with deviations, disputes, and exceptions. Most of these are timing differences between business transactions and recording dates, driven by the last mile of interconnected systems and sharing information across entities. We have seen some reduction through process improvement or automation.

What teams really need is an AI-led control tower that can take these exceptions to zero, bridging the gap between having cutoff dates at month end versus true continuous accounting. By embedding an 'approval mechanism' into dynamic workflows, finance teams can intelligently automate approvals to relevant parties for validation by understanding established relationships and patterns. The intelligent approval engine filters out routine timing differences and issues that can be resolved, and uses machine learning to allow processes to learn, manage themselves, and adapt to changing conditions.

For years, the user experience has been at the bottom of the priority list for finance. This is changing with finance teams focused on not only delighting internal stakeholders, but also providing an engaging experience to external stakeholders, such as suppliers and customers.

A positive experience drives the last piece of the insight-to-action loop for F&A and helps ensure people act on the insights they receive. It has become even more important, especially when teams are working remotely.

There are two actions that will allow finance to deliver exceptional experiences:

• Human-centric design for frictionless experience: By putting the needs of customers, employees, and partners first, organizations can identify new ways of working and guide changes across the front, middle, and back office
• Systems of action to help consume insight: Systems of action nudge behaviors by targeting three out of the five senses (sight, sound, and touch). For example, voice assistants are rapidly becoming a CXO's intelligent personal assistant, delivering personalized insights, research, and real-time responses to queries, and automating simple tasks such as scheduling meeting reminders and routing escalations

To reach a 00001 vision, companies must rethink today's ways of working while understanding that there's next to no direct cost savings or benefits in the short term. That said, digitally enabled organizations have a competitive advantage that enables them to build a more resilient business, capture market share, accelerate growth, and deliver exponential shareholder value.

As each organization defines its roadmap for the path ahead, combining digital technologies with speed, execution strategy, focus, and change management will separate the leaders from laggards.