The introduction of new technologies is transforming theway corporate finance departments go about their jobs, but thesweeping changes pose challenges for finance executives.

The Hackett Group's annual Key Issues Study, which surveyedexecutives at midsize and large companies around the world, foundthat 91% expect digital transformation to fundamentally alter theway finance teams deliver services over the next three to fiveyears, while 97% expect technology to have a big effect onfinance's performance.

“In the next two or three years, there's going to be a verylarge increase in the adoption in finance of new technologies likecloud applications, predictive analytics, and robotic processautomation,” said Nilly Essaides, senior research director at TheHackett Group.

Treasury teams have been on the front lines of the shift to newtechnologies as they've automated cash management and paymentstasks, Essaides said.

“You see more of the transactional aspects of what treasury doesbeing digitized, moving into this new era where transactions arebeing processed and even more complex transactions are moving intodigital solutions, sometimes enabled by robotics,” she said. “It will solve a lot of problems that workstations have not beenable to solve and free up the time of treasury professionals to dostrategic work.”

When asked which major changes in technology they areundertaking this year, 64% of the executives Hackett surveyed citedplans for business intelligence and analytics applications. Hackettlinked those plans to the 94% of executives who cited helping thecompany execute strategy as one of their top business goals for theyear.

Cleaning up the Data

As finance teamscontemplate digital transformation, 75% are preparing for changesby improving their data governance and master data management,according to the Hackett survey.

“If you don't store and organize your data right to begin with,you can't do much with it later,” said Essaides, pictured at left.“It's not reliable; it's not consistent.” She cited such problemsas different parts of a company using different names for the sameproduct or employing different definitions of depreciation.

“The first thing to do is define the data in a consistent mannerand save it consistently across the organization,” she said. “Wefound that companies that do this right actually get a return onit.”

The best approach to a master data management (MDM) projectinvolves collaboration between IT and the business, working “in away that is spread across the enterprise,” Essaides said.

A Hackett study last year of master data management “showscompanies are no longer looking at MDM as a tech, backroom thing,”she added. “It's looked at as a strategic initiative that needs tohappen just because of the amount of data companies areaccumulating. As they bring in more data, it needs to be saved in away that can be retrieved consistently.”

Make a Map

According to the Hackett survey, 44% of companies have developeda strategy for their digital transformation.

Jim O'Connor, Hackett's practice leader for global businessservices and finance advisory programs, said such a road map isn't“an either-or proposition.

“It doesn't mean the treasury workstation goes away; it doesn'tmean the bank technology and how they're automating now goes away,”O'Connor said. “It's more, lay out your five-year plan with otherconstituents and IT, and think about where some of those digitaltechnologies will drive rapid improvement.”

The digital transformation plan should be put together incollaboration with IT, and it has to be tailored to the needs ofthe different parts of the organization.

“The plan for digitizationaround A/P or treasury may be different than the plan for planning,budgeting, and forecasting,” said Richard Cardillo, a principal inthe group finance transformation practice at the Hackett Group.“The tools you leverage might be different as well.”

For example, Cardillo said, treasuries perform two differenttypes of work. Areas like cash disbursement and cash applicationthat are handled manually today “could be addressed by things likerobotic process automation,” he said. “The other part of treasury,around hedging and interest rate projections, might lend itselfbetter to things like predictive analytics or big dataanalytics.”

Of course, one question leads to another. Thinking about whichtools to use for which jobs raises the issue of how those jobs areperformed. “Rather than automating what I have in place today, do Istart thinking about a more effective process?” Cardillo said. “IfI'm going to change process and tool set, do I need to think aboutthe skill sets of people? If I'm going to change tech and processand people, do I start to think about organizational roles andresponsibilities and structures?”

While people contemplating digital transformation tend to focuson technology, “you need to think about the implications of thataround people, processes, and governance,” he added. “It's not justthe application of technology, it's all of those dimensions.”

Cost Considerations

The push to improve finance technology seems to run counter toanother big finance goal: containing costs. In the Hackett survey,reducing the finance function's cost and headcount was cited as atop finance initiative for 2017 by 71% of those surveyed.

But Essaides said automation and digital technology can cutfinance costs over time.

“If you look at our world-class companies versus their peers,automation helps world-class companies become world-class in termsof the cost of finance,” she said. “When you look at digitaltechnology, we expect that cost to come down further.”

A survey of more than 400 CFOs and senior finance executives atU.S. companies conducted by audit, tax, and advisory firm GrantThornton shows that cost considerations rank high among theirconcerns about digital transformation.

In fact, managing costs was the biggest barrier the executivessaw to future technology growth, cited by 51% of those in the GrantThornton survey, followed by the maintenance of legacy systems,which was cited by 41%.

“It's an uphill battle when it comes to adopting new technologybecause they do have existing platforms that need to be managed,”said Chris Stephenson, a principal at Grant Thornton.

Finance executives need to strike a balance “between adoptingnew technology, such as cloud computing and advanced analytics,versus maintaining existing platforms that might be a couple ofsteps behind where innovation is happening,” Stephenson said.

“Companies I've seen successfully make that shift are pushingthe balance a little bit more toward the new systems, newinnovations, new ideas, and not completely ignoring legacy systemsbut keeping them in operating mode and having a plan to transitionto the new system,” he said.

Stephenson also cited the efficiencies that companies canachieve as they adopt more advanced technologies. For example, “thedigital transformation is allowing companies to take some of theirhistoric back-office operations—things as simple as updatingcustomer information—and push that burden to customers andsuppliers to keep updated,” he said.

What About Talent?

The intricacies of digital solutions seem to be a far cry fromthe training that finance executives get in business school. And infact, the Hackett survey shows that just 35% of executives feeltheir finance team has the abilities required to execute a digitaltransformation.

One solution to any knowledge gap is for finance departments towork closely with their colleagues in IT.

“Right now what I've seen in some of the best operating projectsis a very strongly linked CIO and CFO, or at least the groups underthem, with either a translator or an ability to talk about thebusiness side of the project and its capabilities,” Stephensonsaid. “Those [finance and IT groups] that are intertwined from thestart of these programs have had a lot more success inunderstanding what was needed, delivering what was needed, andavoiding end-of-project surprises.”

He added that business education is evolving, with moreinformation systems training provided at both the undergraduate andgraduate school level. “I think we're going to see a maturity ofthe CFO as having IT systems as a second language,” Stephensonsaid.

But Hackett's O'Connor questioned whether universities are muchahead of corporates at this point in terms of their preparednessfor the technological advances, and suggested the work of gettingemployees up to speed was up to the corporates.

“I think this is something most companies need to take on interms of development of their talent,” he said. “If you think aboutthe maturity lifecycle of digital adoption and how that's going toimpact it, we're still in the learning mode. So how differentcompanies are learning it is still slightly different.”