How can CFOs Leverage Digital Technologies to Create Value for their Companies --[Reported by Umva mag]

The business world is not just a fast-paced environment today but also an environment where Chief Financial Officers (CFOs) no longer remain as gatekeepers of financial data. They become strategic leaders who create value through leveraging the use of technologies brought about by digital media.

As more and more businesses start making decisions based on data, this could be the chance for CFOs to make the most of these technologies in terms of efficiency to better their financial performance while developing innovation.

The New Digital Transformation

The introduction of digital technologies has altered the organizations’ way of functioning. It is anticipated that with the introduction of this transformation into the system of companies, the increase will be in a range of 20% to 30% over a period of three years, according to McKinsey. This change is specifically relevant for CFOs because it caters to their specific functions-the ones of guiding the organization through this change process.

In general, digital technology falls under various tools and encompasses, among others, cloud computing, AI, big data analytics, and automation. Through these technologies, processes may be more easily and rapidly facilitated at costs that are otherwise lower, and practices in the past could not have delivered similar types of insights. In this way, CFOs have tremendous opportunities to make significant value for companies through these tools.

Financial Reporting and Analysis Improved

Among the key roles of a CFO is proper reporting and analysis of financial information, and digital methods of financial reporting usually prove to be more comprehensive and efficient than most traditional methods because these traditional methods often depend upon laborious processes that consume extra time and are prone to errors.

For instance, financial applications based on cloud technology allow virtually instant access to and reporting of data. For example, in the event when a CFO needs to prepare precise financial reports immediately, this can be done fast and efficiently, thereby giving room for quick and timely business decisions back-stopped by the latest information. According to a survey by Deloitte, 67% of finance executives believe that automation of financial reporting will significantly improve their ability to respond to changes quickly and in a timely manner.

Another critical area from where value creation can be derived is cost management in the form of digital technologies. Advanced analytics and AI will put the CFO into a much deeper understanding of how spending happens and allow him or her to pinpoint where the potential for cost reduction exists.

For instance, predictive analytics will assist organizations in being able to correctly predict expenses, thereby keeping the CFOs resource allocations in check.

RPA can also ensure more efficient execution of repetitive tasks such as processing invoices or payroll. According to PwC, organizations that adopt RPA can reduce up to 30% in their operational costs. Not only do automation solutions save the valuable time of finance teams, but they also minimize the risks of human errors.

Improvement of Cash Management

As such, cash flow is very essential in any business so that one may flourish. Digital technologies connect CFOs to real-time cash flow monitoring, giving a more visible view of the financial health of the organization. Cash forecasting powered by AI and machine learning ensures that the future cash needs are accurately predicted by the CFO.

In fact, based on the Association for Financial Professionals, companies which apply cash flow forecasting best practices are 2.5 times as likely to reach their financial goals compared to companies that don’t. Using the digital tools for cash flow management, CFOs can guarantee that their organizations have enough liquidity to take up all growth prospects.

Enhance Strategic Decisions

In today’s information-rich environment, the ability to analyze and interpret information is crucial for strategic decision-making. It is through digital technologies that CFOs can tap into appropriate sources-including trends in a market, customer behavior, and operational performance-to make the best-informed decisions that are in line with organizational objectives.

For example, big data analytics can provide CFOs with an understanding of customer preferences and market dynamics. This knowledge, in turn, will guide how one could structure strategic investments or ventures into new markets confidently. In fact, Gartner reports reveal that organizations are five times more likely to make faster decisions than their competitors if they make proper use of data analytics.

Promotion of Innovation

In any type of industry, if there is no element of innovation, then the possibility of achieving success in the long term is quite difficult. Digital technologies do not only optimize already existing processes but also provide avenues for new business models and source of revenue. Investment in the research and development function can easily be facilitated if the CFO plays the key role of fostering innovation in such an organization.

For instance, cloud computing allows distributed teams in a company’s departments to collaborate seamlessly and smoothenly irrespective of where they are based. Such an environment fosters innovation and accelerates cycles of innovation. Accenture has noted that for companies whose culture is focused on innovation, revenue growth rates are 2.5 times compared to firms that possess no sense of innovation.

Building a Resilient Organization

Resilience refers to an organization’s ability to adapt to a fast-changing environment. Organisations that have developed digital technologies in place are far better suited to adapt to changing circumstances faster than other ones. Organizations that had already invested in digital solutions were better placed to pivot their operations when economic downturn or crisis scenarios like the COVID-19 pandemic played out.

The use of AI-powered scenario planning tools, which could simulate various economic conditions and, therefore, help CFOs to anticipate the impacts on their organization’s finances. Such an approach allows companies to prepare contingency plans and react effectively when facing challenges.

Conclusion

The role of the CFO is also changing as new digital technologies play out in the business landscape. They can use these tools to enhance financial reporting, induce cost efficiency, improve cash flow management, support strategic and decision-making activities, create an environment that fosters innovation, and build resilient firms.

The companies will increasingly have to exploit digital technologies as a basis for sustainable value creation and long-term success while operating in a highly complex context. The embrace of this transformation is less an option than a necessity for the forward-thinking CFO to confidently lead an organization into a future filled with deep systemic change.

The post How can CFOs Leverage Digital Technologies to Create Value for their Companies appeared first on Insights Success.

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