Think Tank

Technology and the Future of the Finance Function

In conversation with

Kedar Upadhye Manas Datta Manoj Tulsian ManojBhat Vinod Kumar
Kedar Upadhye, Global CFO, Cipla Manas Datta, CFO, Wockhardt Manoj Tulsian, CFO, JMC Projects Manoj Bhat, CFO, Tech Mahindra Vinod Kumar, CFO&CHRO, Kirloskar Oil Engines

Looking back to how businesses have adopted technology over the last 20 years, it is often Finance that has taken a lead. Technology can transform the Finance function through improved planning and decision making, more streamlined processes and reduced resource utilisation. As CFOs increasingly move from controllership to business partnering, a mix of digitisation, automation and robotics can improve processes and create new efficiencies. Whether it is artificial intelligence (AI), machine learning (ML), the cloud or blockchain, advances in technology present huge opportunities. For their part, CFOs will need to better understand the potential of technology and start to incorporate it if they are to give their organisations a leading edge.

Technology can automate the more transactional processes within Finance but certain strategic areas will continue to rely on manual controls

The potential – and limits – of digitisation
The concept of a ‘digital Finance organisation’ raises questions about just how far the function can be automated and to what extent it can depend on technology. Clearly, it is easier to automate the more transactional areas such as accounts, cash, revenue, finance control planning and tax. Technology has simplified transactions management, including accounts receivable (AR) and accounts payable (AP). Thanks to digitisation, firms do not need devote as much time to activities such as quarterly closing, monthly closing or voucher-processing. However, in the more strategic areas – including treasury, risk management and audit – it is vital to have manual controls in place. On the whole, even as nothing can replace human acumen and experience, technology does create operational efficiencies.

Going forward, predictive analytics will play an important role

What lies ahead – for Finance…
Eventually, all processes that apply/depend on a fixed set of rules should be automated, freeing Finance professionals from such tasks. Further, advanced analytics, which may today seem of limited value – or may even sound like jargon to some – deserves consideration. In the world of tomorrow, one of the primary functions of Finance will be to ensure that the organisation can fully exploit internal/external cloud data, using it for predictive purposes. AI, ML and blockchain will help drive this transformation and move Finance away from its traditional controllership role.

Finance needs to create a ‘data environment’ where each business unit can ‘pull’ out data based on its individual needs

…and for the broader environment
Technology has an equally transformational role to play at the company level and Finance must help guide this change. However, it is important to bear in mind what ‘digitisation’ implies. No company can claim to have ‘digitised’ simply because it has automated transaction-processing or adopted data-visualisation techniques. To create a true ‘data environment,’ where Finance can feed every business unit with the right data at the right time, it must go a step further. For decades, Finance was a ‘provider’ of data, which it tended to ‘push’ onto the business. Going forward, what it needs to create is a ‘pull mechanism’ that allows individual business units to define their data needs, based on specific KPIs/KRAs. More broadly, what is required is a mindset/cultural shift that enables Finance to truly partner with each business unit on its data needs. Some companies go even further, building an ecosystem where each user defines how they would like to view information, but without any interference from Finance.

Tech investments must not be viewed purely from an ROI/payback criterion

The question of payback
Organisations typically expect a large ‘payback’ on their technology investments. One global tech major, for instance, expects that its investments in AI and robotics will help cut its current headcount of 150,000 to just 5,000 in 5 years. Yet, even as advances in technology often bring quantifiable benefits, it is important to not focus excessively on ROIs or payback. Having a technological edge actually enables something greater: business sustainability and more efficient operations. To that end, top management sponsorship and endorsement are key. Ultimately, this is what enables forward-looking investments that help the company keep pace or even lead global trends.

Cipla is a good example of gradual but fundamental digitisation

Cipla’s journey towards digitisation
When Cipla embarked on its digital journey around 5 years ago, the focus was on setting up the core IT infrastructure in terms of transaction processing systems for each function. It went on to transform the underlying systems after giving careful thought to parameters such as efficiency, productivity, resource optimisation and the multiple decisions that get made at each location for each function. Cipla’s transformation involved taking its entire infrastructure to the cloud and ensuring that the hardware kept pace. The company is now on a journey to pivot to the new aspects of digitisation, including advanced analytics, AI, ML and blockchain, while retaining focus on its core digitised transaction processing systems.