Digitalisation Lays Groundwork For Finance To Drive Value

23 September 2020 Arti Tawani

Financial Services Digital Transformation

At the height of the coronavirus spread in China when worst-hit businesses made close to zero revenue, McDonald’s China managed to rake in 60% of its usual revenue, said Aaron Huang, FCMA, CGMA and CFO of McDonald’s China at a recent CGMA100 North Asia Management Accounting Leaders’ Summit in Chengdu.

Sustaining this business continuity is a digitalisation strategy that began years ago, enabling the fast-food chain with 3,500 stores in the country to take orders and receive payments without a customer ever needing to visit its restaurants.

“Four years ago, when we moved to cashless payments, on the surface, it seems like a simple transformation from cash to mobile payments, but on a fundamental level, it’s a finance transformation,” Huang said.

As the pandemic drags on, digitalisation of services from banking to grocery shopping is no longer a good-to-have but a must-have for businesses to meet consumers’ needs.

“Isn’t it true that we can now no longer live without our smartphones?” said John Zheng, FCMA, CGMA and CFO of Mitsui Sumitomo Insurance China, who was also on the panel. 

He explained that such changes are happening against the backdrop of Industry 4.0, a term popularised by Klaus Schwab, founder of the World Economic Forum, to refer to fundamental changes to the way people live and work driven by new technologies.

“And what is the most representative feature of Industry 4.0? Digitalisation,” Zheng said. “In finance, what we’re doing is digitalising our usual daily processes.”

Huang said that even before the pandemic, McDonald’s China received 95% of its payments through mobile wallets — predominantly WeChat Pay and Alipay — with the remaining payments in cash and debit and credit cards.

Such digitalisation in the China market is driven by consumers’ demand for localised products and experiences, Huang said. And with it comes data on customer purchasing behaviours that has become pivotal in the fast-food giant’s strategy to seize market share.

But amidst increasing digitalisation, the bigger question for a finance team is how it can leverage digital tools to add value to the business.

Zheng points to two areas that finance can add value: improving efficiency in processes and profitability. 

“To add value, one aspect that finance teams can focus on is to improve the end-to-end efficiency of the business such as transforming the operating model and shortening cash conversion cycle,” Zheng said.

The other aspect that finance can add value is in the company’s profitability.

“In the past, the simplest way I went about this was to do sales,” he said. “But it’s a real pity that a CFO does sales.” He added that it was a case where he didn’t give much thought to how else he could drive profitability.

Zheng said that for finance teams to increase profitability of companies, their roles should be to produce timely reports for the business toward the goal of providing real-time digitalised insights.

He added that in a digital environment, traditional finance and accounting teams will move from a hierarchical triangle — with most workers at the bottom of the triangle and involved in transactions — to a hexagonal structure, where repetitive transactions are automated and finance teams’ main role is to support decision-making and strategy.

Panellists also spoke on robotic process automation (RPA), a technology that is becoming mainstream as companies increase digitalisation. The appeal of RPA is that it allows companies to achieve process improvements through automation while keeping their legacy systems, said Gabriel Wu, greater China managing director of RPA software company UiPath, on the same panel. 

“But RPA is not something that functions without the human; it’s about the human-bot working relationship,” he said.

Wu added that RPA’s value is in taking over transactional tasks that a finance and accounting department has to do repetitively, such as transactions with customers and banks.

In exploring future digitalisation possibilities, Zheng said Mitsui Sumitomo recently worked on automating a weather alert feature provided to its clients in China. When its system detects an incoming weather event such as typhoons that may disrupt factory and logistics activities, its bots will be triggered to send an email to its clients to sound the alarm.

For McDonald’s, its current digitalisation projects involve its relationships with both suppliers and customers to support its expansion of 400 to 500 stores a year. These include improving visibility into its cash flow, restaurant operations, supply chain, and logistics, using technologies such as blockchain.

By— Alexis See Tho