The Rise of Finance 4.0 and Its Impact on Mid-Market CFOs
Finance 4.0 is all about using digital technologies such as automation, artificial intelligence (AI), internet of things (IoT), and blockchain to transform finance functions such as treasury, budgeting, financial planning & analysis, and order-to-cash management.
The finance department is traditionally portrayed as record keepers who manage order books, receipts, cash balances, and annual reports. While many of the core responsibilities remain the same, the adoption of technology helps finance leaders become strategic experts. They can then steer the businesses toward modernization, market expansion, and growth, all the while managing the costs and the bottom-line.
Here’s how the finance function has changed over the last few centuries.
Mid-market CFOs are now in a unique position to take advantage of these technological advancements. With the emergence of Finance 4.0, they can use automation and AI to streamline their financial processes and reduce errors. This not only increases efficiency but also frees up time for CFOs to focus on more strategic initiatives that can drive business growth.
Why Embracing Finance 4.0 is a Win-Win for Mid-Size Businesses
For mid-size businesses, embracing Finance 4.0 represents a significant opportunity to improve their financial operations and gain a competitive edge. Here are some of the key benefits that make it a win for all stakeholders:
1. Lower Costs and Improved Efficiency
By adopting Finance 4.0, mid-size businesses can benefit from automation and other digital technologies that can significantly reduce costs and improve efficiency. Online software solutions can automate accounting tasks such as invoicing, AR and AP management, payroll management, and cash flow forecasting, freeing up finance teams to focus on more strategic initiatives. Intelligent automation can help lower costs by up to 75% and allows finance employees to devote more time to higher-value tasks.
2. Improved Client Experience
Client experience is a critical component of any successful business, and finance teams play a crucial role in delivering a positive experience. By modernizing their operations with digital technologies, mid-size businesses can improve their invoicing and payment processes, reducing late payments and redundant payment methods. This can help improve the overall client experience and enhance the company’s brand image.
3. Competitive Advantage
In today’s fast-paced business environment, gaining a competitive advantage is essential for survival. By leveraging data analytics and other Finance 4.0 technologies, mid-size businesses can gain valuable insights into customer behavior, market trends, and other key indicators. This can help them make more informed decisions, plan their investments, and forecast business metrics more accurately. By staying ahead of the curve, mid-size businesses can level the playing field with large enterprises and gain a competitive advantage.
4. Employee Experience
Finally, embracing Finance 4.0 can also improve the employee experience for mid-size businesses. By providing finance teams with the right tools and technologies, businesses can ease the burden of mundane tasks and empower employees to focus on more meaningful work. This can help boost employee morale, enhance retention rates, and attract top talent to the organization.
6 Key Technologies Driving Finance 4.0
The emergence of Finance 4.0 is largely driven by technological advancements that are transforming the way finance departments operate. Here are six key technologies that are driving Finance 4.0:
Cloud technology provides companies with on-demand computing, data storage, and network capabilities. This helps reduce capital expenses (CAPEX). For finance teams, the cloud offers a means of automating their processes at lower costs.
2. Robotic Process Automation
RPA solutions help automate specific tasks such as checking emails for payment receipts, matching data records, or sending recurring communications. RPA is often considered the first step that finance executives take to automate processes.
3. Artificial Intelligence
Like RPA, AI and machine learning tools also help automate processes. But unlike RPA that are coded only to accomplish specific tasks, AI tools continuously learn with new datasets and adapt to any deviations from the core process as needed.
4. Internet of Things
Today data, including corporate finance data, is spread over multiple sources including physical devices such as computers, machinery, etc. IoT technologies connect these physical objects so that you no longer have to scout for data but have the objects connect with each other over wireless channels for data sharing. For example, your finance app preparing your balance sheet can connect with sensors on your industrial equipment to get data on depreciation.
Blockchain technology, though still in its nascent stages, is expected to help in financial reporting, ledger management, and payments. Its immutability makes it a preferred method to build trust, reduce errors, and eliminate fraud.
6. Data analytics and visualization
Data is vital to any function today. The volume of data generated and processed exponentially rises with each year. Tools that help analyze data and share the insights via easy-to-comprehend charts are one of the most needed technologies for finance teams.
The Future of Finance: How Automation is Transforming the Industry
Finance 4.0 is all about embracing digital technologies to streamline finance processes and drive business growth. Automation is a key component of this transformation, and it is already transforming the financial industry in many ways. Let’s look at some corporate finance processes that technology has helped simplify. These are Finance 4.0 use cases that you can easily adopt:
Function or Process area
Finance 4.0 teams
Manually check records to match data. Error-prone and time-consuming.
AI or RPA-powered tools match records from multiple sources quickly and more accurately.
Enter data from multiple sources by hand to a digital system or paper records.
AI tools capture relevant data directly from multiple formats including paper records, photos, emails, and websites without any human intervention.
Manually browse multiple records and data sources to build financial reports on spreadsheets.
Automate report creation with pre-defined templates using RPA tools to capture data and record it correctly.
Manually prepare invoices and contact customers to track payment status. High DSO and bad debt ratio.
|Automate invoice creation and delivery as well as dunning processes. Prioritize collections worklists and reduce DSO and bad debt ratio using autonomous solutions like HighRadius’ Integrated Receivables solution.
Looking to the future, the possibilities of automation in finance are endless. As AI and machine learning continue to advance, finance teams can expect to see even more sophisticated automation tools that can handle complex tasks and provide even deeper insights into financial data.
Steps to Prepare Your Business to Embrace Finance 4.0
The emergence of Finance 4.0 represents a significant shift in the way finance departments operate, and preparing your finance team to embrace this transformation requires a combination of mindset and technology adoption. Here are some steps you can take to prepare your business for Finance 4.0:
1. Re-align Your Finance Team’s Mission and Strategy
To embrace the concept of Finance 4.0, modern CFOs need to bring a shift in the attitude of the finance team. You should position the finance team as the driver of profits and value creator for sustainable growth rather than as bookkeepers. Automation helps finance functions such as accounts receivables to move up the value chain and explore new opportunities.
2. Upskill and Reskill Your Team
Training your employees on the latest technologies and other skill sets such as data science, communication, and innovation can help prepare them for responsibilities that go beyond traditional finance functions.
3. Invest in Technology
At the heart of Finance 4.0 lies the use of technology to drive everyday finance tasks. For your finance function and business to successfully transform itself, it should invest in digital technology. But this should not be done in an unplanned or random manner. Adding new apps to your legacy system will only increase its complexity and lead to security and integration issues. Look at investing in a digital core that can scale with your business needs and adapt to the frequent tech changes.
4. Stay Abreast of Competition and Market Trends
Keeping a pulse on the latest technology advancements and understanding how your industry peers are reacting to them can help you identify new opportunities for growth. Conduct pilot studies and trial launches to see how technological changes can benefit your business.
5. Identify the Right Tech Partners
Selecting the right tech partner is crucial to your success in Finance 4.0. Look for partners who understand your business needs and can help you identify and implement the right technology at affordable rates and within optimal timelines. Tech consulting firms, software providers, and IT service providers can all help you identify and implement the right technology at affordable rates and within optimal timelines.
At HighRadius, we offer autonomous software solutions that help transform the office of the CFO. Our Integrated Receivables solutions leverage AI capabilities to transform your order-to-cash and receivables processes, improving cash flow and reducing DSO. Our solutions are designed to help finance teams streamline their operations, improve efficiency, and gain valuable insights into their financial data.