Sage: Game-Changers that Make Digitalisation the CFOs Top Priority
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Executive Leaders Network: Finance, Procurement & HR Transformation Summit - May 2022
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Sage: Game-Changers that Make Digitalisation the CFOs Top Priority
- 2. • • •
- 3. 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Other services Not-for-profit Healthcare Professional services Software-as-a-Service Hospitality and leisure Financial services
- 8. 0% 10% 20% 30% 40% 50% Ability to attract new talent Customer experience Corporate audits Cybersecurity and reducing cyber risks Forecasting and strategic planning Data governance Period-end/year-end close
- 9. 0% 10% 20% 30% 40% 50% 60% Addressing challenges brought on by Brexit Advising the CEO on strategic opportunities to restore/drive growth Financing debt built up during the pandemic and associated lockdowns Cutting costs
- 10. 0% 10% 20% 30% 40% 50% 60% Technology will help tighten our cybersecurity and reduce cyber risks Technology will help drive our customer experience Cloud-ready Not cloud-ready
- 12. 0% 10% 20% 30% 40% 50% Leadership and people management Financial modelling/scenario building Digital skills/technological literacy Advanced data analytics Strategic planning 0% 10% 20% 30% 40% Remote teamwork Advanced data analytics Financial modelling/scenario building Digital skills/technological literacy Stakeholder communication
Editor's Notes
- Good morning, everyone, and welcome to today's session. I'm Ian Rose, a Senior Solution Consultant for Sage. I'm going to be talking to you today about how CFOs lead the change to digital transformation. Sage recently issued a report on this, in partnership with longitude. And in this research, we looked at:
- How the Covid 19 pandemic impacted demands on the finance function from other business stakeholders. How the role of the CFO and finance teams is changing and what new skill sets will be needed for the future. What digital tools finance leaders will need to continue doing their jobs effectively and efficiently. Over the next twenty minutes or so, I’ll take you through some of the highlights of the report and some of the outcomes we can learn from it, which I hope you'll find useful and informative as finance leaders. So let's get going.
- Before I get into the stats, let me set the scene. Here's a profile of the audience we contacted as a part of the research. It reached a number of sectors covering a range of industries from financial services to hospitality and leisure, but also sectors as diverse as healthcare and not-for-profit. In total we talked to 500 senior business leaders, from companies with revenues of between 3 and £500 million And with employee numbers ranging from 50 to 1000 employees So a good cross-section of small and mid-size businesses.
- There's no denying that the pandemic thrust finance leaders across the UK into the spotlight. Covid 19 heightened the leadership status of the finance team, but it also increased expectations that they could predict the financial future This ongoing pressure to provide higher volume and quality of insights, and at greater speed, along with frustration at outdated manual processes, has led to many finance leaders rethinking their digital strategies. {Slide build} According to this survey, more than half (56%) of finance professionals say digitalisation is now their number one goal for the coming two years.
- In fact, our CFO, Jonathan Howell was quoted in the report, saying “those at the forefront of digitalisation understand the benefits that automation and cloud brings to the finance function. The rest of the finance community are very fast followers, because best practices spread.” This just goes to show the influence finance leaders can have.
- It's fair to say that we were already experiencing a lot of change before the pandemic. Finance was seeing ever-increasing demands from the rest of the business, but Covid 19 has had a material impact, and has accelerated that – and in Sage, for example, we are finding this is still the biggest driver of change for financial leaders. The impression is that Covid forced unplanned change which could be seen as a negative, but it's important to focus on the positives that came out of those changes as well. I would posit that the CFOs influence over digitalisation is greater now after the pandemic than it was before, as you can see here. 67% directly agreed that the influence of the CFO over digitalisation has increased, and whilst we could focus on the need for digital financial tools, this isn't limited to finance. 23% of respondents, nearly one in four reported that department heads specifically asked the finance department for investment in emerging technologies, and more than half said they experienced a rise in requests for technology enabled financial tools from other departments. {slide?} I mentioned upfront that this forced change at the onset of the pandemic had both negative and positive consequences, but it has definitely elevated the finance function. Investment in back-office finance systems was often seen to be low value. That’s not necessarily the case where there are real benefits to the broader business as a whole from digitalisation.
- So what are the key challenges that finance face? Finance professionals said they are fed up with outdated processes and lack of analytics, and this is a recurring theme across the board. Nearly a third of them said they don't have the digital tools they need; and 40% said the lack of real-time data and financial insights available made it difficult for them to do the job as they might want to. On the other hand, taking the attention away from Covid for a moment, there are other things going on. Obviously there’s Ukraine and the surging prices we’ve seen recently, and there’s also Brexit. It's fair to say that the attention on Brexit has reduced over the last two years, but finance leaders haven't forgotten about it because it's definitely not going away. More than half, the 51% you see here, still see it as a key challenge for their operations, putting concerns about Brexit ahead of staying informed about ongoing legislative change (49%) and meeting stakeholder demands (34%), so whilst there has been less press coverage of late, the underlying issues are still there and need to be addressed……..It's still a major issue for many businesses and In particular, a number that we spoke to noted that Brexit had sharply increased the red tape and paperwork associated with cross-border trade, increased regulatory requirements, and reduced access to talent which is something we will talk about more in a moment. Finance functions need advanced analytical capabilities and digital literacy on their teams, and these skills are hard to come by. In part that is because you’re often looking in a talent pool outside the historical finance skillset, and this means you’re competing with other areas for skills in data, and analytics, etc. It means a change in mindset when recruiting, especially in a tight job market. The younger generation in particular, expect these digital tools to be available and will look to organisations that are investing in them, rather than those who are using old systems with lots of manual processes. People want real-time information, available at the click of a button, rather than a traditional finance close and reporting after the event.
- So there’s no denying that technology is expected to impact several key finance challenges. And as you can see from this chart, we know that: Period and year end closes remain a top priority for finance professionals, but there’s increased emphasis on data governance, forecasting and planning, and also areas such as cyber security, and the ability to attract new talent. The results here reflect expectations that emerged in our CFO 3.0 2019 survey, when 94% of financial professionals said technology innovations and automation would play a crucial role in their future finance function. So looking at these in more detail, let's look at the whole period and year end close. At Sage we've been talking about the potential of the continuous close, so the close just happens without the need for manual intervention. The systems are always live and in real time. You can set up automation and workflows so things are just done for you because as finance leaders you need to have the tools to always have that real-time data whenever you need. You don't want to spend your time manually running reports - whether that's at month end, quarter end or year end - and then getting the data into Excel to manipulate it for those insights you need. If we look at something like forecasting and strategic planning for example, this is obviously really critical if we want our finance leaders to be those strategic, visionary leaders who have the real-time insight to help them predict and plan for what is going to happen in the future. Another one is corporate audits. They’re a given. No one in finance really likes them and you’re always concerned that you could get tripped up on that one piece of information which is missing until the auditor finds it, as they always do, but if you have the right finance systems in place, and you have the right people in the business using them, you’re pretty much covered. And with your data in the cloud with automated reports and dashboards, you can be ready for audits at the drop of a hat, and potentially even have a remote audit. What’s to stop you giving your auditors read only access to your systems from their offices? Now, we've already touched on talent, but it's worth going into a little more detail. It's critical to have the right tools and technology to attract the skills to provide real-time insights that businesses need today. For millennials and the like, you’re likely to struggle to find and retain talent if you haven't embraced digitalisation. People coming into organisations now are used to having the latest and greatest technology and the information there whenever they need it. If you haven’t got it, you’ll find it much harder to attract, and most of all retain, that talent you need.
- Going digital is a top priority for finance leaders. We asked about the priorities for the finance function in the coming two years, and again that first one is about digital transformation, the second one is about cutting costs, and the third is financing debt. It's really interesting that digital transformation is coming in higher than what you might expect to be the main focus for finance, with 56% saying digital was their top priority compared to say, 15%, now saying Brexit related issues are. What is also really interesting, as I discussed earlier, is that more than half of respondents say they experienced a rise in requests for technology enabled financial tools for other departments, so again it's not just about finance, there’s increasing demand everywhere for more up-to-date and real-time data.
- So are there some businesses which are more ready for the cloud than others? Well, yes. And we know that because you told us that in the survey. When we launched our CFO 3.0 survey about 63% of finance professionals felt their business wasn't yet culturally ready for more automation. That has dropped to 53% in the latest survey. There's obviously been a shift in the last few years on this. This next aspect of the report looks at the different attitudes of cloud ready versus non-cloud ready businesses. You can see for yourself from this graph how being cloud ready really boosts business confidence. If you haven't adopted cloud, you're not necessarily aware of where you’re being held back, but when you do adopt you can then start to see where those areas were. If you have things automated in the cloud it can make your life that much easier. And on top of that cloud ready leaders are much more likely to link digitalisation to achieving key business goals, things like better cyber security – the 49% you can see here – and also the better customer experience that you can see here. So finance leaders who are more cloud ready, having the tools already in place, can see the higher level of value that these tools bring to their businesses. This enables that human element of your business to focus more on being the strategic thinkers for you rather than just running those reports we’ve talked about.
- To just reinforce some of the points in the survey; despite recognising the link between technology and creating new value, and despite this being their top priority, a lot of finance professionals are still struggling to get their organisations to adopt the cloud and automation. If you look at the stats here, it's quite staggering that 64% say their business is not ready for cloud-based financial management systems. 53% say their business is not yet culturally ready for more automation, even though 40% say decision-makers in the business spend just as much time collecting and preparing data as they do analysing it. Among those unsure of their readiness to move to the cloud, the biggest obstacles are the perceived cost of technology (47%) and related training required (44%). This is a shift from previous surveys, where worries over data management and security were bigger concerns but it definitely suggests there is still work to do in changing mindsets and cultures. Also, companies that say they aren't cloud ready are more likely to say technology will impact tactical tasks, like year-end close 48% and data governance 47% whereas cloud ready companies were more likely to choose cyber security 49% and customers experience 38% as we saw a moment ago. This suggests cloud ready companies see the strategic value and risk mitigation that tech brings to the table.
- to link back to what I mentioned previously, I think the only way you can attract the skills and the drive you need to drive the business forward will be by having the right tools and systems in place to attract the right candidates. We know that it can be particularly challenging for finance leaders who currently lack digital skills and knowledge to navigate this journey successfully but the core skills needed in the finance function won't change, it's more about the list of additional skills and requirements, and that list is only going to get longer as finance teams go digital. If we look at some of these stats in a bit more detail, the chart on the left shows that advanced data analytics (40%) and digital skills (37%) are among the top three capabilities finance teams will need in the next two years, as well as the ability to interpret data and translate that into strategic plans. The right-hand chart shows you that digital skills are the second most difficult to find after stakeholder communication, and the first reference to finance specific skills (as in financial modelling and analytical capabilities) only comes in after these two. So the digital transformation journey may also be hindered by access to talent and there is a need to work out how these concerns and restrictions will be alleviated. Demand for those skills will only increase as digitalisation continues and businesses without them will ultimately get left behind, and a big part of achieving this digital transformation, especially in the finance function, is down to adopting cloud-based finance systems.
- So how can technology help you. In the survey 48% suggested that if companies push digitalisation forwards, it might make it easier for them to attract better candidates. If they have the investment in the right technology, they’ll get the right kind of people. Ultimately high-quality finance professionals don't want to be using outdated spreadsheets and be manually cutting and aggregating data as I've already touched upon. They want to do work that is tied to strategic understanding and decision-making. And also, as you start to get new finance graduates entering the market, they’ll expect to be working with the latest generation of financial tools, and seek out employers who provide that environment for them to work in. I talked earlier about some of the changes brought about by the pandemic. This is one area where it may have brought about some positive change. The enforced enablement of virtual work has made business leaders more comfortable with the idea of hiring remote teams, allowing them to recruit from much further afield. Even if we are seeing a push to return to what we will all have classed as normality, I think remote hybrid options will be a permanent part of the way we work in the future, which makes remote teams a reasonable recruitment strategy, even if there's a lot of noise in the press from the government at the moment about trying to get people back to the office.
- This leads me to a quote from Susan Cummins, the CFO of DCSL GuideSmiths; “the thought of having talent in Newcastle versus Spain, it doesn't really matter, as long as they have the skill sets you require.” And then those digital technologies that enabled this in the first place are now needed to enable you to get the best people working for you.
- Thank you very much. If you have any questions, please ask.