The CFO’s Guide to Digital Transformation

Whether they asked for this responsibility or not, CFOs are now the corporate face of org-wide transformation.

According to Microsoft, CFOs have gone from chief “number cruncher” to strategic partner in a short time. And, today, it’s the big finance boss that makes transformations happen.

Gartner experts agree, and say it’s the CFO’s responsibility to set the organization’s digital strategy and ambition. It’s their job to understand what outcomes the company is trying to achieve. That way, they can ensure all decisions and investments support those outcomes.

The CFO sits in the sweet spot where finance meets strategic planning. They’re perfectly positioned to fuel growth and meaningful, sustained change through digital investments.

In this guide, we’ll discuss six ways digital transformation has changed the CFO role, and what that means for companies moving forward.

1. Finance Fuels Innovation

According to McKinsey many department leaders still view the CFO and finance team as barriers to innovation. However, that perception doesn’t necessarily reflect reality.

Data from the PwC 2021 US Pulse Survey showed that CFOs are increasingly seeing serious growth opportunities in the digital economy. Research revealed that 46% predicted high growth in this area, while 36% said they expected to see modest growth.

McKinsey analysts say that the innovation process is all about resource allocation. Companies need to identify high-impact DX projects, set clear goals for realizing specific outcomes, and measure progress toward those objectives.

It only follows that the CFO must function as an “innovation ally.”

For instance, building innovation goals into the company’s overall growth strategy allows the CFO to work with other senior leaders and come up with a plan for exploring new opportunities beyond minor process improvements.

Finance leaders can also speed up the budgeting process, by moving resources to critical areas as needed, rather than operating on quarterly or annual timelines.

2. Real-Time Data Informs Financial Decisions

According to a 2020 survey, 64% of CFOs believe their most valuable asset is the finance and accounting skills they bring to the table, while 67% of CEOs say it’s actually the CFO’s strategic insights they value most.

Michael Magaro, a Senior VP at Workday, told PwC that finance needs to move faster than ever. It’s finance that needs to be the company’s trusted source for real-time data.

He explained that company planning works best when everyone – marketing, sales, HR, and so on – is working from the same data sources.

Because finance is in this position where they have this high-level understanding of each department’s goals – and that all of those goals link back to the core financials – finance is best equipped to deliver the real-time insights the organization needs to reach its objectives.

BARC research found that investments in self-service planning tools are on the rise, as finance leaders scramble to adapt to a more dynamic environment. Advanced scenario planning, real-time forecasting, and AI simulation are quickly replacing traditional spreadsheets.

Magaro says that his company launched Workday Adaptive Planning, which gathers inputs from the entire organization, allowing the finance to dynamically reallocate resources as opportunities emerge and needs change.

3. Accelerate Digital Transformation with AI & Automation

Automation & AI will transform finance. That is, if CFOs can manage to think outside-of-the-box.

Microsoft predicts CFOs will continue to prioritize investments in AI and automation capabilities that will free people from repetitive finance tasks.

As it stands, about 80% of finance leaders report that at least 5% of their workflows leverage robotic process automation (RPA) or other simple automations. 90% of those respondents say the primary benefit of automation is reducing the amount of time spent on time-consuming manual activities, while just 32% say it’s the cost-savings these tools have unlocked.

While these capabilities do drive efficiency, accuracy, and agility, they don’t deliver any real competitive advantage.

CFOs must instead invest in technologies designed to tackle more complex tasks that actively generate value. Though, it’s worth noting that this process may require a bit of soul searching.

Deloitte researchers say, automating operations has implications for the role of finance moving forward — and as a result, finance teams will need to rethink what it means to provide value.

This shift will require finance teams to deliver high-quality, unique insights and top-tier customer service. Meaning, CFOs will also need to allocate resources for building dedicated business centers and enabling cross-functional knowledge sharing and collaboration.

4. Manage & Respond to Complex Risks

CFOs need to be able to quickly size up complex risks — cyber threats, climate change, supply chain disruptions, COVID— and gauge their potential impact on the bottom line.

In today’s volatile environment, striking the right balance is high-stakes for CFOs —and finance leaders must gain a deep understanding of how spending connects to org-wide digital strategies and the desired outcomes for those strategies.

According to Gartner, CFOs aren’t solely responsible for their company’s digital strategies.
But, they do play a critical role in weighting strategies toward one side or another. And – they use factors like risk appetite, potential impact, costs, etc. to guide decisions about where to invest.

Gartner researchers say that CFOs must balance process optimization with large-scale transformations in order to ensure their org achieves critical business outcomes – efficiency gains, revenue growth, or whatever else.

That said, with a recession looming over the horizon, finance leaders may need to make some tough decisions about how to weather the next storm. While it’s tempting to cut things like upskilling programs or IT investments, successful organizations focus on efficiency gains and future resilience.

5. Tackle Skills Gaps and Shortages

Reskilling, upskilling, and preparing employees for future unknowns are critical imperatives for CFOs.

A 2022 PwC survey found that 55% of CFOs consider attracting and retaining talent a serious business risk — as finance leaders struggle to overcome “great resignation” challenges that put businesses in a vulnerable position.

Moving forward, the CFO will be instrumental when it comes to prioritizing capability-building and investing in development, AI augmentation, and other solutions that will help their organizations avoid skills gaps in the future.

It’s on the CFO to ensure that critical investments in less tangible areas like professional development don’t get slashed when people freak out about the economy or some other disruptive force.

Strategic investments in AI can help companies get more from smaller teams or less experienced staff. As an example, food flavoring company McCormick used AI to supplement the knowledge of junior food scientists. With a helping hand from AI, new hires were able to perform at the same level as senior scientists with 20+ years on the job.

We should note that AI isn’t being used to replace senior scientists — it’s more of a supervised partner, there to help leaders accelerate training and get more value from new hires.

6. Transform Workforce Strategies

The modern CFO has a data-driven, collaborative mindset and offers strategic insights that help the entire organization work together to gain (and sustain) a competitive advantage.

It only follows that more and more CFOs are taking the reins when it comes to remote, hybrid, and return-to-office strategies.

They’re looking at the bottom-line impact of these new work structures and analyzing the costs and benefits that come with the territory.

For example, organizations are looking for insights that might tell them how much they stand to save on office space by going remote. Or, what kind of financial impact they can expect by letting employees work from home some or all of the time.

The CFO’s unique perspective can help business leaders weigh pros and cons of each model and make decisions that are rooted in reality.

Consider the pervasive idea among business leaders that working in an office is always better for the company. Employees, however, feel differently. Many workers say they’ve been happier and more productive working from home.

The CFO can look at the actual numbers and create different forecasts based on different workforce models — remote vs. in-office vs. hybrid. And, from there, they can bring more nuance and context to a discussion largely based on assumptions, emotions, and individual preferences.

Additionally, CFOs can help orgs evaluate potential tech investments that support remote collaboration — and measure the impact of those investments against various metrics — revenue, customer experience, employee productivity, and so on.

Final Thoughts

The main takeaway here is this: the CFO’s role in the organization is changing fast. It’s no longer enough to make top-down financial decisions about strategy and spending.

While many finance leaders are aware that things need to change, making that happen comes with its fair share of challenges.

A partner like Velosio can help you navigate those challenges by leveraging the entire Microsoft ecosystem to unify and modernize your entire business — and unlock access to game-changing insights that enable finance pros to take action toward high-level goals.

Book a consultation to learn how our digital transformation services can help your business grow.