Article credit: Sage 

Digital transformation is an important talking point for businesses right now. The message that financial services must innovate is not new.

As a leader in wealth and asset management, you’ll already understand that new ways of working are being encouraged, digital tools and capabilities can break silos, and that you should take advantage of technological change (if you haven’t already) to make your business more efficient.

When coronavirus (COVID-19) hit, it acted like a storm that forced many businesses to accelerate their path to the digital future that was already on the horizon.

It’s been a big reminder that change is constant – a reality you can’t ignore. And to cope with change, you’ll need to adopt digital transformation.

What is digital transformation?

Market research and consulting firm SMB Group is defines digital transformation as the way businesses use digital technologies to create or modify existing business processes, practices, models, culture, and customer experiences to meet changing business and market dynamics.

Digital innovation has changed customer expectations.

Today, we’re surrounded by digital experiences that allow businesses to provide a better quality service – such as round-the-clock support and ecommerce.

With examples of innovation in the form of artificial intelligence (AI), machine learning, and the Internet of Things, many industries are undergoing sweeping changes.

What digital transformation means for your business

Digital transformation is about identifying how you must adapt your business to drive customer loyalty and maintain a competitive edge in the digital age.

Instead of thinking about specific applications , you need to have a digital transformation strategy that’s fit for purpose in preparing your business digitally.

It would help if you had purposeful thinking about using technology to engage your customers and employees better, and how to meet changing business and market conditions.

Digital transformation is more than asking: “How can we do the things we do today, only faster?”.

Instead, you need to ask: “How do we need to adapt our business processes to keep pace with new market realities, and how does our technology strategy need to change to support this?”

Why digital transformation is essential

Digital innovation allows you to keep pace, meaning you can keep pace with customer expectations, competitors, the pressure to streamline operations, and unpredictable market conditions.

Due to the rise of financial technology, you can take advantage of a financial services landscape that has evolved, giving rise to an era of open application programming interface (APIs) that allow your systems to integrate with new platforms and applications.

In wealth and asset management, digital transformation is vital to help you take advantage of the sharing economy – the exchange of assets or services between consumers, both peer-to-peer (P2P) and business-to-business (B2B).

In the past, you’d have to purchase software that you installed on your servers.

With the rise of the sharing economy, you can now use accounting software that doesn’t require a massive upfront investment and is accessible online from anywhere.

The sharing economy allows for more effective and efficient ways of delivering value beyond traditional methods, creating an opportunity to increase wallet share by democratising wealth management through the adoption of digital capabilities.

Want to embrace digital transformation? Take these 4 steps

Know where you want your business to be in the next few years as far as digital transformation goes? It helps to create a strategic plan to get you there.

Maybe you’ll want to start with automating your three most repetitive and manual tasks, which will result in the biggest impact on your business – such as reconciliations and closes.

Your digital transformation would be less about replacing traditional systems and more about incorporating technology that can provide better services for all stakeholders.

There’s no one-size-fits-all path when it comes to digital transformation. But here are some useful tips to help you along the way…

1. Evaluate how the ground is shifting and prioritise business goals

Understand what’s changing in your business, with competitors, and with customers – for example, a competitor may have come in with a new business model.

Look at your specific issues and problem areas, and set goals to sustain and grow your business.

2. Collaborate and communicate

Get input early from stakeholders, so you’re not missing a vital piece of the puzzle.

It would be best if you had executive buy-in, but you also need support from employees who will need to adapt to new business practices and tech solutions.

Also, get feedback from customers and partners.

3. Assess your technology requirements

Is your technology helping you achieve your business goals, or is it holding you back?

You should look for solutions that automate repetitive processes and provides the information and analysis you need to make better decisions.

You might need advisers who can assist you in understanding what you need for your business and what costs might be involved.

4. Think of Business solutions as your on-ramp to innovation

Accounting solutions are flexible, and providers embed new technologies such as artificial intelligence (AI) and machine learning into their solutions.

Where financial management software can help

If you are still working with manual processes, you can take advantage of new technologies, tools and innovations. Look at technology that can:

• Improve the customer experience and provide more streamlined sales and marketing communications.
• Increase personalisation through customer support tools such as robo-advisors
• Provide data collection and analytical capabilities
• Achieve a single 360-degree view of the customer.

In wealth management, you should look at financial management software that allows you to achieve a single 360-degree view of the customer, allowing you to connect with existing clients and attract new prospects at a faster pace.

In your financial management software, look at three capabilities that can help your business to move forward productively.

• Continuous accounting: Using software to automate routine, but necessary, accounting activities – with the ultimate aim of eliminating ‘the close’.
• Continuous trust: Making use of software to test and validate data flowing through your financial system. This can support real-time visibility with real-time trust.
• Continuous insight: Freeing up the finance team from heavily manual work in compliance, audits, and the month-end close, so they can instead focus on more strategic initiatives.

Conclusion on digital transformation

Business success increasingly depends on putting technology to work to better support your goals.

Now is the time to think, plan, and build a strategy to transform workflows and processes with modern technology solutions that will empower your business with the capacities and agility necessary for success in the digital age.

Article credit: Sage 

Business owners might feel like they’re always putting out fires. But with better insight into their operations and processes, there won’t be any fires for you to fight.

You can do this by complementing traditional financial performance metrics with proactive, indicative, and granular performance metrics.

This will show you how you’re tracking against your goals and what you need to do if you’re off target.

The three main indicative metrics are:

• Client retention
• Cash flow
• Working capital

In this article, you’ll discover more about these three metrics and how you can use them to take action across your business.

Client retention

We’re in the age of the customer, which means key performance indicators (KPIs) should include client metrics.

Often, these metrics are a good indication of revenue performance and cash flow, so it’s important you understand client behavior.

Take client churn as an example. A high churn rate could signal business contraction – and replacing lost customers costs more than just replacing lost revenue. You also need to factor in marketing costs to attract new customers.

Customer satisfaction surveys are useful but, as a traditional metric, the results come in long after the opportunity to resolve a potential issue has passed.

To identify the clients that are at risk of churn and to turn your focus to client retention, consider these steps:

Identify your top tier clients

Analyse your client revenue, client lifetime value and client profitability. And remember that you’ll get a different value depending on how you group these elements.

Clients that generated the most revenue this month, for example, may not be the clients with the highest lifetime value.

But since they’re regular customers, their loyalty could contribute to factors such as brand awareness and year-on-year growth.

Analyse proactive metrics

What percentage of work has not been invoiced for? What percentage of projects are at risk? How many invoices were rejected?

These behavioral insights are immensely valuable and can inform your response.

Take action

The clients that are most likely to churn should get most of your attention. Do you need to prioritise a client project to mitigate risk? Do you need to place an order to keep a client on track?

Share this information with your customer service team and come up with an action plan to change how you service these clients and deliver on the experience you promised them.

Adopt the insights throughout your business

To reduce the risk of churn going forward, you might need to make some changes in your business. Perhaps you need to segment clients into groups in your accounting software, for example, by product or industry.

Data-driven insights show you which clients are at risk of leaving. This allows you and your team to focus on nurturing those relationships.

You’ll also have insight into which team members are serving these clients, what projects are underway, and where clients are in the client lifecycle, so you can respond to potential issues faster.

Cash flow

Poor cash flow management is one of the biggest causes of failure among small to medium-sized businesses.

So, having insights into cash flow is crucial if you want to grow your business.

This means having the ability to predict fluctuations in cash flow in response to shifting dynamics in your business. It means building scenarios around in-progress projects, jobs you still need to start, opportunities that are closing soon, and more.

When you understand how all this impacts your cash flow, you’ll have better visibility into your business’s financial health.

Here are a few steps to help you get those insights:

Measure the right things

A high percentage of credit sales might seem profitable, for example, but the cash hasn’t actually come into your business yet, which could impact free cash flow.

To get a sense of cash coming into your business, look at revenue from in-progress jobs and revenue from jobs that you still need to start.

Know your inventory-to-sales ratio. Are you keeping too much stock on hand relative to sales?

Build cash flow scenarios

How can you improve your accounts receivable with upcoming invoices and payment terms? The more historical and trend data you analyse, the better your predictions will be.

Take action

If in-progress jobs are bringing in good revenue, consider prioritising other work. If you have a lot of revenue outstanding, think about renegotiating payment terms with clients.

Encourage your sales team to tie up current opportunities before building the prospect pipeline.

Working capital

You can also increase cash flow by improving the efficiency ratios that impact your working capital, which gives an overview of your current situation.

Working capital is necessary to help you pay off short-term debt or expenses, but having too much working capital means some of your assets are not being used optimally now or for the long term.

Having a good grasp of your accounts receivable is crucial to monitoring and measuring working capital.

How long do clients take to pay, on average? How quickly do your best clients pay versus your slowest-paying ones? Are your invoices segmented by project type?

When your accounts receivable processes are optimised, it’s easier to improve your working capital using automated billing and invoicing, understanding outstanding payments and how to restructure payment terms, and knowing when to request payment in person.

Follow these steps to avoid working capital issues:

Measure the right things

Decrease your accounts receivable by improving your collection practices, for example. Know how long it takes for an invoice to get paid on average.

And know how long it takes to invoice and process a payment according to your payment terms.

Identify issues

Implement performance goals for the above metrics, based on appropriate values for your business.

For example, you might not want the ‘average days sales outstanding’ to exceed your average payment terms by more than half.

So, if your payment terms are 30 days, and customers pay, on average, within 45 days, this will be within your performance goals.

Identifying trends can also help to prevent issues. For example, you might notice that a certain group of clients are typically late payers.

Or clients become late payers after they order a product that has a more complex onboarding process. There might be internal processes that you can improve to avoid this.

Take action

Technology and more efficient processes can improve your accounts receivable, debt collection, and credit management practices. Also consider renegotiating payment terms to optimise your working capital.

Editor’s note: This article was first published in December 2019 and has been updated for relevance.

Article credit: Sage 

Business is evolving. Technology, customer expectations, the roles your employees play and the workplace tools you use have all transformed. There’s no turning back.

In finance and accounting, you’re seeing the impact of artificial intelligence (AI) and automation to enhance connections between customers and employees.

Today’s financial departments have technology that allows them to become highly tuned time machines, which can streak forward and back through a wealth of data at a moment’s notice.

With the evolution of accounting and finance has come the evolution of the CFO.

The early CFO, or CFO 1.0, was the historian. Next came CFO 2.0 – the real-time analyst who could catch issues with real-time dashboards.

But now is the opportunity to become CFO 3.0 – a leader who can see into the future.

You will be familiar with using a rear-view mirror to provide business information – looking behind yourself while attempting to steer forward. With data and predictive analytics, you can understand data to look ahead.

The role of digital transformation

Driven by new technology such as automation, combined with increasing customer expectations, your business needs the right technology foundation to undergo digital transformation, where tech is integrated and co-ordinated across the entire business ecosystem.

In growing businesses, the first investments are often made in financial management, building out the technology you as a CFO will need for success.

However, this also means the business requires you to be front and center when it comes to leading change through digital transformation.

This puts you in the ideal position to evolve from CFO 1.0 and CFO 2.0 to CFO 3.0.

You can put what you need in place to move beyond your traditional role and lead your business to new heights – you may end up driving business transformation beyond finance boundaries.

CFO 3.0 means you’re the visionary.

While today you’re focused on the past and present, tomorrow you’ll need to make use of vast amounts of data that is available in our digitised world. This will help you predict the future of your business, uncover hidden opportunities and close information gaps.

According to a new piece of research by Sage, where 500 senior in-house financial decision makers were surveyed, that shift is already happening.

The report, CFO 3.0: Digital transformation beyond financial management, revealed that more than two thirds of CFOs (70%) said they have full responsibility for digital transformation.

How is the finance function changing?

In a digital world, e-commerce is critical to integrating front and back office processes, with our research revealing that 65% of finance leaders believe e-commerce is the only way to maintain control in the face of digitisation.

You just have to look at retail today and the impact online shopping has had on retailers both old and new.

To achieve top-level visibility of business performance, your finance teams must have the right digital tools and flexibility to use them. Only then can you dovetail with the other sides of business and collaborate for growth.

Digitisation means you can have advanced analytics to improve decision-making, metrics for real-time financial information, and the insight you need into your operations to uncover growth opportunities.

Challenges that CFOs and finance leaders face

Of course, owning the digitisation journey and becoming the data gatekeeper is a big responsibility. This means the role of the CFO role is expanding.

As well as data and technology, you need to manage employee and stakeholder expectations.

Embrace this responsibility and you can boost the whole business. A failure to grasp the opportunity leaves you at risk of being overtaken by competitors.

To deliver data-driven insights, you’re going to need to upskill your team – more than three quarters (78%) of financial decision makers view technology literacy skills as essential to the future of the finance department.

There is still a digitisation skill gap to bridge – two thirds of CFOs (70%) still make decisions based on gut feeling rather than data.

As the gatekeeper of data, fraud, cyber misuse and data privacy are increasingly falling under your remit, and that of the finance department.

While this sounds like more work, remember that emerging technology can decrease the risk of data breaches.

You should look at skills training, whether it’s for you or other members of your team.

The changing dynamics of your job mean you need to keep learning to have the business, analytical and data skills you and your team require.

How automation is making an impact

When it comes to how the finance department functions, it’s administration that hampers productivity – 70% of CFOs agree that admin has a significant effect on team productivity.

New technology can drive improvements in efficiency. And naturally in the process of leading digital change, you will need to invest in the right financial management platform to move money and data within your business.

It’s here where automation can cut the hours you spend each week on collecting and preparing data.

It shifts the burden of dealing with onerous, repetitive and simple tasks from you and your finance team to machines, which will help to ensure increased efficiency and quality.

More than nine in 10 CFOs (94%) agree that financial management technology will play a crucial role in tomorrow’s finance function.

Beyond benefiting your finance department, it can also lay a foundation for the better use of critical data and insights across the business.

Conclusion on CFO 3.0

Technology can help you build a finance function that can withstand future challenges. 

You’ll need to lead your finance department in a world awash with data, so focus on honing management processes though data flow, data governance and analytical insight.

There’s no getting away from the challenges.

But the future is bright because you’re receptive to new technology and the digital transformation required – three quarters (76%) of businesses are already in the process of transforming to automate most of their processes.

And critically, 86% say automation has already improved business productivity.

With technology to support your endeavors, you have the space to become a CFO 3.0 – a visionary who can uncover the hidden opportunities and close gaps through data and insights.

With that in mind, you can embrace your role in delivering and shaping the strategy of your business through digital transformation, something that’s much more rewarding than simply being seen as the person pulling the company’s numbers together.

Article credit: Sage 

The words ‘accounting’ and ‘bookkeeping’ were once used interchangeably. But their respective meanings are drifting apart.

As technology rapidly and unblinkingly learns how to perform routine accounting tasks, the traditional accounting value proposition of bookkeeping is being commoditised. Now, accountants, and the businesses they work for, must find a new purpose; instead of ‘balancing the books’, they must find what is valuable within them to the benefit of their clients.

The status quo under threat

Not everyone has acknowledged the winds of change in the accounting industry.

In the 2020 Practice of Now (PoN) survey, 46% of the accountants that participated still considered themselves as reporting focused number-crunchers. It’s a concerning admission, both in its scale and character.

Processing power will shortly assume total responsibility for counting beans and the like. And that’s a good thing – it means that the accounting profession must shoulder a higher purpose, an ingredient that could not only make the profession more attractive for talented, ambitious individuals, but also work to uplift the image of the industry as a whole.

What does that higher purpose look like? It’s advisory. It’s sophisticated. It’s personal.

Interpreting the numbers

Another intriguing finding from the PoN survey was that 82% of accounting firms are willing to recruit people from non-accounting backgrounds. It’s a trend that is being driven by the evolving needs and expectations of their clients; they don’t just want the numbers; they want to know what they mean, and how they can leverage them.

The disciplines of marketing, cashflow management, human resources, people management, and growth modelling/forecasting are increasingly expected to be within the wheelhouse of those offering ‘accounting’ services.

To be sure, understanding the numbers is a prerequisite for interpreting them. It follows that it’s the accountants who have the best foundation to deliver valuable insight across their clients’ businesses.

But it means that the professional bodies that shape the emerging accounting professionals must redesign their courses to include teachings on technology, business intelligence, data science, machine learning, project management, sales, communication, and emotional intelligence. That’s not an exhaustive list, either. Luckily accountants aren’t scared of hard work!

This applies equally to experienced professionals; they must upskill themselves in these areas in order to serve the new, advisory-based purpose that their profession is quickly pivoting towards.

Embrace software

At AXCELERATE, most of our clients are accelerating the use of technology in their businesses. As a result, we have to understand and be able to assimilate with, the software they’re using. The expectation – which is gaining momentum across the industry – is that we’ll be able to integrate with their systems when delivering our accounting or payroll services.

Our business, and others like it, must continually invest the time and money necessary to deliver sophisticated accounting services that leverage up-to-date technologies. Some of the advances we’ve made include:

• automated, recurring invoicing;
• paperless accounting;
• using Sage and SQL business intelligence tools;
• automated debtor’s management;
• using APIs to eliminate duplicate entries; and
• remote client interfacing and delivery of services.

We’re all familiar with the saying that what worked yesterday might not work tomorrow. And it rings true when it comes to the use of technology. It will not suffice to make an upgrade here and there; rather, those delivering accounting services must adopt a continuous learning attitude and get comfortable implementing the necessary changes as their clients’ demands evolve.

Software and technology are inextricable parts of that equation.

Yes, soft skills matter

When you move from handing over a product to delivering a service – the journey the accounting profession is currently taking – a different set of skills is required to be successful. The first step toward becoming a trusted business advisor (the new purpose) is to fully understand both the people you’re engaging with, and the challenges they face within their businesses.

You can achieve neither of those effectively without practicing empathy.

Ask thoughtful questions. Listen carefully to the answers. Show them that you understand their pain points. At this point, there’s a common misconception that you need especially gifted creatives to come up with the solutions. Sure, some lateral thinking is required. But really, the key to finding a solution is to understand their challenges as well as they do.

Once you and your team have a potential solution for your client, communicating it effectively is non-negotiable – many great ideas are lost in badly worded proposals or disjointed presentations.

If they like your service/solution, the next soft skill that must come to the fore is sensitivity toward customer service. Do what you say you will, and then some more. Remember the finer details, like birthdays or what their personal interests are. Take the time to tell them, specifically, why you enjoy working with them. Those small touches mean everything.

Little bites, but keep eating

Change is only daunting when we look at where we are versus where we need to be, and then let our imaginations run amok about everything it’s going to take to bridge that gap. It’s a surefire approach to keep you stationary.

Choose not to overwhelm yourself by breaking down the bigger changes you need to make into bite-sized pieces. This will help you start the process sooner. And, once you get a few wins under your belt, you’ll find the necessary momentum to achieve real, sustainable change.

From the perspective of the individual accountant, developing a habit of continuous learning has never been more important. The rate of change that the accounting profession is currently subject to is unlikely to relent; more likely to steepen. To be in a position to consistently add value to both the firm you work for, and the clients they service, you’ll need an ingrained ability to adapt and upskill yourself into perpetuity.