Removing friction from the role of CFO

In recent years, the role of the chief finan­cial offi­cer has gone through a pro­found tran­si­tion, and now they find them­selves at the heart of the com­pa­ny, heav­i­ly involved in shap­ing strat­e­gy and con­trol­ling out­comes of a busi­ness. A recent study by KPMG showed that 75 per cent of chief exec­u­tives see the impor­tance of the role increas­ing faster than any oth­er mem­ber of the C‑suite.

The rapid evo­lu­tion of the CFO could be traced back to the finan­cial cri­sis of ten years ago, where in volatile and uncer­tain times a finan­cial mind that guid­ed a busi­ness through the tur­moil became an invalu­able asset to the com­pa­ny. From there, CFOs were pulled from behind the cur­tain and into the spot­light of being seen as not only a finance leader, but also a busi­ness leader.

Today, com­pa­nies are more glob­al­ly spread out and inter­con­nect­ed than ever. As they con­tin­ue to grow and expand into new mar­kets, this can increase the com­plex­i­ty of the chal­lenge a CFO faces, from exchange-rate volatil­i­ty to reg­u­la­to­ry pres­sures, increased risk and cost-cut­ting. A fur­ther headache is pro­vid­ed in deal­ing with the expec­ta­tions of the chief exec­u­tive to demon­strate more than numer­i­cal prowess to deliv­er above and beyond by giv­ing sup­port on strate­gic deci­sions.

With so much going on, it’s con­cern­ing that in a recent Ernst and Young CFO sur­vey 51 per cent of CFOs said that they can­not focus on strate­gic pri­or­i­ties because of increas­ing oper­a­tional respon­si­bil­i­ties. On top of this, finan­cial and admin­is­tra­tive process­es can remain inef­fi­cient and tedious, wast­ing time and ener­gy. Iden­ti­fy­ing these points of fric­tion is the first step towards remov­ing them and in many cas­es a tar­get­ed approach to automa­tion can reap real rewards.

Recent­ly, Tung­sten Net­work launched its inau­gur­al Fric­tion Index report to high­light how much time is spent on inef­fi­cient pay­ment prac­tices. It high­lights that the aver­age UK busi­ness los­es £88,725 a year through sup­ply chain inef­fi­cien­cies, which equates to almost 6,500 team hours wast­ed every year deal­ing with pay­ment issues. These include every­thing from chas­ing for pur­chase order num­bers to pro­cess­ing paper invoic­es and respond­ing to sup­pli­er inquiries. Under­stand­ably, giv­en the wast­ed mon­ey and man pow­er, 36 per cent of busi­ness­es said remov­ing fric­tion from the pay­ment process is a top pri­or­i­ty for 2017.

Tech­nol­o­gy can do away with these cum­ber­some and menial tasks, and instead boost pro­duc­tiv­i­ty and effi­cien­cy

The Fric­tion Index also explores which com­pa­nies are most affect­ed by fric­tion in the sup­ply chain. By cal­cu­lat­ing an index score out of 100 when analysing the cur­rent state of poten­tial caus­es of fric­tion and the pri­or­i­ty lev­el of remov­ing fric­tion from pro­cure-to-pay process­es, it was found that larg­er com­pa­nies were most affect­ed by fric­tion with a score of 101.0, com­pared with medi­um-sized (99.7) and small­er com­pa­nies (96.3).

Larg­er busi­ness­es could be more sus­cep­ti­ble to sup­ply chain fric­tion because of inter­na­tion­al sup­ply chains that can mean deal­ing with the addi­tion­al tar­iff and com­pli­ance issues which vary by coun­try. In the absence of automa­tion, such demands add to the bur­den on accounts payable depart­ments as they lose valu­able resource chas­ing after pay­ment and respond­ing to queries.

One way tech­nol­o­gy is help­ing to reduce this fric­tion is through automat­ing the process with elec­tron­ic invoic­ing. Dig­i­tal tech­nol­o­gy pro­vides a clear oppor­tu­ni­ty to stream­line these process­es and absorb the strains that are eat­ing into the finance team’s time. Tech­nol­o­gy can do away with these cum­ber­some and menial tasks, and instead boost pro­duc­tiv­i­ty and effi­cien­cy.

If busi­ness­es aren’t tied up chas­ing invoic­es or receiv­ing phone calls from sup­pli­ers, they have more time to ded­i­cate to expand­ing their glob­al oper­a­tions and dri­ving growth. If all the data from past invoic­es is eas­i­ly acces­si­ble, oppor­tu­ni­ties to iden­ti­fy vari­ances that tar­get effi­cien­cies are more eas­i­ly vis­i­ble. If paper is com­plete­ly elim­i­nat­ed from the process of pay­ing glob­al sup­pli­ers, the effi­cien­cy and accu­ra­cy of an accounts payable team is increased.

Dig­i­tal trans­for­ma­tion needs to come from the top, includ­ing the CFO. As high­light­ed in the recent Har­vard Busi­ness Review report, What is hold­ing back the dig­i­tal rev­o­lu­tion?, if senior exec­u­tives aren’t dri­ving the organisation’s devel­op­ments then dig­i­tal trans­for­ma­tion is unlike­ly to hap­pen or invest­ments could be made in the wrong area.

As enter­pris­es con­tin­ue to expand, so will the expec­ta­tion of what is required of the CFO. In this high­ly com­pet­i­tive busi­ness envi­ron­ment, there are no signs of this slow­ing and we will con­tin­ue to see them doing more with less. Ulti­mate­ly, this will see CFOs become more depen­dent on tech­nol­o­gy that can ease fric­tion and free up time, and they will be instru­men­tal in dri­ving tech­no­log­i­cal change and adop­tion.

Exploit­ing the dig­i­tal rev­o­lu­tion can bring busi­ness­es into a fric­tion­less world, where finance teams run effi­cient­ly, oper­ate with greater con­trol, and are allowed to focus their efforts on strate­gic and growth pri­or­i­ties. It is the intro­duc­tion of tech­nol­o­gy such as e‑invoicing that will enable CFOs to move beyond the num­bers and adapt quick­ly to meet the new demands of their role while help­ing to solve wider busi­ness chal­lenges.

To find out your business’s Fric­tion Score please vis­it FrictionFinder.com

Rick Hur­witz dis­cuss­es the impor­tance of remov­ing fric­tion and mov­ing to a dig­i­tal envi­ron­ment