We’re so excited to have you join us as a speaker at our AptConnect event next week! Can you give us a quick overview of how KPMG views digital finance and the digitization of business as a whole?
David: Very much looking forward to speaking at AptConnect. I think it’s important for finance teams to come together to learn and be inspired. Many organizations are having the digital finance conversation but often we find that the conversations that are happening are not visionary enough. I think bringing people together can help with that.
KPMG has developed a thought leadership perspective related to ‘the 21st century enterprise.’ Included in our perspective is the view that all companies will become significantly more technology enabled in the future. Companies that do not adopt a technology-first approach will really struggle to stand the test of time and differentiate from their competitors, both old and new. For many organizations, this shift to tech-first has driven multi-million-dollar investments in front office and client-facing apps, to migrate CRM systems and HR systems to the cloud, for example. But finance departments are commonly left behind. The reasons for this vary but it’s resulting in finance departments that are holding the business back.
Why do you think finance departments are lagging other departments when it comes to modernization?
David: Finance departments often struggle to receive investment required for real change. This is because the business does not see them as adding value – they are a cost center that they want to spend the least on. Therefore, the money that could be spent on finance projects is spent elsewhere, in areas where they think they will get more return. Marketing or client facing applications, for example. But the problem with this view is that they are looking at the jobs finance teams do today, not what they will need to do in the future.
Do you see the majority of finance teams fighting for this investment? Do they understand the power they could have with the right tools?
David: We see various different scenarios in the market. In many cases finance teams can be resistant to change or get complacent – as in, “we haven’t received anything so we just won’t ask again.” We do see instances where the entire C-Suite, not just the CFO, are starting to realize that they can’t be a digital company with a dinosaur finance department. It’s only as strong as the weakest link. Especially in industries like banking where they’ve been forced to be more open to change and innovation.
So, say a finance department can secure investment for a digital finance transformation – what areas would you say need particular attention, or present the most challenges?
David: These are complex projects so there are a lot of areas to choose from, but I think I have to start with defining the project vision. Most finance teams who claim they have a vision, actually do not. They have an understanding of what they think they might want to do and it’s not visionary at all. You can’t start by saying, ‘what processes I need to fix.’ That’s the wrong question. It’s immediate and doesn’t represent the needs or desires of the company 3 or 5 or 10 years out. You should be asking ‘what problems will I need to solve in the future and what technology do I need to achieve that?’ It is interesting that we see an increase in new CFOs coming from non-traditional places like actuaries, engineers, data scientists. They are bringing a new perspective to finance departments, increasing their focus beyond accounting standards. Across the board we see most CFO’s starting to operate more like second CEOs. I think this will help with the vision problem.
Another area would have to be data. Finance has valuable data today, but I think it’s inadequate. The level of analysis that is possible is hindered by the lack of depth of data available and the fact that it’s so aggregated. When a question is asked, it requires a week’s worth of gathering to answer. I think the data issue is one of the largest problems in a transformation program, but there are so many benefits if you do it the right way. Having a single, central source of data and trusted data stores – that is absolutely critical to be successful. But finance departments really have to invest and control data at the beginning of the process.
Are you seeing increasing interest in RPA, AI and Blockchain? How soon do you think teams will be using these technologies in everyday work? (If not already?)
David: I think good examples are out there but we’re still not seeing companies take an aspirational enough approach and asking, ‘what could we do’ vs ‘what we need to do.’ Most organizations today are using RPA to make broker processes more efficient. It is not addressing the root-cause that processes are sub-optimal as they evolved over time. Too many times, RPA is automating process that might not even be needed anymore. I worry about RPA becoming a worse problem than Excel reporting for Finance departments.
The most important thing is to leverage the right technologies to create “natural” automation based on what each Finance technology is designed to deliver. Using the right platforms for right purpose you can automate 80% or more of todays’ finance activities. Once you leverage RPA to fill the gaps, you can get to 90%+. Then you can layer AI on top to really drive value out of Finance. Lastly, technologies like Blockchain allow for the more reliable and trusted capturing of data across multiple entities.
This is where you can maximize opportunities for efficiency, agility and foresight by offering intelligent forecasting to other departments within your business to help drive value and profitable decisions making.
How about cloud adoption by finance? Is there still a nervousness around putting financial data in the cloud?
David: There’s certainly been a lot of change the last few years. I think we’re at the bottom of a hockey stick in terms of adoption. I expect that we’ll see a significant increase in adoption in coming years. Initially there was a hesitancy on the finance side to move which always perplexed me. HR data has been in the cloud for a long time – does finance really have more sensitive data than HR? Moving to the cloud is accepted as a necessity and advantage so the resistance is declining, but there are still varying levels of maturity as to what it means and understanding the true value it can offer. Finance are still educating themselves but are moving past the point of saying ‘we can’t.’
How important is it for finance to undertake a digital transformation?
David: A lot of Finance organizations haven’t invested appropriately in Finance technologies but are getting to a point where they must. It’s imperative because business is moving faster than ever, and finance cannot be the handcuffs that are holding back the business. They must be able to respond quickly and dynamically and for most companies they cannot do that within their current environment – it has to change.
Thank you David!