January 24, 2020

Digital Transformation Brings Overdue Innovation to Accounting - CFO Magazine

By Jason Bloomberg December 10, 2019 15 0

The storied history of accounting has undergone three disruptive innovations. From its invention in ancient Mesopotamia more than 7,000 years ago to the debut of double-entry accounting in the Middle Ages, the interval between disruptions clocked in at a mind-boggling eight millennia.

The next innovation, chartered accountancy, arrived a mere 800 years or so later, in Victorian Scotland in the mid-19th century. And then? Well, nothing really, with only the promotion of accounting to a profession marking its progress.

Perhaps it’s time for accounting to take its next big leap. Today’s computing is certainly part of the story, as is the world of modern finance. But in the end, today it’s still about bean-counting: as always, the focus is on getting the numbers right.

The big question, therefore, is whether there is a disruption on the horizon that can shift accounting from a mere numbers game to a position of strategic value for the organization.

The answer is yes. Of course, given the centuries-long plodding pace of innovation in accounting, one might ask why now? What is it about the current business and technology landscape that promises to bring new disruption to accounting?

And the answer to that — with advance apologies for using such a massively hyped term — is digital transformation. Strip away the massive hype and what’s left is indeed disruptive: an end-to-end, customer-driven rework of the business that leverages technology to bring new value to all the people who interact with them.

Addressing shifting customer priorities is rightly the central focus of such transformations, although customers aren’t the whole story. Employees are every bit as important part of digital transformation. If an organization treats its personnel the same as it always has, it’s unlikely to be able to transform itself.

This focus on people is what promises to disrupt accounting. Remember, for 10 millennia its focus has been on the numbers. Getting the numbers right will always be important, of course. But today, how we get the numbers right — that is, how the people that support the accounting function in their organizations get their work done — is every bit as important.

The CFO’s Priorities

To use an appropriate accounting metaphor, CFOs’ priorities have always been below and above the line.

As to the former, CFOs value accuracy, efficiency, and transparency. They are simply not doing their jobs unless they excel in those areas — and yet, none of them are strategic to the enterprise.

Above the line, CFOs earn their place in the C-suite by focusing on strategic priorities: improving market share, delighting customers, and maximizing overall profitability. For today’s progressive organizations, digital transformation is essential to achieving such core strategic drivers.

To achieve both below-the-line and above-the-line goals, today’s CFOs must center their efforts on automation, integration, and simplicity. Accounting is simply too complex to depend on manual effort. Instead, automation drives efficiency and accuracy while simultaneously shifting the finance department’s day-to-day work from routine tasks to more valuable ones.

However, automation doesn’t work in a vacuum. It must work within the context of the ERP technologies in place, as well as any other software relevant to the duties of the CFO’s office. In other words, integration is essential to the modern CFO’s remit.

Automation and integration won’t facilitate the strategic goals of digital transformation, though, if the organization doesn’t also achieve simplicity. After all, the reason accounting requires disruption in the first place is because it is becoming too complicated — and with complexity come inefficiencies, inaccuracies, and in the end, poor business value.

The Solution 

This confluence of increased complexity, digital transformation priorities, and the changing context for the day-to-day work of finance personnel means we’re in need of real innovation in the finance department.

We need solutions that support day-to-day finance workflows, while making jobs easier, simpler, and more efficient. For example, the Finance Close Automation app offered by cloud computing company ServiceNow* offers exemplifies how companies are using technology to streamline the step-by-step processes finance personnel must execute, from closing the books to reconciliation to audits.

Automation both improves the lives of the finance team and frees CFOs to focus on strategic tasks. No longer does the overweening complexity of the finance function need to absorb the bulk of CFOs’ attention. Instead, they can work with the rest of the C-suite to achieve the goals of digital transformation.

Remember that such transformation requires an end-to-end rethink of how the business gets its work done. Rethinking the accounting function by reworking the duties of the finance team is a perfect example.

The last thing CFOs should want is to be the “department of no.” They should want to be the department of transformation, and technology can help make that goal a reality.

Jason Bloomberg is president of Intellyx, an analysis and advisory firm focused on digital transformation. 

* ServiceNow is an Intellyx customer.

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