The digitalization following MTD – a challenge or opportunity for finance?
For a long time, finance departments have been lagging behind areas like marketing and sales; Areas that seem more data-efficient due to their digital processes, analytics, and insights sharing. Now, it is finally finance’s turn to seize the benefits of technology. And we mean finally. Too many companies are maintaining a process that is long and inconsistent.
Finance has prioritized investment in digital processes in all other areas but themselves. As a result, many finance professionals are:
- Left guessing on details
- Creating inefficiencies and additional risks in the process
- Not implementing complete transparency into tasks and data
AN OPPORTUNITY FOR IMPROVEMENT OF DATA QUALITY
The last two years have shown that digital solutions are essential for maintaining productivity in a company and answering to higher and more complex demands. And this is why we in finance and auditing can use Making Tax Digital (MTD) as an excellent reason and driver to start the digital journey now.
But whether you as a finance leader are embracing the change or not, the point is that digitalization is here to stay. The current development is evolutionary rather than disruptive. And most of us understand this and supports digitalization projects across the business; however, somehow, the finance function overlooks itself in this process.
It is especially in uncertain and changing times we experience an increasing need for the data insight of finance leaders. We have seen it with MTD, Covid, and increasing consumer demands - all external factors and drivers pushing us towards digitalization. The effect these unforeseen challenges had had on business processes and the data journey in finance is significant. It is more important than ever to present forecasts and recommendations that solve current and future problems to develop your business. And this demands close attention to data quality.
Data is one of the most crucial components in the industry thriving today, especially finance. It is a well-known fact that businesses generate significant amounts of data in their daily operations. Running a business without data and analytics is like walking in the dark with no light.
IT IS TIME TO PRIORITIZE THE DIGITALIZATION OF FINANCE
When operating with an increasing amount of data, the need for several different software and systems increases, as does the demand for faster financial insights based on high-quality data. The massive amount of data we need to analyze and integrate quickly turns into too much. The amount we produce pile up and become unmanageable. That is unless we change our manual processes. How do we do this? The key is simple tools and an eye for data integration. If you go through your data flow process now, the question is, how much of it is automated and integrated?
Today, it is not only compliance driving the digitalization process. Across sectors, there is a common understanding that the finance department holds vital information for business success. Right now, we see the most significant gain for the finance function, with clear benefits, like:
- Innovative ways to manage cash flow
- Ensure the financial stability
- Monitor payment authorizations in a cost-effective way
- Translate raw data into valuable insights
- Gain real-life data to eliminate risks right away
New digital technology allows you to automate manual work and data flows, but more importantly, it ensures standardized processes and has predefined control points, so errors are discovered early on. A strength of especially cloud-based software is that it enables you to integrate your systems quickly. In groups with subsidiaries in several countries and various ERP systems, using one software to standardize and automate the consolidation ensures everyone in your team, across borders, uses the same methodology in the review or preparation.
Many CFOs and other finance professionals admit to accepting errors in their VAT reporting. And even more, find errors every time finance have to translate the data for the record to report. This can be why automation is (and should be) a crucial driver for many organizations in the reporting process, including consolidation, visualization, and repetitive tasks. It all comes down to the possibility of saving time and gaining insight to reveal strategic information instead of error-checking.
Choose tools and systems that integrate well
With an endless sea of software and systems to manage the entire workflow, it’s key to keep in mind your actual needs and current pain points when selecting software for your finance ecosystem. Consider:
- Does it integrate well with other systems?
- Is it simple to use?
- Will it remove manual processes?
The consolidation process is one of the processes in finance that is most challenging for finance professionals, no matter region or country, because of inconsistent data integration issues. The complex process, prone to constant error-checking, is often demanding and time-consuming. Furthermore, it involves insecurities about the number of validations across the group and its subsidiaries. Of course, there is the element of strict compliance and governing regulations to think of too. It only escalates the complexity, as the auditor separates financial statements from subsidiaries, mergers and acquisitions, foreign currency translations, and intercompany transactions. This is one process that you should digitalize. There is a better use of the finance team’s expertise, project management skills, and agile mindset elsewhere.
Data integration and choice of digital ecosystems are not straightforward approaches. It is a long-term investment, which demands structural changes. But the reality is that there is no way around digitalization and data integration if you want to stay relevant as a finance professional.
And instead, look at Making Tax Digital as just an opportunity to digitalize other parts of the reporting process, eradicate errors, and use the data for insights instead of ‘just’ reporting. The real focus of digitalization should be around the choice of software and its integration possibilities. Our job is to demand a digital ecosystem that integrates easily between software, systems, and processes without developing unnecessarily duplicated data.