The past few months have transformed the way finance teams work. The disruption caused by the coronavirus pandemic has forced businesses to adopt technological solutions at an accelerated rate, while many operate from their homes, tackling a list of new and ongoing issues remotely.
This new way of working has changed the way organisations collaborate internally and interact with their clients, but most noticeably, how businesses approach the adoption of new technology that can transform finance and accounting processes. This is reflected in a recent survey we conducted among C-suite executives and finance professionals globally. The results show that finance leaders and professionals are keen to use automation to improve processes such as financial planning, budgeting and forecasting (40%), financial reporting and filing (36%), as well as accounts receivable (29%), over the next 12 months.
With that in mind, here are five trends that I expect will shape finance and cash management within organisations this year.
1) The move to modern accounting
In 2021 it is no longer a question of if the accounting function should digitise but how best to do it. Remote working has become the new normal, so all departments, even those that have been traditionally office based, such as accounts receivable (AR), will be looking for ways to monitor the success of remote workers. This year will see the controllership invest in technology to turbocharge their digital transformation journeys and move to a modern accounting model that unifies all of a company’s systems and data into a single source, automating manual, repetitive activities that drain time and energy. This includes processes related to cash and AR, a critical subset of activities that need to be completed as part of the financial close.
2) Renewed focus on cash management
Global financial uncertainty means cash will continue to be king. New trading efforts could stall or slow down, so businesses will need to focus on collecting cash from overdue invoices. Companies are now shifting their focus from the income statement to the balance sheet to unlock working capital potential. In 2021, automated cash application will be vital for continuous cash forecasting, increased collections, optimised credit, and reduced time-to-cash. The addition of intelligent automation (IA) means that when conditions change, or when there are non-standard tasks to be done, IA learns and adapts to control the change.
3) Enhanced application of AI to collection analytics
The increase in remote work means employers can afford to be more flexible with staff working patterns. The ‘working day’ will become an outdated concept, as the increase in AI technology means cash-collection efforts can still be carried out even during downtime. AI will become increasingly intelligent as AI vendors will be able to use the lessons learnt from the Covid-19 crisis to model and predict future outcomes for AR teams in times of economic challenge. In other words, payment behavioural analytics can now be more refined. There is already demand for these types of solutions – our research shows that more than a third (35%) of finance leaders and professionals are interested in using AI or machine learning (ML) to predict customer payment patterns to help them more accurately forecast cash flow, and three in 10 (30%) think using AI or ML to better understand customer financial behaviours would help to lower the risk of non-payments.
With cash collection being pushed to the forefront of revenue generation efforts, customer-facing roles also have the potential to be redefined in order to create a cash culture. Compensation for sales and other roles will pivot from revenue to cash-focused goals and specific tools that drive collaboration and embed cash generation across the organisation will be a priority for all enterprises.
4) Financial close as a dependent and continuous feed to FP&A solutions
Over the past 12 months, CFOs have become more focused on financial stress-testing, analysis and forecasting and close to a third (32%) of our survey respondents said the pandemic has made their colleagues value real-time access to financial data more. This means that modern, continuous close technologies will be the hot topic in 2021. They will enable the flow of clean, reliable and timely data more readily into financial planning and analysis (FP&A) tools when the CFO demands information and scenario planning in hours, not just at month-end.
5) Modern intercompany automation and governance
Covid-19 has significantly affected the global marketplace with intensified scrutiny and closer controls over transfer pricing – the charges incurred in the sales of goods and services across internal legal entities. As a result, the ability to comply with documentation and country-by-country reporting requirements can be extremely time-consuming. It can lead to tax adjustments, penalties, interest charges, and even negative publicity. Multinational companies will start to more widely adopt a centralised intercompany model, to automate the initiation, reconciliation and settlement of all internal transactions and supporting details.
Looking forward to the year ahead
The past year has been a defining moment for disruptive technologies, especially those that can make a real difference in overcoming the challenges caused by the pandemic. While the crisis has exposed gaps in the day-to-day policies and processes that finance, accounting and treasury rely on, it has proved that innovation is key to not only staying ahead of the competition but also adapting to unforeseen circumstances.
Embedding automation within routine activities makes it possible to gain real-time financial intelligence, enabling the finance function to provide unprecedented value to the broader business. With 24/7 access to financial data, CFOs can obtain quick answers to important questions about cash flow, risk profiles and regulatory requirements, for example. As a result, they can offer consultancy on key business decisions such as potential expansion, a new cost strategy, or moving into new verticals. Rather than solely managing data, digital transformation enables finance to activate it, and uncover valuable insights that could ultimately determine the success of their business. If you haven’t already looked at how you can utilise technology to safeguard and grow your business, now is the time to do so.
