The digital cfo: 10 key steps to success

Covid-19 has forced companies to accelerate their digitisation efforts. An example? We are all working from home now, we start our day staring at a dashboard and we organise virtual meetings and coffee breaks. We are also witnessing how robots and AI algorithms can simplify our lives by autonomously analysing large volumes of data and tackling complex problems. So, long live digitisation!

Everyone realises that further digitisation is necessary because it allows us to do things smarter, faster and cheaper, thus boosting our productivity. However, a recent CFO study shows that the productivity of most finance departments has decreased by 60% to 80% since the start of the pandemic.

There are many reasons that may explain this decline in productivity. For example, working from home with children is not ideal, and the lack of social contact and relaxation leads to excessive fatigue or stress. But there is more... After all, this pandemic has been the first real test of how far finance departments have progressed in their digital transformation. Everything before this seems like nothing but a feel-good show. So we can learn a lot from successful digital CFOs. In doing so, there are 10 key steps:

1. Adapt your recruitment policy
CFOs who want to focus on digitisation should adapt their recruitment and retention policies. After all, a shortage of employees with technological competencies will have a negative impact on the finance department's decision-making and data processing.

2. Make reporting more user-friendly
Finance departments are overwhelmed with data. The way in which these data are presented or interpreted is often subject to specific format requirements or standards. Therefore, employees who do not have a financial background often consider financial reports too technical or boring and therefore stop reading them. Digital CFOs rethink the way data is presented and make reports more intuitive and user-friendly.

3. AI is here to stay
In the years ahead, AI will thoroughly reshape finance departments. For example, AI technology will automate many repetitive tasks and assist the CFO in making complex decisions. On condition, of course, that the CFO understands the technology and invests in the necessary training and infrastructure. Some key questions CFOs can ask themselves include, "How can I ensure that my data infrastructure and data processes support AI?", "Which profiles and training courses should we invest in?", and "Which tasks can be performed by smart algorithms?".

4. Rediscover finance analytics
Digital CFOs are much more proactive in exploring how they can assist other departments such as R&D, logistics, IT, marketing and production with in-depth analyses and strategic decisions. A proactive CFO can also counteract the proliferation of reports and interpretations.

5. The cloud is here to stay too
Before the Covid-19 crisis many CFOs showed an interest in the cloud, but ultimately they did not take the leap because the investment was too high or they were worried about privacy and security risks. Those same CFOs are now realising that traditional ERP systems have become overloaded since employees have been working from home, and certain applications and data are not accessible remotely. The shift to the cloud is therefore a necessary one. It allows the finance department to act much more swiftly and flexibly.

6. Reporting on demand
Reporting expectations have evolved, which increases the pressure on the finance department to report in real time. External interest groups also demand more real-time access to data and advanced analyses. CFOs need to understand how to turn these expectations into reality: “Which technologies can help them to report on demand?”, “Which guarantees can be given when financial and non-financial data are published in real-time?” and finally “What data ultimately qualify for real-time reporting?”

7. Digital transformation creates new risks
Now that more and more companies, together with their customers, suppliers and the government, have become part of a digital ecosystem, they also increasingly have to deal with cybercrime such as malware, ransomware (e.g. Picanol and Asco), identity fraud, crypto hacking or system fraud. The digital CFO works closely with the CIO or the security team to assess the extent to which corporate assets are exposed to these cyber risks, the costs that may be associated with them, and how to report on this both internally and externally.

8. The CFO assists the AI algorithm
The AI algorithm may assist the CFO in taking complex decisions, but it also depends on the CFO's input. For example, the digital CFO ensures that the algorithm can learn from qualitative and reliable data. Moreover, the CFO helps with the interpretation of the AI results, especially when those results are counter-intuitive, and promotes ethical and sustainable use of AI technology.

9. Innovation and partnerships
In their digital journey, many CFOs are informed by external technology players. For example, countless companies are offering RPA and accounting robots. However, experience shows that many of these solutions are not true solutions, they may create many other problems, and they are often wrongly sold under the guise of AI technology. That is why it is better to look for a technology partner that puts the customer first rather than the product, one that is inspiring and quotes realistic targets. Digital CFOs also stimulate a culture of innovation internally. After all, a great deal of AI technology is open-source and allows the finance department to work independently. A digital CFO knows only too well that there is no such thing as a standard AI solution. Every business context is different. Insight and a better knowledge of AI also helps the CFO to better estimate what the technology can do (and where it is still lacking)!

10. CFO Leadership
As CFOs are increasingly interested in technology such as cloud computing, AI and other analytical solutions, they must be careful not to let the "hard" form of leadership dominate. In any case, CFOs often have the reputation of being 'tough cookies' because they make decisions based on figures. In order to maintain a good balance, the digital CFO also needs 'soft' leadership qualities. In the near future, creativity, adaptability, integrity, modesty, commitment and empathy will be just as important for successfully leading the finance department through the digital age.

Kristof Stouthuysen is Associate Professor of Management Accounting at Vlerick Business School and KU Leuven. At Vlerick Business School he leads the Centre for Financial Leadership and Digital Transformation. For several few years he has been focusing on the use of AI by CFOs and in financial positions.