Businesses of today are striving to digitally transform their accounting and finance departments to unlock efficiency and business growth opportunities.
Instead of getting all hands on deck, digital transformation of finance departments reduces manual touches, relieving your finance teams from manual data entry to improve the accuracy and productivity of operations. However, the question arises, how to digitally transform the finance department, and how it affects the finance teams. This blog answers this question and explores how to transform the finance department digitally and how it benefits small and medium businesses (SMBs).
Understanding Digital Transformation
There are many ways to transform a business digitally. It depends on the industry, size of a company, and needs of a business. Generally, a digital transformation is meant to introduce digital technology into a business which can be transforming processes, workflows, and more.
Transforming a business digitally reduces the cost of operations because the work is handled through digital means, modifying the existing processes. This translates into greater accuracy in processes and operations, increased productivity, and a reduction in errors that are otherwise caused by manual inputs.
In the context of the finance industry, digital transformation means relying on digital means for transactions, recordkeeping, and enhancing the customer experience, all while reducing repetitive tasks. For instance, getting paid in electronic funds transfers instead of cash and paper-based checks. Implementing digital transformation in finance reduces or eliminates paperwork and provides a scalable solution for businesses.
Key Areas in the Finance Department for Digital Transformation
Embracing digital transformation in the finance department comes in four different dimensions. Here are the areas to digitally transform your finance department.
1. Digital Transformation of Financial Processes
Many SMBs opt for transforming their financial processes to achieve greater efficiency of operations and reduce the cost of operations that otherwise would necessitate manual inputs. Transforming the processes may include implementing a new system to manage processes online or using computer systems instead of paper-based systems for invoicing and recordkeeping.
Implementing an accounts receivable automation solution is the best practice to transform your financial processes, as it streamlines your invoice-to-cash process. This frees SMB finance teams from manually invoicing, collecting payments, and reminding customers to pay their invoices, thereby saving resources and reducing operational costs.
2. Transformation of Business Model
A business model defines how a business operates. If a company faces a loss of customers and intense competition, transforming the business model can be a reliable solution. Business model transformation involves changing operational strategies within the industry to enhance business value.
This business model transformation not only helps you stay competitive but also enables you to meet the needs of existing and potential customers who might otherwise turn to competitors for new, in-demand products. Conversely, businesses that ignore industry changes may face significant losses, as losing customers can lead to financial decline.
3. Domain Transformation
Many businesses undergo domain transformation to extend their business offerings to a new dimension to customers. The purpose of domain transformation is to suit the changing needs of the customers while maintaining your business model.
The common domain transformation approach is choosing a digital presence considering customer demand and industry trends. Some common examples include Walmart, Tesco, and Aldi who started as wholesalers and now cater to customers online using a digital mode to meet industry trends.
4. Cultural and Organizational Transformation
Businesses may choose to transform their culture and organizational practices to improve performance. Cultural transformation aligns with digital transformation to introduce new approaches to business while reducing resistance to change. These cultural changes ensure that employees embrace transformation by educating them and redefining their roles. Additionally, opening lines of communication provides a clear vision of expectations across the business.
Positive Outcomes of Finance Digital Transformation
Implementing digital solutions to transform your business operations comes with an array of benefits for your business and finance teams. Here are key benefits you can enjoy with finance digital transformation.
1. Greater Operational Efficiency
From digital invoicing to electronic transactions, businesses can reduce the friction in their financial processes. Digital transformation not only prevents the finance teams from manual data entry but also accelerates the cash flow processes through workflow automation and receiving payments electronically. While businesses can collect ACH payments and credit card payments, customers are facilitated with multiple payment options to make online payments without relying on the bank to process checks.
2. Organized System with Data Analytics
Transforming your finance department with digital solutions will relieve you from more piles of paperwork as all the processes of invoicing, payment collections, and reconciliation are streamlined. This reduces the operational costs that otherwise would necessitate manual work from the finance team, increasing the accuracy of financial records and empowering the finance managers with data analytics to make data-driven decisions.
3. Reduction of Human Errors
Replacing your processes with digital means will prevent you from many types of human errors including simple mistakes, skill-based errors, rule-based errors, and knowledge-based errors. Leveraging accurate data and information, you can make accurate decisions that otherwise would be challenging with manual systems.
4. Positive Customer Experiences
Digital transformation will also change the customer’s payment experiences by offering them multiple options to pay their invoices. Customers can gain access to payment portals to view their invoices, toggle the auto-pay feature for seamless payments, and get in touch with their vendors through online chat or live chat feature. Addressing customer queries will be easier with options to open new tickets on the customer’s payment portal.
5. Increased Revenue Growth
Transformation of the finance department will unlock revenue growth opportunities for SMBs which otherwise was challenging with manual systems. SMBs can prevent revenue leakage by optimizing their repetitive costs, reducing the need for manual touches, and directing finance teams to focus on consumer experiences and other strategic objectives. Faster collection of payments reduces the days sales outstanding (DSO) and unlocks the company’s cash flow. With cash in hand, businesses can settle their short-term debt, fund their payroll, and plan their investments for revenue growth.
To Wrap Up
Today’s digital business landscape necessitates digital transformation to stay competitive. This blog highlighted ways to transform a business and how SMBs can digitally transform their finance departments to unlock growth. Transforming financial processes offers numerous benefits to SMBs. It enhances invoice-to-cash workflows, reduces errors, and minimizes manual touches, improving operational efficiency and accuracy. This leads to greater overall efficiency, digital insights into financial performance, positive customer experiences, and a reduction in profit leakage. The accuracy of data analytics can help SMBs make well-informed decisions and plan their cash flow for business growth opportunities.
