Information Technology and Finance Departments
I certainly won’t strike you as a master of wisdom by sharing with you that information technology and finance departments utterly need to walk hand in hand, so the good health of an organization can be sustained. The goal of any company is growth, and the finance department is at the heart of the realization or not of this ambition. Thus, there is immense pressure on the CFO. At the end of the day, without numbers to support and justify the decision to pursue a given strategy, a corporation cannot function properly.
In this day and age, with technologies improving exponentially, companies constantly need to be on the look-out for IT innovations. They must embrace this strict discipline, so they can improve the efficiency of their day-to-day activities and, simultaneously, maximize the implementation and execution of strategies aimed at gaining substantial market shares to become increasingly attractive to investors of all sorts. In other words, a finance strategy must go hand in hand with an IT strategy. Discarding the latter would be a great mistake. Finance needs technology.
According to Gartner, worldwide IT spending will reach $3.7 trillion in 2018. Finance automation is a catalyst for growth and continuous process improvement. The adequate solution can leverage the ever-increasing proliferation of data to create competitive advantage. In what follows, I will avoid being redundant with what you all already know about the benefits of technology on finance (ERP systems, customized reporting, etc.). Instead, I choose to focus on the newer cutting-edge technologies, and how they impact finance departments.
Artificial Intelligence and Finance Departments
What does Artificial Intelligence mean to finance departments? AI is the ability an application has to perceive its environment and take actions that maximize its chance of successfully achieving its goals. In other words, it’s no different from having complex algorithms analyze terabytes and terabytes of data to identify patterns that are assumed to likely repeat. It’s a bit like data mining but on steroids.
The immediate impact on finance teams is the elimination of repetitive and time-consuming tasks, which can now be automated thanks to AI and performed at an accelerated pace. Ultimately, AI drives massive improvements in terms of efficiency. Thus, finance teams are able to focus on what they do best, which is to manage finances, instead of wasting time and resources on tedious and manual tasks that are prone to human errors.
There is another side of the coin. There are roles that aren’t needed any longer. For example, business analysts and data modelers suddenly see their skills and responsibilities replaced by a piece of code that literally spits out conclusions in a split second. Also, anyone whose daily task consists in keying-in data manually immediately becomes obsolete. The machine and the associated level of automation do the work on their behalf. This unavoidable human obsolescence and its replacement by technology provide organizations with the ability to decrease their workforce and therefore cut human resources spends. Almost all studies actually suggest that the entire finance function will be entirely automated by AI exclusively or a human-AI hybrid. And this makes sense, since this automation is allowing finance departments to complete larger and more complicated tasks with fewer hours of (human-related) investment.
Blockchain and Finance Departments
Blockchain technology will transform how financial transactions are recorded, reconciled, and reported. The system is decentralized and distributed. Authority is shared among all participants (in its permissioned version, which is adequate for B2B transactions). When a data is pushed to the Blockchain, it is validated through the solving of a complex algorithm, and once it is stored inside a block it cannot be overwritten, which brings a level of security no centralized system can match. Moreover, the system audits itself every ten or so minutes to continue validating all data stored inside each node of the network. Thanks to smart contracts, Blockchain technology affords trading partners to experience an unmatched level of automation that eliminates errors (smart contracts and their inherent data are immutable) and consequently significantly lowers costs.
Today, there are solely small-scale projects that are running on a Blockchain network. The reason is a lack or even a total absence of regulation concerning the technology. At the moment, large businesses are either assessing what benefits the technology can bring them or starting to develop proofs of concepts. The existence of Blockchain platforms well suited for B2B exchanges such as Ethereum allow major organizations to partner in the development of those concepts.
Blockchain enthusiasts consider it’s the next-generation business process improvement software. On the other side of the spectrum, there are quite a few detractors, whose opinion is motivated by fear (of seeing their profession disappear), by the unknown (no regulation in place), by loss of control (immutability aspect of the Blockchain), among other considerations. But, at the end of the day this new technology certainly strengthens the Finance industry’s need for change, especially in regard to reliable information, accurate reports, and secure processes.
The Bright Future of Finance Departments
Finance departments can leverage directly the benefits those new cutting-edge technologies like AI and Blockchain offer. Thanks to AI and Blockchain, they are able to maximize the effectiveness of their operations and, at the same time, affirm the importance of their contribution to the overall operations of the organization they serve. Naturally, making the choice of implementing new technologies carries a significant cost, and at the moment only the largest ones can afford the investment. Having said that, there are solutions out there (ERP systems and process automation tools, among others) that include an optional “entry-level” AI feature. For a low cost, mid-size organizations are able to experience at a high level the benefits of a potent technology.