Digital Transformation in Corporate Finance

When it comes to business digitalization, digital transformation acts as an important driving force for corporate finance. Changes in an enterprise’s business operations often stem from customer requests and demands. To be more specific, it is the continuous effort of the enterprise to bring customers the best experience possible. These changes are often referred to as business transformations. So what role does finance play in business transformation?

Challenges businesses face in the financial sector:

Companies often encounter difficulties in streamlining operations and issuing detailed analysis reports on a timely basis. They also come across the need for in-depth, high-level analysis to support their business strategies.

The collection and transfer of information and data between diverse sources is a time-consuming process for the finance department in various businesses. The reason for the hassle is that different departments normally use separate, unconnected or external computing systems such as Excel to track and analyze revenue, costs, calculate and consolidate statistics to the corporation. Since data is becoming more and more complex, its origins are difficult to track and look up by data systems.

Requirements for corporate governance are increasingly high. Operations and decision-making require continuous, real-time, high-quality detailed analytical data to ensure efficiency and compliance. However, the fragmented connection and ineffectiveness of the system fail to satisfy the growing needs for information.

An escalating number of companies have initiated their process automation so far. Nevertheless, analytical reports from systems (such as ERP) only present past problems, which serves as a status report with barely no information or no forecast, whereas the real value for executive decisions lies in predicting the future.

In addition, extensive analytical reporting systems have become an essential daily tool for operations and can hardly be served by enterprise systems with old technologies or built in a fragmented fashion without any architecture and an outdated data structure.

Digital transformation in the financial field, as a result, is vital for businesses to have a solid foundation for sustainable development.

Digital transformation in the financial sector: Solutions and Benefits

The transition towards process and solution optimization based on advanced technologies such as Artificial Intelligence (AI), Cloud Computing (Cloud), etc., is dominating and rapidly changing the corporate finance sector, delivering significant advances in efficiency, automation and decision-making. This is considered a revolution in the way the financial apparatus operates, and consequently bringing great benefits.

1. Boost efficiency and automate the finance department:

Manual, paper-based processes are being replaced by automated workflows and smart systems, increasing efficiency and reducing operating costs.

AI technology empowers the application of various automation tools such as checking and processing invoices, automatically filtering, importing and reconciling data, automating compliance processes and preparing financial reports. AI-powered instruments are capable of extracting, analyzing and aggregating data from diverse sources, generating financial statements and ensuring compliance with regulatory requirements.

AI can also automate financial reconciliation processes, lessening manual effort and guaranteeing accurate financial records. Specifically, AI algorithms match transactions from multiple sources, identify discrepancies, and automatically reconcile accounts (e.g., automatically trace and reconcile payment transactions with bank ledgers, automatically compare supplier invoices with orders and warehouse receipts, automatically check and identify receipts with sales invoices, etc.), saving time and minimizing errors.

In addition, AI is able to forecast revenues in a smart fashion by analyzing historical sales data, customer behavior, seasonality, and market trends. AI algorithms identify patterns and predict future revenue with greater accuracy, allowing businesses to make informed resource allocation decisions.

Furthermore, AI supports data-driven investment decisions by providing insights into investments, market trends, asset performance and risk factors. Specifically, AI algorithms analyze large amounts of financial data to spot potential investment opportunities and evaluate investment risks.

AI helps enhance working capital management by optimizing cash flow, inventory levels, and accounts receivable. What’s more, AI-powered tools can analyze financial data and pinpoint areas for improvement, aiding in the better utilization of working capital and reduction in financial costs.

These new technologies minimize manual work and streamline operations, freeing up finance staff to focus on strategic initiatives.

2. Enhance data-based decision making:

Today, AI-powered applications are revolutionizing financial planning and forecasting by allowing businesses to analyze large amounts of real-time and historical data to create accurate and predictive financial models. The finance department has real-time access to comprehensive, accurate data anytime, anywhere to make informed decisions based on the insights gained. These models can help companies predict future financial trends, identify potential risks, and make effective strategic decisions. Cloud-based analytics tools and platforms enable data integration and visualization, providing a panoramic view of financial performance and assisting in pinning down areas for enhancement.

Improve risk management and compliance: AI and machine learning algorithms are increasingly used to analyze financial data and locate potential risks, such as fraud or non-compliance with regulations. AI is transforming risk management practices by enabling businesses to more effectively identify, assess and mitigate financial risks. Thanks to its ability in analyzing transaction patterns, recognizing anomalies and flagging potential fraudulent activities in real time, this technology is playing a vital role in fraud analytics, forecasting and detection. Such predictive analytics approach helps prevent financial loss and protect sensitive data. AI algorithms can analyze vast amounts of data to uncover hidden patterns and correlations, provide insights into potential risks, enable effective, proactive risk mitigation strategies and ensure regulatory compliance.

Streamline spending and procurement management: Digital transformation facilitates streamlined procurement processes through automated purchase orders, electronic invoices, and supplier management and evaluation system. This improves visibility into spending patterns, optimizes inventory management and cuts down procurement costs. Procure-to-Pay (P2P) processes are rationalized. Specifically, AI standardizes P2P cycles by automating tasks such as invoice processing, payment approval, and supplier management and evaluation. The automation helps mitigate manual errors, speed up payment cycles, and improve overall supply chain efficiency.

Strengthen relationships with investors: Interactive channels and real-time reporting systems provide investors and stakeholders with a transparent and accessible view of financial performance. This fosters the development of stronger relationships and smoothen the way for better communication with stakeholders.

3. Enrich customer financial experience:

Digital solutions give the means to personalized customer portals and self-service options for account management, payments and inquiries. This improves customer convenience and satisfaction while reducing administrative costs for businesses. Besides, digital transformation using AI can help companies personalize the provision of financial solutions and services to customers. AI-powered tools can analyze customer data to understand their financial needs, behavior, preferences and risk tolerance, thereby offering appropriate financial services and enhance customer satisfaction.

Increase flexibility and scalability: Cloud-based solutions enable flexible and scalable financial operations, which allows enterprises to adapt to changes in market conditions and business needs, while supporting their growth and expansion plans.

4. Strengthen collaboration and communication:

Digital platforms and communication tools facilitate seamless collaboration between finance teams, departments and external stakeholders. The improved communication promotes better alignment, faster decision making, and increased efficiency.

5. Reinforce security and data protection:

Strong cybersecurity measures and data encryption technology are essential components of digital transformation in the financial sector. They protect sensitive financial information and ensure compliance with data privacy regulations.Sustainable financial practices: Digital solutions enable businesses to track and manage their environmental impact, promoting sustainable financial practices, which brings down resource consumption, lowers carbon emissions and improve corporate social responsibility.

Overall, digital transformation in corporate finance is a powerful driver for growth, efficiency and competitive advantages. By leveraging digital technology and innovative solutions, a finance department can unlock new opportunities, enhance its decision and strategy-making capabilities, contributing to the whole success of the organization.

Author Nguyen Thi Phuong

Senior Consultant, Business Sector

FPT Information System Company

*Reference sources: articles on the websites of Oracle, SAP, Google’s chat-Bard and some other documents.

• https://www.oracle.com/
• https://www.oracle.com/erp/financials/
• https://www.sap.com/sea/products/erp/grow/features/finance.html?campaigncode=CRM-YA22-INT-1517075&source=ppc-ph-google_ads-search&gad_source=1&gclid=Cj0KCQiAj_CrBhD-ARIsAIiMxT-m4-ZDu-ORvR4Zb-hbYa9IumCdidwL8DNCyj2_G5gAAkU3i2GvbSgaAtcIEALw_wcB&gclsrc=aw.ds
• Reference sources: articles on the websites of Oracle, SAP, Google’s chat-Bard and some other documents.https://www.oracle.com/https://www.oracle.com/erp/financials/https://www.sap.com/sea/products/erp/grow/features/finance.html?campaigncode=CRM-YA22-INT-1517075&source=ppc-ph-google_ads-search&gad_source=1&gclid=Cj0KCQiAj_CrBhD-ARIsAIiMxT-m4-ZDu-ORvR4Zb-hbYa9IumCdidwL8DNCyj2_G5gAAkU3i2GvbSgaAtcIEALw_wcB&gclsrc=aw.ds