A staggering 96 percent of CFOs can’t be wrong, right? Let us explain.
A recent survey conducted by PYMNTS.com and VersaPay polled 400 chief financial officers (CFOs) to find out what they’re thinking about a wide range of timely and important business and technology issues.
From how much they use digital accounts payable (AP) processes, to invoice and payment processes they want to digitize, to the biggest obstacles they’re facing, this is a full-blown exploration of the current state of mind of CFOs.
We strongly encourage you to read the full report here, but here are some highlights:
This report guides you on how to speak the CFO’s lingo strategically. Learn powerful techniques to think through how automating AP syncs with your CFO’s strategic goals and find out how to come best prepared with answers to tough questions.
Broad support for digitizing accounting systems
A resounding message from the survey results is that digital transformation of finance functions is inevitable. Ninety-six percent of CFOs either have digitized or plan to digitize their AP and AR accounting functions in the next year. That same percentage made the move to better benefit their customers and vendors.
These are long-term strategic moves. According to the survey, 62 percent of CFOs say the pandemic has made them more focused on driving strategic issues with the potential to shape the long-term future of their organizations.
Priorities driving AP digitization
The survey revealed fascinating insights on what matters most to CFOs. More than half (54 percent) say they’re digitizing AR/AP processes to provide customers and vendors with more efficient payment processes.
That’s consistent with the results of an AvidXchange survey earlier this year of more than 500 U.S. business leaders. When asked if they agree that technologies would improve their team’s ability to work more efficiently during and after the pandemic, 84 percent said yes.
But there’s more to this efficiency story.
“The case for modernizing accounting systems has historically been based on metrics of efficiency, such as reductions in the use of paper, work hours and manual errors,” according to the survey report. “These remain important selling points, but recent events have demonstrated that going digital is about more than optimizing existing processes — it is also about enabling entirely new ones.”
Investments in digital invoices and payments
CFOs want to digitize two key invoice and payment functions:
- invoicing customers and vendors (61 percent have digitized, 11 percent plan to in the next year) and
- payment processing (51 percent have digitized, 24 percent plan to within the next year).
Growing use of digital payment types
Consistent with this, most CFOs say digitization has allowed them to increase their use of each of these types:
With electronic payments so pervasive, it’s no surprise 40 percent of CFOs say they’re paying less often by check.
Digitization means transformation
The survey also asks CFOs to share their views on digitizing their businesses and how that relates to their investments in transformation and automation. They were offered the option to label their technology investments in AP/AR as “transformation” or “automation.”
Their answers were intriguing. Fifty-seven percent chose transformation; 43 percent selected automation. Nearly 60 percent see transformation as a way to bring new capabilities to their operations.
Going a step further, the survey report assigns definitions for digital transformation and automation. Digital transformation uses digital tools to do things in new and better ways, whereas digital automation eliminates manual functions or processes and replaces them with digital ones.
“Our research shows a large share of executives view AP/AR digitization as a transformative process that offers new and better capabilities rather than just automating existing ones. This paradigm shift can be summed up as automation versus transformation, and our research shows a growing share of CFOs view digitization through the prism of the latter.”
This transformation/automation dynamic may seem a bit trivial and a matter of semantics, but it highlights how CFOs like to think of and describe their shifts to full-scale digitization these days. It’s marketing and strategic positioning at its core. But whatever the label, this is all about using digital technology to power their entire businesses – from marketing to supply chain to sales and everything else.
An industry-specific look at transformation vs. automation
The survey looked at how CFOs from four different industries view their strategic shifts as transformations or automation. Differences among industries are considerable.
|Finance & Insurance||46%||56%|
Whether transformation or automation, we’re still talking about digitizing business processes. And in that regard, the survey reveals that almost all CFOs are adopting digital workflows and operations.
A similar theme came through from AvidXchange’s survey of middle market companies. A large majority – 88 percent – said they’ve implemented new technologies within the past year and are engaged in rapid digital transformation because of the pandemic.
Obstacles preventing AP digitization
Despite the momentum towards digitizing AP and AR processes, CFOs face plenty of obstacles. More than two-thirds (70 percent) said payments volume delays worsened during the COVID-19 crisis.
“Payment delays loom large when considering the negative impacts of the previous year — a consequence of the difficult circumstances in which many firms found themselves during the early days of the crisis,” according to the report.
AP delays have been an ongoing stumbling block. The AvidXchange survey of business leaders found that 52 percent experienced invoice processing delays during the pandemic.
The same percentage (52 percent) said the process of securing payment approvals while working remotely stood out as the biggest reason for those delays.
But there’s some upside to this. Delays have caused changes in financial transaction processes “provided a motivational jolt to overhaul invoicing and payment practices that have long been mired in inefficiencies and manual and paper-based processes, including a heavy reliance on checks.”
Missing in-house expertise
According to the survey, nearly two-thirds (60 percent) of CFOs said the biggest obstacle to achieving digitalization is a lack of in-house expertise to lead their transformation projects.
In a different, yet similar challenge — 47 percent of CFOs are struggling with identifying the right technology or technology company to work with.
Luckily, there’s a solution for both. Work with AP automation companies that offer outstanding and ongoing customer education and technology support for buyers and suppliers so the transition to automation happens quickly and easily.
Lack of ERP integration
Another big challenge is the integration of financial systems. Nearly two-thirds (65 percent) of CFOs who work for smaller companies (those with revenues between $25 million and $100 million) cite the lack of fully integrated enterprise resource planning (ERP) platforms as impediments to digitization. That’s three times higher than large firms.
At the core of these problems is figuring out how to connect AP, AR, accounting and enterprise resource planning (ERP) software-based systems so they effectively “communicate” with each other. That would enable your company, for example, to send invoice and payment data back and forth quickly and reliably.
Problems with financial software integration have vexed the industry for several years. From our survey of business pros with the Institute of Finance & Management (IOFM), we learned only 35 percent of businesses leverage fully integrated systems to manage their financials.
This is a problem of complexity. More than three-quarters of finance teams rely on at least two, and sometimes four or more, applications to handle critical day-to-day processes. Without consolidation, productivity declines which is why solving these integration challenges matters so much.
Now that you’re up to speed on what CFOs are thinking, it may be time to consider how you can use this knowledge to boost your company’s performance. You might want to consider taking these three steps:
- Embrace the inevitable momentum towards digital “modernization” and “transformation” of AP accounting practices. It’s where the industry is headed, and nearly all CFOs are leading their companies towards digitization.
- You’ll be well on your way to higher productivity using AP automation to tackle your technology integration challenges. For your company to become truly digital and function smoothly with different types of software and other technologies, successful integrations couldn’t be more important.
- Focus on how digitization of your AP functions will help you perform tasks and serve customers more efficiently. The less work and time it takes to perform these tasks, the less money it will cost your business and the faster your services will be delivered. And that’ll make your customers happy.
The ultimate goal, of course, is to lift your business above the status quo and grow faster with new and more efficient operations fueled by technology.
Again, we strongly encourage you to read the full report from VersaPay and PYMNTS.com here.