Insight

Update - Digital Finance Use Cases - December 2021

IMA India recently undertook a collaborative research project with IBM India to study the nature and extent of technology transformation within Finance. For years, Finance has led the digital agenda at organisations, often being the first to leverage state-of-the-art technologies. The disruption caused by the pandemic has forced many businesses to further accelerate tech adoption. Emerging technologies such as artificial intelligence (AI), machine learning (ML), predictive analytics (PA) and Robotic Process Automation (RPA) generate tangible benefits such as cost savings, lower HR counts and reduced output-delivery time. This paper highlights some practices in the end-use of such technology in the Finance function.

Enterprise Data Management

Increasingly, organisations are shifting from traditional data management, which involves long man-hours, to more efficient, technology-led processes such as RPA, which automates routine, rule-based tasks. A major Indian tyre manufacturer deployed RPA to create database profiles for new vendors and update information on existing vendors – something that typically involves intense manual interventions. Unilever has digitised its pan-India distribution network to such an extent that it can detect stock-outs before they occur at a particular store. Similarly, Continental uses EDI (Electronic Data Interchange) for data transfers between the company and its customers/vendors. Bajaj Auto uses it to connect vendors, who can operate on a self-certification basis to get a complete pass-through for material-transportation vehicles. The system is linked to GPS to optimise material-resource planning.

Automating routine tasks to generate new efficiencies… …and digitising distribution networks to optimise stocking

Payment Management

Another key application of technology is in the payments process, which many companies are automating on both the vendor and the customer side. Marico uses a bot for end-to-end process management. It cross-references bank balances with the general ledger, creating journal entries in the system and flagging any errors. From pre-Covid levels of 55-60%, Godrej Consumer Products (GCPL) now processes ~70% of its invoices using bots. Meanwhile, Nayara Energy had automated its Procure-to-Pay (P2P) systems, allowing it to cater to everything from tendering and vendor on-boarding to procurement. It has invested in a vendor-invoice management system that automates processing, resulting in a first pass-through rate of ~80% and a reduction in processing time from 35 days to just 4 days. The processed invoices are auctioned, generating additional returns of ~5% above the overnight rate.

GCPL now processes 70% of its invoices using bots, up from pre-Covid levels of 55-60%

GST Filing and Reconciliation

Tax-related automation solutions that optimise costs, prevent credit leakages and reduce tax compliance risks are great value-enablers. Beumer India has a bot to claim GST credit on employee airline travel. The bot reads through airline invoices, extracts the relevant GST information and tallies it with the organisation’s data while identifying any potential credit losses. This generates significant savings each year. Meanwhile, Cipla has fully automated its GSTR filings for both inward and outward data. The data is auto-reconciled and uploaded from the ERP on to the GSTN portal with the help of robotics. This has enabled a more streamlined process while improving GST compliance.

Claiming GST credit, and automating filings

Supply Chain Management

Data-driven analytics can power superior business performance. Typically, Finance sits on troves of data that, with the right tools, can help uncover new sources of value and efficiencies. At Marico , Finance uses advanced exception analytics to improve controls and optimise value in terms of procurement, supply chain and sales spends. The broad spectrum of information – from high-level KPIs to granular process data – helps identify and mitigate a host of risks/exceptions, creating new efficiencies and optimising cost.

Using analytics to uncover new efficiencies…

…and to streamline pricing

Pricing

Predictive analytics can also help optimise pricing. GCPL uses such tools to predict revenue growth and determine competitive pricing. Its data lake captures past and current trends, and internal as well as external data, on a host of indicators such as competitor pricing, sales and market share, highlighting trends and relative pricing. The Future Group uses digitisation to improve pricing outcomes. Specific to its food segment, it uses a platform (‘Agribid’) that aids vendor selection and onboarding through a reverse-auction process. So far, this has yielded a 200-bps improvement in gross margins.

New ways to record and reconcile transactions – and even to predict revenue and profitability

Transaction Processing

Increasingly, companies are using blockchain to record, reconcile and report financial transactions. IBM also uses it for indirect-tax filing and regulatory compliance. In India, for instance, it distributes hardware that is imported from Mexico and Singapore. Blockchain helps reconcile multiple documentation sources and ensure the integrity of transactions. Meanwhile, Wipro – which uses varying revenue-recognition norms, and different billing rates for employees that are engaged in some 10,000 projects – uses AI to predict revenue. A home-grown solution has even allowed it to identify the variables that impact the bottom line, with 99.8% accuracy levels.

New ways to record and reconcile transactions – and even to predict revenue and profitability

Enterprise Performance Management (EPM)

Finally, companies are working to standardise their reporting and analysis, and in parallel, they are leveraging visualisation technologies to create more intuitive and visually-appealing reports. At one level, this helps ensure that reports are predictive in nature, and not just descriptive, as they used to be in the past. It also enables ‘What if?’ analysis, which allows for faster decision-making in response to shifting business imperatives. At another level, it makes it easier for concerned stakeholders across the company to comprehend and make full use of the analysis. For example, Cipla’s ‘Project Insight’ – a digital-builder project within Finance that aims to deliver a real-time, impactful, end-to-end integrated view of all the key metrics – standardises reporting, automates MIS generation and allows for predictive analytics.

Making reports more predictive, easier to absorb and simpler to understand – across the organisation

Not everything should – or need be – done in-house

On each of these use-cases, rather than doing everything in-house, many Finance organisations have chosen to augment their internal teams by tying-up with a strategic partner. Here, the choice of partner becomes critically important, because what is needed is not just technology expertise, but also deep experience in operations transformation.

PEOPLE

BECOMING A STRATEGIC BUSINESS PARTNER

For the CFO, the significance of day-to-day ‘Finance’ work is diminishing relative to new demands around business leadership. Apart from a basic technical/accounting background, the key skills and competencies today’s CFO must possess rest on four fundamental pillars: leadership, operations, controls and strategy. Sumendra Jain, CFO (India & Asia Pacific) at SMS India, believes that for Finance leaders to be effective business partners, they must have the necessary leadership and communication skills. Additionally, to be able to offer an independent perspective, they must possess a strong understanding of the company's business model and industry. CFOs should also be able to identify opportunities for top-line growth, manage downside risks and drive profit improvement, not just through the traditional methods of cost-control, but using new methods like product line/regional profitability analysis and benchmarking against industry players. Sumendra’s 25-year-long career offers insightful lessons and learning for executives in general and CFOs in specific.



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