expenses

Perception vs. Reality – The Use of Technology in Finance Departments

by Anant Kale March 4, 2021

Technology plays a critical role in modern finance departments. From e-invoicing to analytics dashboards, CFOs and their teams are expected to know a lot about computer systems. But how deep does the use of technology go within the average finance department? And how effective are those systems in delivering value to the function?  

AppZen and CFO.com interviewed finance leaders from over 200 global organizations to ask these questions, and the findings were eye-opening. 

Numerous respondents describe a disjointed view of technology in their organizations – with the perception of IT adoption far more positive than the reality of the situation. In this blog, we identify two areas where this disconnect exists, explore why it occurs, and provide recommendations for organizations looking to close the gap between perception and reality by effective use of technology.

The Illusion of Automation – Expense Reports

Processing employee expenses does not drive revenue for an organization – it is a cost center. Therefore, the expense challenge for CFOs is to manage these costs – typically by implementing technology that can reduce the amount of manual, human input required. 

Automation is the primary solution. 46% of finance leaders from the interview were confident that their systems for expense audit and control were highly automated and provided them with real-time data and reporting. 

Yet, when we analyze this data a little closer, we begin to see a disconnect.

When asked if their finance team spends more time policing expense reports than analyzing trends and areas of improvement, 72.2% agreed. How can this be if the systems are highly automated?

If CFOs perceive their systems to be functioning automatically, why, in reality, are they stretching their resources to police the process? There are several possible explanations:

Misconfigured Systems: Automation may have been implemented but not configured to the task at hand. If this is the case, manual policing or involvement within the process is needed to ensure accuracy.

A lack of trust: Automating systems requires you to place significant trust in the software you use. If there is a personal lack of confidence with the system, choosing to police the process yourself or through your team appears the better option. 

Limited Internal Communication: Knowledge surrounding automation, its benefits, and its uses may not be internally understood by all. Miscommunication can misinform management on what is and isn’t automated, potentially providing CFOs with incorrect information for decision making. 

Closing the gap between reality and perception requires the appropriate and effective use of automation. More specifically, it requires the team to trust automation and its ability to reduce manual processing and errors.

Understanding and Controlling Spend

Acquiring data on employee spend is invaluable when making informed decisions on cash flow management and policy setting. Being aware of what, when, and how employees are spending is also the first step when optimizing expense management. 

This viewpoint is mirrored by the 45.2% of CFOs who ranked “understanding how employees spend…” as their top priority when asked where their focus is on expense management.

This research highlights how vital understanding employees’ spend is for CFOs. Surprisingly though, when asked, “which strategy their organization is most likely to adopt” as a follow-up question, only 15.9% chose to optimize the level of control overspend. 

These results raise eyebrows, further juxtaposing what CFOs value important against what they’re adopting. Why might this be the case? 

Ideal vs. Practical: When asked what they  “think” about the priorities, CFOs could consider what they value the most. However, when asked which technologies they are likely to adopt, reality kicks in — forcing them to focus on what their organization needs right now. Concentrating on understanding employee spend may be a priority for the CFO but may not be the best practical option in the short term. 

Lack of clarity: The inconsistencies could indicate that some CFOs aren’t hyper-focused on their current goals within the organization. There is perhaps an emphasis on the “best” option for this task (expenses in this case) in isolation from other finance functions.  This silo-ed view is common – but ignores the benefits gained from connected finance software platforms.

Conclusions

The finance department is a work in progress in terms of IT maturity. The gap between perception and reality, while not ideal, is purely illustrative of this developing capability. But that cannot be an excuse. 

As we move beyond the pandemic, the use of technology within the finance organization needs to be focused, consistent, and carefully delivered. The digital transformation of finance can propel the entire business into the future at speed – now is the perfect time to ensure that this project gets the focus it deserves. 

*All data in this report was sourced from research performed by AppZen in late 2020. Full copies of the data can be found in the CFO Survey Report – Why Optimism Abounds.

Anant Kale
CEO

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