Digital transformation in finance

By Pinky Mehta, CFO, Aditya Birla Capital Ltd and Vice President, Bombay Chamber of Commerce & Industry Introduction to 4G and 5G communication technology helped transform the finance function by enabling integration and digitalisation of firm finances on real time basis, it helped in innovating the corporate finance process with the help of modern tools and advance technologies, it allowed companies to automate finance related task, allowing integration of multiple software’s and tools thus, deriving significant time and cost benefits, better decision making, transparency of information flow and finally integrating finance function with other business operations. The fast-paced adoption of digital lending tools can mostly be accredited to the increasing demands for credits, the proliferation of smartphones and the internet, facilitating initiatives taken by the government and rapid technological innovations fostered by the fintech players. Digital lending has not only made it easier for millions of Indians to get access to formal and affordable credit but has also contributed to financial inclusion and empowerment in the country.

Thus, digital transformation in finance helped in reorganising and reshaping the finance and accounting function using technology. Key technology trends in the finance function i. Using digital platforms has become the preferred and dominant business models for banks and financial institution.

Through digital financial services (DFS) banks and FI’s were able to progress from paperwork-laden processes to tip-of- your-finger mobile apps, delivering a positive impact on both revenue and enhanced customer experience, improved operational efficiency, insight driven decisions. ii. Availment of cloud services: Banking and financial institutions recognise that cloud is more than a technology; it is a destination to store data and applications and access advanced software applications via the internet.

Cloud services helped business in combining digital assets like data algorithms, software platforms specially tailored for banking operations which will help in delivering business innovation, enhanced IT security, build resilient operations. iii. Artificial intelligence helps banks to process large volumes of data to predict the market trends, advance machine learning help evaluate market sentiments.

Challenges of technology adoption i. Consumers are susceptible to financial fraud such as SIM swap fraud, aggressive marketing and debt collection practices, data breaches and poor dispute resolution added more to problems to financial ecosystem. ii.

Apart from above there is no physical branches, no relationship with personal banker leads to reduced degree of customer satisfaction. iii. Addressing regulatory challenges by Banks/NBFC/financial institution in digital lending space.

These challenges primarily revolve around customer protection, compliance, and the evolving nature of digital lending. Diligently following the Reserve Bank of India (RBI) elaborate guidelines on digital lending to safeguard the interests of borrowers from unethical lending practices; thereby ensuing transparency and accountability in a sector evolving at an unprecedented pace. Opportunity/benefits in the adoption of technology i.

Reduce cost of operations ii. Speed iii. Faster rate of processing financial approvals and KYC iv.

Overall improvement in the areas of customer satisfaction and tax compliances and transparency. v. Use of cutting-edge technologies helped in the digital lending space by usage of predictive analytics, data analytics and artificial intelligence increased scope for offering customised and affordable credit solutions to diverse range of customers.

Case studies/examples of successful technology adoption We have introduced the process of “Digitisation of vendor invoice process”. Under the programmes, procurement process flow of a transaction to its recording in books of accounts in SAP- ERP is fully digitised. Project objectives i.

Reduce cost of operation ii. Purchase order can be placed basis budget sanctioned. iii.

Real time statistics of budget vs actual spend, business wise, segment wise, branch wise. iv. Fully manage service for buyer with seamless integration with supplier network v.

Correct and digitally processing vendor invoices. vi. Build strong relationship with the supplier.

vii. Reduce Fraudulent supplier or duplication of invoices. viii.

Clear Payable cash flow and spend analytics. ix. GST and Income tax compliance validation of vendors Project benefits  It automates entire process of Budget Maintenance, Purchase Requisition (Asset Note), Purchase Order (PO) Generation and Invoice Processing under one roof.

 For PR, PO, and Invoice Delegation of Authority (DOA) embedded in system as per policy, based on amount it will follow the approval matrix.  System Generated Purchase Requisition/Purchase Order/Invoice with Approver Name, Designation with Approval status along with Date.  Real time MIS reports.

 Email trigger to each approval once case PR (Asset Note /PO/Invoice lying in his/her queue).  User Demo/Training has been done with IT Procurement Team & Admin team. Also, system was released for testing and they have given UAT sign off as well.

 Real-time integration with SAP application to get latest status of PO and Invoices.  Supplier (vendor) can directly submit their invoices from supplier portal.  Approver can approve PR (Asset Note)/ PO and invoices from email itself without login into system or VPN, as it is directly accessible via the internet.

 Invoice Approval-finance Checker 1 (Osource) will be at first place in approval, post that it will go to further approvers (Business).  OCR invoice reading for nominal errors in invoice processing. The future of technology in finance function .

Usage of AI, ML, blockchain technology, and data security  Investing in new technologies and strategic partnerships with Fintechs allows NBFCs to lower their costs, increase their customer base, lowering customer acquisition costs, service existing customers, or de-risking the portfolio while trying to overcome the increasing formal credit penetration in a growing economy.  Blockchain technology promises to transform financial services and fintech by enhancing the digital customer experience and reducing data risks in a secure environment. NBFCs are using technology to offer more attractive and competitive lending rates by using blockchain technology.

Blockchain technology helps secure and transparent way of storing and sharing data and reduces the risk of fraud and other financial crimes. A blockchain is an advanced database mechanism that allows transparent information sharing within a business network.  AI and ML are being used to automate credit scoring and fraud detection, while blockchain is being used for secure and transparent online transactions.

ii. Integrating emerging technologies like cloud-based application software and its integration with finance functions has helped businesses in the complete digitisation of accounting functions, vendor payment process, and customer invoicing.  Cloud-based software is of vital importance in the present scenario, to maintain business continuity, as well as tax compliance.

 Our vendor invoice processing is fully cloud based and completely automated. Employees are able to work remotely, that is anytime, anywhere access, and this is one of the biggest advantages of using cloud-based software.  Vendors can upload their invoices remotely basis PO issued to them in digital form.

 Application software updates are dynamic and automatic and eliminate the need to manually update a software each time and on each employee’s system.  Data storage is in AWS Cloud server and can be accessed from anywhere securely.  The benefit of having everything in one place, from accounting to filing to reporting, at the click of a button, makes financial processes easier and faster for any organisation.

 We have already initiated moving to cloud based application for customer invoicing and complete digitisation.  Have reduced cost of operations and reduced turn around time to process each invoice. We were able to process more invoices with existing manpower.

iii. How to leverage technology to create value for the organisation beyond cost saving  Technology helps the CFO and SMT in decision making process and harnessing business opportunity. Cost saving is a byproduct of the usage of technology.

 Use of new technologies, from process robotics to data analytics is set to free time away from backward looking at internal finance tasks, as well as offering deeper insights and forward-looking projection, from which an informed decision can be made.  Helped increase connectivity with new technologies and are enabling real-time collaboration with the team members. if (!window.

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