The world is currently witnessing a profound surge in the digital revolution, a phenomenon that is reshaping industries worldwide. This wave of change has given birth to what we now call “digital transformation,” a concept wherein businesses are swiftly acknowledging the imperative of incorporating cutting-edge technologies into their functioning. This process of digital transformation is geared towards enhancing competitiveness by leveraging technology to its fullest. Beyond just an integration of new tools, it entails the overhaul of core business processes, products, and services, while also instigating shifts in organizational culture and elevating customer experiences.
The need to modernize operations and processes in finance and accounting through digital transformation has become an area of significant investment and focus. According to Research & Markets, the world’s largest market research store, the global digital transformation market is projected to experience a growth of $1,009.8 billion by the end of 2025 from $469.8 billion in 2020 at a compound annual growth rate (CAGR) of 16.5%.
In the same vein, the International Data Corporation (IDC) projected that digitally transformed organizations will contribute to more than half of the global gross domestic product (GDP) by the end of 2023 and accounting for $53.3 trillion. The International Data Corporation (IDC) also estimated that the global spending on services and technologies that will allow digital transformation will amount to $2.3 trillion by the end of 2023.
Digital Technologies
There are a variety of new technologies which are transforming accounting and finance processes. These are Artificial Intelligence (AI), cloud computing and the Internet of Things (IoT). The other ones are Big Data, Machine Learning (ML), Blockchain and a specialized accounting software. Cloud computing virtually stores data in the “cloud” and makes it easier to centralize and manage data while ensuring smooth access. Accountants can collaborate with other business units through the cloud to leverage financial data to create plans that drive innovation, promote growth, and create efficiencies. Real-time access to financial data through Internet of Things (IoT) has enabled quicker and more informed decision-making. In the case of Artificial intelligence (AI) and machine learning (ML), they have also opened up opportunities for predictive analysis and risk management with minimal human intervention.
In addition, digital transformation integrates critical processes systems and enables firms to scale and serve a more extensive customer base faster through 24/7 online access. Apart that from the use of these technologies, a specialized accounting software also plays a key role in digital transformation space. A specialized accounting software, for instance, recksoft is used for account reconciliation involving large volumes of transactions. It manages and records the day-to-day financial transactions of an organization, including expense management, revenue management, accounts receivable, accounts payable, sub-ledger accounting, and reporting and analytics.
Indeed, digital tools and these new technologies have enabled finance and accounting departments to streamline and automate their processes, thereby driving innovation while improving efficiency, accuracy and transparency in financial operations. As a result of the application of new technologies as well as digital tools, Accounting and Finance professionals have freed-up time to focus on strategic tasks requiring creativity, collaboration, and professional experience. They can, for example, transform the insights extracted from high-quality data into more effective financial planning and reporting for informed decision-making.
Main Areas of Digital Transformation
At its core, digital transformation is about doing things differently and better in an organization. It involves a cultural shift that requires an organization to continually challenge the status quo. This is a change management process that takes time and requires full commitment from all levels of the organization to succeed. It is important to have a clear understanding of the objectives of the transformation in order to ensure that the right changes are made. In that regard, if an organization is planning to embark on a digital transformation project, there are four main areas it should consider:
-Process Transformation
Process transformation involves using digital technologies to automate or improve existing business processes. It involves a thorough review of existing processes and systems with the goal of identifying areas for improvement. Hence, the first step is to understand the reasons for the transformation. A reason could be established to automate data entry or implement artificial intelligence to streamline decision-making. For example, introducing robotic process automation may convert manual operations in revenue collection and audit, taxation, accounts reconciliation and other administrative functions to a touch of a button activities. The transformation process should incorporate close monitoring and evaluation to make necessary changes for success. Process transformation should involve all stakeholders in the change process and seek their feedback about the existing processes and systems and what they expect from the new ones.
-Business Model Transformation
Process transformation focuses on finite areas of the business while reinvention or digital transformations aim deeper into how value gets delivered. Business model transformation aims at answering the question relating to whether or not your current business model can hold onto the status quo in the face of global digitalization. Digital technologies are indeed transforming existing business models with innovation spur new opportunities for growth. The modernization of accounting processes with new IT infrastructure in this regard makes the industry more competitive.
-Domain Transformation
The current domain transformation market is one of the most significant opportunities for company growth. When a company is able to effectively transition into another industry, it then fits into what is known as domain transformation. New technologies have the ability to redefine products and services, blur industry boundaries and foster opportunities for non-traditional competitors. This form of wholesale transformation offers incredible opportunities for businesses to create new value. An excellent example of domain transformation is Amazon. It has expanded its services to include both its own streaming platform (Amazon Prime) and Amazon Web Services (AWS), which is now the most widely used cloud computing and infrastructure provider in the world.
–Cultural Transformation
A successful digital transformation demands more than just adopting a new technology or re-designing existing accounting processes and practices. It involves a cultural shift through a comprehensive and collaborative effort to re-orient key stakeholders to understand and embrace an advance digital transformation. This process is very important because individuals within an organization may resist and frustrate those changes due to the fear of the unknown. They will prefer to stick with the existing procedures instead of accepting and adapting to a new technology.
Apart from that, reassurance to address skills gaps must be part of the strategy. To achieve this result, business leaders need to formulate a clear vision of the transformation and effectively communicate it throughout the organization on an ongoing basis. They must be clear about what the risks involved in the digital transformation process are and why they are in everyone’s interest.
Conclusion
Advanced technologies are indeed transforming accounting and finance processes and empower organizations to make quick and informed data-driven decisions. There again, when organizations make a deliberate effort and prioritize investment in digital transformation, they will not only reap the benefits of making the accounting and finance function more agile in operations but also reposition them from cost center to a strategic business partner. Even though the digital transformation journey has some challenges, the benefits outweigh them and there is the need for organizations to embrace modern trends to make them more competitive.
BERNARD BEMPONG
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
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