Finance transformation is a buzzword that gets tossed around a lot in corporate circles. The phrase refers to a shift toward AI-driven automation, digitization, and strategic enablement. But beyond the flash terminology, finance transformation has tangible business value.
Unfortunately, that value is frequently underestimated or overlooked altogether. If you are going to invest in transformation initiatives, you must define and demonstrate the ROI to get the rest of the C-suite on board.
Here is a look at why the true ROI of finance transformation gets overlooked and how you can quantify the value of your proposals.
What Is Finance Transformation?
Finance transformation refers to a substantial change in how your department operates. It typically entails:
- Automating manual processes
- Redesigning workflows for efficiency and scalability
- Applying AI and predictive analytics for planning and reporting
- Enhancing data visibility to support real-time decision-making
- Elevating the finance team’s role
Finance transformation aims to increase speed, accuracy, and insight across all of your department’s functions.
Why the Value of Finance Transformation Is Overlooked
Despite all of the measurable benefits of making the finance department more efficient and nimble, many organizations fail to capture or even look for the return on investment that it delivers. Some common reasons why the benefits of finance transformation get overlooked include:
- Overemphasis on upfront costs
- Lack of baseline metrics
- Narrow success criteria
- Disjointed initiatives
These barriers lead to transformation efforts that succeed operationally but fail to earn support from company leadership because the ROI is not clearly calculated.
The True Value of Finance Modernization
When planning modernization efforts, you should focus on three key areas: automation, predictive analytics, and process redesign. Start by examining opportunities to apply these tactics to your finance department and identify relevant metrics to gauge the ROI of each strategy.
Here is a closer look at the value these tactics can provide and how you can quantify your return on investment.
Automation: More Than Just Cost Savings
Most finance transformation projects begin with automation, and for good reason — organizations want to reduce their reliance on manual processes, as they tend to be tedious and error-prone. Automating high-volume tasks like invoice processing or data entry delivers immediate labor efficiency.
Some of the metrics you should focus on to gauge the impact of automation include:
- Time Savings: Reduce monthly close cycles
- Labor Cost Reduction: Reallocate full-time employees to higher-value work
- Error Reduction: Minimize the need for rework and decrease compliance risk
- Scalability: Support business growth without adding headcount
Automation also drives intangible returns, such as improving employee morale by eliminating tedious tasks. These returns can be tough to measure and require you to consider multiple secondary metrics, such as turnover and employee satisfaction.
Predictive Analytics: The ROI of Better Decisions
AI-driven tools facilitate forecasting and analysis. The ROI here is less about cost savings and more about informing decision-making. Some of the strategic benefits of leveraging artificial intelligence tools include:
- Faster forecasts
- Improved accuracy in budgeting and cash flow projections
- Early detection of anomalies
- Smarter resource allocation
Embedding AI into your planning processes will allow your company to pivot quickly in volatile markets. Gaining that competitive advantage far exceeds the price tag of artificial intelligence analytics tools by improving outcomes and delivering short- and long-term savings.
Process Redesign: Agility and Control
Equipping your team with better technology can deliver a strong return on investment. However, you must also reshape your processes to unlock the full value of new tech. Focus on areas that have traditionally been plagued by bottlenecks or a lack of visibility. How can you make them clearer and more efficient?
Improving antiquated processes can offer a variety of benefits both in the present and in the future, including:
- Shorter cycle times
- Standardized controls
- Improved data integrity
- Enhanced audit-readiness
Keep in mind that these improvements may not show up immediately in the income statement. Even so, they will reduce your overall risk exposure and set your business up for scalable growth. Think of it as ROI through resilience and reliability.
How to Measure ROI More Effectively
Here are some general strategies to help you measure the return on investment of your finance transformation initiatives:
- Establish baselines and target thresholds for important metrics
- Look at financial and non-financial outcomes
- Assign value to strategic outcomes
Employ these tactics to build a business case for transformative investments. In many instances, finance leaders implement pilot projects as a proof of concept before scaling up their initiatives.
How to Position Finance as a Value Center
Traditionally, the finance department has measured the value provided by other teams. However, transforming your team, technology, and workflows allows finance to create value for the organization. The goal is to move into a strategic role.
Instead of merely tracking savings, discuss how finance can facilitate key projects and enable other departments. You should also shift the culture from transactional information exchange to transformation. By moving away from buzzwords, you can create real value and justify your transformation investments.
