The Joy of Finance: Summary

Bots, Algorithms, and the Future of the Finance Function (McKinsey & Company)

The Joy of Finance curates and summarizes the best finance and operations content for busy folks.

Automation and disruption in finance is real

To ease the burden of digital transformation, CFOs are rethinking and reshaping their finance teams to accommodate current and incoming technology.  To accomplish this, they are dissecting which functions can be automated now and which solutions must be accounted for in the future. By doing so, finance leaders can set up their organizations for a more streamlined integration. A McKinsey research study concluded that 42% of all finance functions can be fully automated, while 19% can still be partially automated. Some of the easiest functions to automate are:
  • General accounting operations
  • Cash disbursement
  • Revenue management
  • Financial controlling
The most difficult include:
  • Risk management
  • Audits
  • Business development
As is evident in the findings, tasks requiring higher level thinking and analysis processes require more intelligent solutions like machine learning or natural language utilities. In terms of development, if these cognitive automation tools were a human, they would still be sporting diapers. However, similar to the current robotics process technologies, they stand to have a sizable impact on finance functions in the years to come.

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    The inevitable truth

    As these technologies pervade throughout our workforce it’s important to understand exactly how to integrate them seamlessly into current organizational structures. Some positions will be transformed, while others are terminated. McKinsey recommends the following steps to manage this transition:
    1. Transition transactional tasks first. These positions are the easiest to automate and typically experience higher turnover.
    2. Partner human resources and finance departments. Some employees may be able to be re-tasked elsewhere within that company as part of an automation integration strategy. This is not always possible, as higher level tasks require specialists.
    3. Actively seek out individuals whom embrace digital transformation. Companies will still need employees, but they need employees who are dedicated to learning and utilizing these modern solutions.
    What does one of these solutions look like? You can check one out here.

    Disruption doesn’t need to be destructive

    While undoubtedly challenging, reshaping how an organization’s finance department functions is not only prudent, it is rapidly becoming mandatory. Being proactive about this transition and maintaining transparency throughout the process is what will define the companies who are successful at doing so. Click here to read the full article “Bots, Algorithms, and the Future of the Finance Function.”