The benefits of digital transformation have been clear for years: efficiency, organizational agility and transparency, which, in turn, can foster trust, customer satisfaction and growth. And yet, when it comes to the embrace of modern, cloud-based platforms, finance departments have tended to be laggards, not leaders. That’s changing, as more and more CFOs are realizing the benefits of modernizing their companies’ payments.
Colin Anderson, the founding partner of Friends & Family Capital and former CFO of Palantir Technologies, recently spoke with Modern Treasury about why CFOs should be champions of digital finance transformation, even in today’s tumultuous economy. Disruption, he says, is happening one way or another. The question is: will you disrupt, or be disrupted?
What’s the biggest challenge facing CFOs today?
First and foremost, a key priority and constant challenge for CFOs is creating legibility into and understanding of what’s actually happening in their businesses. One of the beautiful things about finance is that no matter what the atomic units of your business, at some point there will be a translation into a number or metric, typically as a transaction, collection or payment. At a basic level, customers should only pay you if you create value for them. The way your business shares in that value creation is by collecting cash from your customers. The way you know where your business is investing is by looking at your bills.
Connecting all those dots is literally one of the main challenges, and ties into payment operations. Do you have legibility into everything that’s happening in real time?
Do I have the cash where it needs to be to meet my obligations? Am I supporting all of my customers in the way they need to be supported? Am I getting paid by the people who need to pay me? Do business operators have confidence that their teams are investing in the right areas? From the seat of the CFO, a first order approximation that can answer these questions really comes through having the legibility to follow the money.
How does legibility relate to managing for growth and scale?
I tend to follow simple models because you can remember them as complexity grows. One simple model we used inside Palantir through periods of rapid growth was that of an accelerating train. Here your company is the train, and it’s traveling faster and faster. Your job as a CFO is not just to make sure it’s in motion, but also to look ahead and ask yourself some important safety questions. How far down the track can you see? Is there an obstruction? If so, what are your options? Do you have the levers to slow the train down or to switch to a different track? Do you need to build a bridge? Will you need to do something crazy like turn the train into a plane to fly over an obstruction or chasm? Using these first principles questions can help you stay above all the noise that you’re constantly bombarded with when you’re a CFO.
So as you scale, keep answering those fundamental questions: Do I have money? Is it safe? How do I know it’s safe? What’s it invested in? On the payment operations side, is my money sitting with me until it goes out? Or is it sitting with a third party until it goes out? Do you have faith in that third party? If you’re getting payment data as the lifeblood of legibility of your business, how far in advance can you see with it? Do you have a week of forecasting and parameterization? A month? A year?
It’s about constantly extending your thinking, or—in the train metaphor—extending your visibility. And then considering how to react and respond.
How can technology enable digital finance transformation?
Technology is a force multiplier to humans, especially at scale. Software can handle data very, very quickly and accurately. So let a computer do that. And let humans do what they’re best at in the world, which is looking at the broader context and trends, and examining whether things make sense. Answering fundamental “why” questions is not a strength of computers today. That’s for humans.
Think about embedded payments, for example. They can unlock members of a finance, accounting or product team from having to do rote processes where computers may be best. And that, in turn, empowers those teams to think about the bigger picture. It’s up to humans to figure out processes and ask questions: Are my workflows connected in the right way? Why are we doing this? For what purposes and under what conditions? That’s what humans should focus on: the higher order piece. And when it comes to payment matching ledgers, let technology, embedded payments, solve it.
With this technology, you can run faster, you can do things more safely, with fewer errors, and your team is going to be happier. You’ll have fewer fire drills when something goes wrong. You can focus on the “why.”
Why Digital Transformation in Finance Should Start with Visibility
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