New technologies continue to be at the center of the big changes and business progress in the retail industry. Surprisingly, the modern CFO has to play the unexpected role of digital transformation champion. Besides, they hold the purse strings and control how much will go into the technology budget. The CFO has to ensure that technology expenses deliver a good return on investment (ROI) to the organization. Separating technology from the business strategy is an absurd idea, when everyone else is investing in tech to drive their marketing, and internal operations. Tech companies like Netflix and Uber have already pushed over traditional giants in their industries. Machine learning technologies will improve data collection for executives, and give more impact to their decisions.
Here are the 4 top challenges that the CFOs may experience, and possible interventions that will help to overcome them.
1. Revenue management
Recently, the retail business has been experiencing a crazy cycle of increased revenues and shrinking margins. The growth is mainly attributed to online expansion strategies, exposing the firms to global markets. The same strategies have also increased the level of competition, leading to expensive price wars. Financial officers have found themselves in situations where they have to balance between growing the revenues and cutting the overheads.
2019 would be a good time to test the different revenue streams that can be altered to increase profitability. Technology has already proven effective at measuring the efficiencies of different strategies within the organization. The number of people and the time taken, has been reduced and the personnel minimized. Such data can be relied upon to make quick decisions on pricing and inputs.
There is no doubt that pricing remains a hot topic, with many firms looking to grow and maintain their market share. As they move to claim the markets, they could find themselves in a fix. On entering the market at a low price, they might have problems raising it back to sustainable levels. In such an environment, the financial executive will need a way to monitor the markets, make predictions and provide actionable insights. Software solutions collect and process this data with a high level of accuracy. The consolidation of the data collection and reporting functions turn the software into a dedicated data scientist for the organization.
2. Talent management
As the economic environment becomes more unpredictable, attracting and retaining top talent is becoming a challenge for many firms. Besides ensuring that employees are properly skilled, the company executives need to invest in tools that help to increase their profitability. The benefits cut both ways. Technology aids in employee productivity and they are likely to increase their loyalty to the organisation.
The team might also need to adapt to the changing roles enforced by the dynamism in the market. To stay ahead of the competition, machine-learning systems are needed to keep abreast with the demand for big data, processing systems, and instantaneous feedback. Business executives will be able to make a quick assessment of current strategies, changing them where necessary. For instance, CRM systems that interact with customers round the clock.
3. Alternative budgeting systems
Gone are the days when the budgets set by CFOs were cast in stone. In an ever-changing environment, sole reliance on the plans that were formulated in the previous year is highly dangerous. A slight shift in technology, for instance, can send them back to the drawing board. Machine-learning software declutters the decision-making process by hoarding and processing relevant data that can be used to implement rapid responses to changes in the environment.
The year ahead presents an increased need for deeper business insights to help with financial planning. The speed with which the system collects organizes and processes the data enables the CFO to develop and coordinate multiple financial plans. The algorithms can also help with forecasting, which increases the precision of the plans.
In 2019, we expect the CFO to accelerate the use of software-based applications in the budgeting process, especially when it comes to data management. The software can be used to analyze and identify the inconsistencies with increased speed and accuracy. The executives, as a result, become more strategic in carrying out their duties, as the mind is freed up from worrying about the transactional issues.
4. Customer relationship management (CRM)
Cloud-based software is the double-edged sword in CRM for retail. In a perpetually connected world, one of the biggest challenges for many businesses remains how to maintain constant communication with the customer. For instance, companies have to gather relevant market data from several social platforms while sending out their message. A good software provides multi-channel interactions with integrated reporting systems.
One of the active approaches in CRM is the ability to listen to online conversations and find out what customers are saying about the company. Deploying a team to follow the conversations will prove to be expensive in the long run. AI provides the CFO with the opportunity to rein in on costs while keeping 24-hr tabs on the market. For instance, did you know that some of the modern machine learning systems have bots that can perceive human emotions?
AI systems can be able to pick up customer interests, increasing the possibility of future conversions. By accurately predicting customer interests, executives are in a better position to increase the efficiencies of various production systems. For example, when it identifies products that are likely to be bought by the customer, the management can plan for the right inventory. The systems can also be used to check for products whose demand is likely to fall in future.
How the CFO can provide the solutions?
With the testing of self-driven cars already underway, technology is proving to be a major influence in our daily lives. The same can be said of organisations, where it has been used to support different functional areas. For example, small companies have been able to leverage on AI increase their global reach. No department has been spared of the sweeping changes, and that includes the role played by the CFO.
It will not be long before all CFOs start assuming a bigger role in technology development. Organizations are already emphasizing the need for increased coordination between the CFO and the CIO. It is as a result of such partnerships that AI-powered initiatives can be used to improve financial planning. The systems can be used to cut expenditure, streamline the workflow, shorten the cash cycle, and increase customer retention.
If you are a retail executive, you can expect major changes in sales automation, payment systems, manufacturing and logistics. For instance, Amazon is already planning to start sending packages by drones. Improved cognitive systems will be able to make accurate predictions of consumer choices and attitudes. AI will enable the CFO to include a greater number of relevant data subjects to help with the planning process.
Recent advancements in machine learning systems have made it more affordable to deploy new technology within the organization. Considering that every function involved has a financial leaning, it is only fair that the CFO participates in almost every department. After all, they are in charge of rationalizing the business aspects of every decision within the organization. Their current challenges go beyond navigating the seemingly complex data analysis processes within the finance department.
We can expect a shift in the CFO’s role from chief strategist to technology champion. With many analysts predicting a global economic slowdown in 2019, the work of the CFO is certainly cut out in the following areas:
- Promoting a move towards cloud-based software: Whatever happens in different departments may be outside the CFO’s mandate, yet they have a huge impact on the company’s finances. The CFO should consider introducing cloud-based applications as a cost-saving measure. Rightly so, software is one of the biggest cost factors in technology budgets. Some of the areas that can be covered using cloud-based applications include the sales function, revenue management, marketing, and human resources. With cloud-based applications, the operations can easily be scaled up and replicated with minimal costs. It eliminates the need for purchasing new software when expanding the marketing team, for example. They also allow for multiple collaborations, as historical data is centrally stored for easy access. Such applications will also help the CFO to guide the procurement department on how to cut costs and manage supplier contracts. Cloud computing is ideally the foundation of connected technologies. Everything else, from AI to machine learning systems are hinged on it for support. However, many CFO's are going to grapple with the security concerns relating to the vulnerability of connected systems. Hopefully, new improvements will have stepped in to increase the resilience of the systems.
- Increased emphasis on data-enabled decision-making: The adaptive CFO understands the value of big data to the organization. Already more than 70% of CFO's agree that digital technologies have changed the way they make decisions and perceive the business environment. The volume of data generated even by the smallest organization can overwhelm the most experienced of executives. To counter the problem, the CFO's will have to look into software that runs daily insights and analytics from massive data. To meet the modern demands of business, finance managers need to drop a reactive approach to the markets. Playing an active role means that they have to pay more attention to the data collected by software. Adopting financial planning software will help to cut down the time spent on budgeting and forecasting. It will leave them with more time to concentrate on formulating strategy and making informed decisions. However, data-enabled strategies are only as effective as the analytical skills of the manager. We expect to see finance managers promoting talent acquisition and skills development in line with the technological strategy. Data-enabled decision making should be encouraged across all the departments. The existing applications may need to be reviewed to find out whether they meet the needs of the business.
- Looking ahead: It is evident that the CFO’s role goes beyond setting budgets and financial consolidation. The modern financial manager needs to be an active participant in the firm’s technological growth. Setting the right tone calls for complete cooperation and active participation of all the stakeholders. Left on their own, the CFO’s might find it difficult to implement any meaningful digital transformation strategies. Artificial intelligence is a vibrant technology that has revolutionized the business environment. However, the potential of machine learning technology has only been scratched on the surface. With continued improvements, executives should brace for more interesting times ahead.