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How must SME finance chiefs approach technology transformation?

Author: ICAEW Insights

Published: 01 Apr 2022

Digital transformation can provide SME finance functions with a powerful edge – but how should firms execute this critical process? We spoke to ICAEW Southern President Ashley Milne to find out.

Technology transformation is a phrase we usually hear about in relation to large corporates – sprawling, long-established firms that are looking to slough off outmoded legacy systems and become leaner and faster. But it is also a pivotal rite of passage for small and medium-sized enterprises (SMEs) that are aiming to set themselves up as profitable, growth-focused contenders that can compete with the big players in their markets.

One critical area for SMEs to focus on in their transformation journeys is the finance function. And in that arena, ICAEW Southern President Ashley Milne has acquired significant experience. As CFO of fast-growing, independent gas and electricity supplier Utilita Energy, Milne has made it his ongoing mission to drive process improvements through the implementation of – and education around – new technology.

“Before we start looking at specific technology types, I’d say that the primary struggle SMEs face right now is resourcing: having access to skillsets that can make the best use of new technology and extract the greatest value from it once it’s in place,” Milne says.

He notes: “In a large organisation, if you need a data scientist or analyst, you’ll advertise accordingly and pay a salary for that specific role. But an SME will tend to require a Jack-of-all-trades who can cover several dimensions of technology development, as well as core finance tasks. Finding that sort of hybrid employee is a real challenge.”

In terms of the most pressing need that SME finance functions must answer as they refine their systems, Milne says: “Realising and exploiting the various benefits around data is a key priority. The crucial thing for SMEs to grasp is that effective automation can’t happen in a vacuum. There’s no point having automation in place unless you have the data to inform it.”

As such, he says, “it’s vital for SME finance chiefs to have a strategic vision for tech transformation. What sort of data do you want? What form do you want it in? And how do you intend to use it? Having that plan and vision is useful because it can help you attract talent into your organisation – it shows people that there’s an opportunity.”

The big why

On that point of talent attraction, though, isn’t one of the core objectives of technology transformation to minimise headcount and cut costs?

“In any large organisation that would almost certainly be the case,” Milne says. “But for SMEs who are focused on growth and driving their businesses forward, tech development is not really a cost-cutting exercise. Instead, it’s more likely to require you to add the talent who can provide you with instrumental help on your transformation journey. So, that’s the basis on which SME heads of finance should sell their need for further staff to senior management and other stakeholders. The talent and transformation go hand in hand.”

Milne explains: “This all comes down to the big ‘why?’ behind your decision to initiate a transformation in the first place. Are you doing it because it sounds cool, exciting and cutting edge? Or is it a watershed that will actually benefit the business?

“For example, let’s look at a routine task such as processing invoices. In a large-ish SME, you may have something like five people looking after that workflow. But if you’re considering implementing an optical character recognition tool with the aim of saving a couple of heads, you may struggle to justify that to your senior team. It’s not necessarily the wrong thing to do, but at that narrow scale of cost saving, it could be potentially misguided.”

He notes: “Ask yourself what your true business priorities are. Should you spend a £50,000 to £75,000 chunk of your budget on putting in some accounts payable automation to save on a couple of heads? Or should you dedicate that funding towards something with a more strategic purpose?”

“Some large organisations are almost driven and led by the finance function,” he points out. “But that’s not really the way it works in the SME environment. Instead, finance departments are following the senior team’s lead. We’re there to help and assist, so perhaps it’s wiser to look at how your technology additions can support the firm’s wider strategic goals.”

Inbuilt agility

Turning to the sorts of processes or methodologies that SMEs should put in place to ensure successful transformations, Milne says: “That all comes down to culture. When we brought in our new enterprise resource planning (ERP) system, we got everyone in a room, explained it in detail and then completed implementation in five months. We didn’t go through a lengthy, waterfall-type procedure.”

In Milne’s assessment, that’s a benefit that SMEs in any sector can harness. “Their scale automatically grants them a high level of agility,” he says. “In any firm, there will always be people who are less engaged with transformations, or their work is more transactional in nature, so they’re not as invested in the strategic rationale behind what’s going on. But in an SME, it’s not always necessary for the end point of a change initiative to be fully prescribed at the outset. You just need the collective ability to pivot and adjust along the way.”

That agility extends to the types and brands of technology that SMEs can readily adopt to make themselves future fit. “In the Software as a Service bracket, there are lots of data analysis and visualisation tools available that fit the bill really well,” Milne says. “For example, any SME finance head with, say, five people could download the free version of Qlik, build the required dashboards and share them on a network drive for the whole team to access.”

He adds: “Power BI is another great app. You don’t need the Enterprise Edition – you can simply pay per user for a pro licence, which is $5 per month. Then for ERP functions in the context of owner-managed companies, there’s Xero, which enables you to match data straight from your bank accounts. That type of capability doesn’t exist in the likes of Microsoft, SAP or Oracle, unless you start spending lots of money on putting in specialist solutions. But with Xero, it comes straight out of the box.”

Future of the finance function

Transformation within the finance function has been accelerated over the past couple of years. How is the role of the finance function changing? What technology is facilitating that change? And what skills are most in demand?

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