Why finance should embrace Industry 4.0
As we progress further into Industry 4.0, finance needs to further leverage new technologies to add real value to a business’s bottom-line, yet it remains in its infancy stages, says Mark Wilson, Managing Director at SYSPRO Africa.
Industry 4.0 has impacted a range of industries, and with the digitisation of industrial value chains, many forget about finance, which has only touched the tip of the iceberg when it comes to leveraging new technologies.
Disruptive technologies such automation, artificial intelligence (AI), the Internet of things (IOT), bots, blockchain and machine learning are thrusting the global economy into a new digital era.
Instead of seeing all these new developments in isolation, finance must focus rather on connection points, finding ways to optimise them to provide greater value to the organisation, says Mark Wilson, Managing Director at SYSPRO Africa.
Companies risk losing ground if they do not understand the changes and opportunities Industry 4.0 brings.
Industry 4.0 has seen information replace capital as the main asset driving the way finance operates, with data at the centre of business models.
In the midst of the data revolution, organisations depend on structured, organised data that is not only accessible, but useful, especially software.
Finance has been creating meticulously structured data for computing systems for decades, as evidenced by protocols such as double-entry bookkeeping. Structured data has always been an essential part of finance.
However, digital transformation and globalisation has forced companies to do more with less, with many now adopting a data-driven approach, re-looking at enabling technology that supports granular details and integrated analytics.
This approach has proven to be effective. In fact, according to McKinsey Global Institute, data-driven companies are 19 times more likely to be profitable.
Without systems like enterprise resource planning (ERP), many organisations are forced to use various programmes across departments. ERP systems break down these data silos, helping businesses analyse data so they can use resources more effectively and efficiently, as a result, bringing significant business value and understanding.
So, much like Industry 4.0, finance is data-driven, so it would be peculiar if the advantages of this new era did not carry over into the world of finance.
Accounting is key
Let’s take a step back and look at ERP, which, at its most basic level, is accounting software. If you want to improve your company’s financial health, you need to know what is going on deep within the numbers.
ERP systems record and keep track of all operations. For example, in the automotive industry, the moment a part is used, the ERP system uses real-time information to record the cost and order a new one.
Finance welcomes the arrival of IOT and cyber-physical systems. Why? Because it provides businesses with better control and detailed insight into the costs of producing goods and services.
Working in finance is all about the details and the ability to derive valuable insights to execute decisions. So, in a way, Industry 4.0 is merely an extension of what financially inclined individuals already do, but with exponential benefits.
Finance is rapidly changing
The world is changing at lighting speed and businesses must adapt, with a shift from a push-paradigm, in which businesses sold goods and services that set the consumer agenda, towards a pull-paradigm, where the consumer is now king. Therefore, businesses need to be flexible in order to profit from shorter lead times and rapidly changing consumer demands.
Technologies foster agility and flexibility and are key to a business’s revenue and profit. However, this will require changes in finance, with Industry 4.0 technologies forming the backbone of these, known for bringing about efficiencies and increased profit if utilised effectively.
Companies must consider their own fiscal situation in order to determine a long-term budgeting strategy to stay afloat, while investing in technology that will benefit their bottom-line.
To uncover new revenue sources, trim costs, boost operational efficiency while reducing risks and simplifying compliance, businesses need to leverage technology such as SYSPRO’s ERP CFO Solutions.
While systems such as SYSPRO’s Financial Management software deliver core financial and accounting functionality, businesses also gain a 360-degree view of all the factors that influence their company’s financial health, in real-time.
Global growth is slow. Even more so in South Africa, with a projected growth rate of only 1.6% for 2019, according to PwC.
With shrinking budgets, many companies are going under, while others are using innovation to keep afloat in the face of an economic recession.