Chapter 4: Digital tech and finance function

• How cloud computing is changing the structure of the finance function

  1. work anywhere

  2. Collaborations are increased

  3. Software is continuously updated

  4. Data security
• How big data is used in finance functions?

  Internal audit: Analytics helps with identification and management of risk.
• How big data is used in finance functions:

  Management accountants: External data can be used to measure performance management.

  variance analysis used to measure underperforming people.
• How big data is used in finance functions:

  financial accounting: big data used to increase quality of financial help
• How big data used in finance functions:

  Financial reporting:

  Big Data supports development of relevant info.
• Process automation?

  Automation means accountants can stop doing mundane simple tasks and now do value adding services.
• Advantages of automation?

  1. Staff can do value adding tasks
  2. Reduce cost (Less staff needed)
  3. Human error reduced.
  4. Positive return on investment
• Disadvantages of automation?

  1. Training costs increased
  2. Change
  3. Uncertainty over job security
  4. Automation has to be competent
• How AI Can help finance function?

  1. simple processes can be automated
  2. Improved fraud detection
  3. Forecasting
  4. Help with shopping
  5. Extracting info
• Data Visualisation?

  Allows for richer information to add more value to finance function
• Distributed Ledger technology + Blockchain:

  Usages?

  1. Increase clarity and transparency
  2. measure value and ownership of assets
  3. Higher accuracy of ownerships and transactions means less internal audits needed
  4. Smart contracts that automatically sign.
• Key Digital Skills: BASIC DIGITAL LITERACY:

  Finance professionals must be able to work in a digital environment and have the confidence to use it:

  Be able to?

  1. Create digital content
  2. Ensure data safety
  3. Communication
  4. Solve problems created by digital environment
• Key Digital Skills: Tech Know-how

  Finance professionals must have sufficient technical know how?

  1. Understand digitial issues
  2. Understand digital technologies can disrupt business Orgs business model
  3. apply data privacy and security procedures
• What does Financial Reporting do?

  Reports financial position for external users: Employees, Customers, Banks, Managers, Gov
• What does management accountant do?

  *Provide information as basis of managerial action

  *Aid planning and controlling organisation

  Doing the budgets:

  CRUMPET used to show benefits of budget.

  C - Coordination (Organise departments)

  R - Responsibility (Spending responsibily)

  U - Utilisation (Utilising money effectively)

  M - Motivation

  P - Planning

  E - Evaluation

  T - Telling (Sets expectations)
• What does a treasurer do?

  They are responsible for raising finance and controlling financial resources.

  Key roles include:

  1. Working capital Management (Managing cashflow)
  2. Financing money
  3. Foreign Currency management
  4. Taxation
  5. Cash management
• Tax Types?

  Tax avoidance = Using tax law to legally lessen tax payable

  Tax evasion = illegal

  Tax mitigation = Reducing tax liability through conduct that does not frustrate the intentions of parliament when law was created.
• what do internal auditors do?

  1. Report on effectiveness of internal control systems
  2. accountable to audit committe
  3. Ensure rules and policies applied
  4. Audit business operations
  5. detect and prevent fraud
• Causes of fraud?

  1. Low staff morale
  2. Lack of monitoring and control systems
  3. Lack of segmentation of duties (Tasks not being shared)
  4. Unneccessary complex corporate structures
  5. Domination of management by one person
• What are the symptoms of Fraud?

  1. Strange transactions
  2. Payments being made out of proportion to actual work done
  3. Lavish lifestyle of employees
• What are the limitations of internal audit?

  1. independence
  2. organisational constraints
  3. Poorly qualified staff
  4. Self interest threat
• Human only activites?

  These are when humans outperform machines because humans can apply their knowledge across a range of tasks.
• Impacts of automation on the components of the finance function? Financial reporting?

  1. Downloads of bank transactions into the accounting system
  2. Posting of bank transactions to nominal accounts
  3. Reconcilliations of bank, supplier and customer accounts
  4. Creation of statutory accounts
  5. Finding errors
• Impacts of automation on the components of the finance function? Management accounting

  1. Generation of management accounts
  2. Calculations of variances and finance ratios
  3. In depth analysis of results and data analytics to support theories
  4. Budgets based on current actuals
  5. Forecasting based on assumptions set by finance team
• Impacts of automation on the components of the finance function? Treasury

  1. Investment appraisal calculations
  2. Analysis of financial markets to predict costs of capital
  3. What if scenario planning to analyse potential outcomes for investments
  4. Monitoring of currency markets
  5. cash flow forecasting to identify future requirements
• Impacts of automation on the components of the finance function? internal audit

  1. Routine monitoring
  2. routine testing of controls
  3. simulations of cyber attacks
  4. real time feedback of system controls
  5. Vulnerability testing to identify potential weakness and impacts
• Ethical considerations for data?

  1. Data dependence
  2. data mining and storage
  3. data distribution
• Data dependence?


  Data doubles rapid, therefore the data might not be accurate
• Digital mindset

  The three steps:

  1. Dealing with complexity
  2. working in creative and agile way
  3. lifelong learning
• Featured of change adept organisations?

  1. Lean processes
  2. Flexible structures
  3. forward thinking
• 3 key financial ratios used by FR

  1. EPS (Earnings per share) - Profit after tax / weighted avg number of shares
  2. PE (Price earnings) - Share price / EPS
  3. Dividend Yield - dividend per share / current share price