Overcoming Institutional Inertia Among CFO’s Biggest Challenges

Today’s new macroenvironment has brought with it new responsibilities for finance leaders.

Still, no matter the landscape, one of the principal roles of the chief financial officer is to protect the balance sheet by relying upon concrete fundamentals that ensure long-term visibility over working capital and profitability.

Now that the actual balance sheet has, for the most part, gone digital, the realities of the present environment have opened up a wealth of opportunities.

“There’s a lot less paper than when I got here 12 years ago,” Darrell Walsh, CFO at TCH (The Clearing House), the only private-sector real-time payments, ACH and wire operator in the United States, tells PYMNTS.

But Walsh explains that his focus has remained the same: How do we automate certain things, make processes better, and where do we get efficiencies and effectiveness in the company?

One immediate benefit of digital is its ability to “minimize touch” he says, adding that easy-to-implement automation wins across processes like accounts payable (AP) and procurement can “streamline the processing of a payment throughout.”

Read moreLeveraging Real-Time Payments to Solve Bill Pay Challenges

Faster, More Efficient Transactions

Being able to cultivate technology can support nearly all points of strategic differentiation for enterprises. Particularly when that technology is developed in-house.

“Being the network operator of instant, or real-time (RTP) payments, we started using our own product for paying our vendors,” Walsh says.

That said, two-way integrations are not without their challenges or bottlenecks, particularly as it relates to establishing a new payment process supported by modern technology and digital tools.

“We needed to make sure our customers could handle these changes — that if we made a real-time payment, the vendor could accept it,” Walsh says. “We needed to hack that communication and partnership to make sure it was both possible [and easy] and that there was buy-in [on both sides].”

PYMNTS research in the April 2023 edition of the “Real-Time Payments Tracker” found that over half of users (52% ) report encountering at least one pain point when it comes to bill pay, such as missing payment features or a lack of payment options — and the situation is no different for enterprises around business-to-business (B2B) and third-party vendor transactions.

These frictions can frequently mean the difference between bills that are paid in a timely manner and relationships that eventually go south due to an ongoing technical disconnect.

“There’s always a technical lift — and it’s not just the money and resources, it’s often the human capital as well that needs to assist in getting these changes implemented,” Walsh says.

He explains that legal, finance and IT are often stakeholders in process modernizations, and that this can lead to a type of “institutional inertia” where businesses tend to ask, “Why change?” rather than make the necessary changes that will benefit them in the future.

It is often said that a failure to prepare means preparing to fail, and firms using legacy methods like spreadsheets, outdated processes, and entrenched workarounds often find it difficult to build and scale in today’s environment, where efficiencies matter and process optimization can further drive competitive differentiation.

Digitization Brings Benefits

PYMNTS has been covering how the contemporary, digital-first CFO stack already allows finance teams to do more with less and frees up their time to focus on business-critical matters by automating laborious and repetitive nonstrategic tasks.

Today’s CFOs can tap modern solutions to drive alignment and accelerate sustainable growth in even the most challenging times by being clear about strategic priorities and business assumptions and socializing them with the rest of management.

“Historically, the finance function and the CFO in particular was just about reporting results, but now the move forward is more of a strategic advisory role: How do we add value to the management team and company in total?” Walsh says.

The answer to that evergreen question of building a better business.

Walsh explains that by using tools to generate better insights and more efficiencies, the CFO can activate a new ability to “look across processes within the firm” and identify areas to add value or automate cost centers, as well as by stress-testing hypothetical scenarios across different priorities and with different tactics.

Looking forward, Walsh sees a combination of generative artificial intelligence (AI) and data analytics driving business benefits through next generation financial dashboards and report automation to integrate the whole management team into financially led decision-making processes.