An SME CFO Guide to Digital Transformation

Digital Transformation is often considered synonymous with Digital native organizations, i.e. Googles and Amazons of the world, or at most something to do with the ‘top end of town’ or ‘blue chip’, global multinationals.

Small and Medium Enterprises (SMEs) tend to be sceptical about this as it is either seen as a cost and resource-intensive exercise or regarded as something that will not deliver enough value due to the relatively smaller size of the SME. When it comes to the Finance functions of such SMEs, it becomes an even bigger challenge owing to the limited budgets and lean teams of a supposedly ‘back office’ function.

SMEs are the backbone of any economy. As per a report by the World Economic Forum, SMEs contribute up to 70% to global GDP and employment. The good news is that, in another report, 85% of SMEs realize the need to transform digitally to increase the efficiency of their operations, reduce costs and create competitive advantage.

It is also one of the most frequently asked questions I get from CFOs and Finance Leaders during my keynotes on Digital Transformation — how can a small-sized organization afford to embark on a Digital Transformation journey?

In this article, I will share FIVE steps that CFOs of SMEs can take to transform their functions Digitally. While at it, I will also bust some myths about why investing massive capital and resources has little correlation with the success of Digital Transformation.

Assess current maturity:

The first step is to engage with wider business to understand the current digital maturity of your SME. For an SME, a peculiar advantage is their rather closely-knit organization. Functional silos are less defined as opposed to their counterparts in bigger corporations. This can work to their benefit by approaching digital transformation needs from a business perspective as opposed to a standalone finance function point of view.

To achieve that, the first step is to understand the current maturity of the organisation and identify the biggest areas where Digital will deliver maximum business value. This needs to be a holistic exercise across the organization and must not be restricted to Finance only. SMEs have the further advantage of being agile and less bureaucratic, so mapping the biggest value drivers of automation can enable an end-to-end business case of digitalisation. For example, to create a seamless sales funnel for your B2B customer, you might want to invest in not just the front end of the sales portal, but how it integrates with the back end from invoice processing, discounts, claims and payment management. This assessment will help you focus and prioritize your efforts on only the biggest challenges with the highest ROI potential of digitalisation.

Clear roadmap:

Once the maturity assessment is done and the key business challenges and areas of improvement are identified, create a clear roadmap on what, how and when to solve. Do not tackle everything at once. Start with small 3-6 month sprints of projects that have the potential to deliver maximum value. Look at the initiatives end-to-end rather than just stopping at the edge of Finance functional boundaries. If reporting ROI on Ad-spend is a big challenge, do not just focus on finding a technical solution for transaction processing. In fact, involve the Head of Marketing from the beginning to find an end-to-end solution for transaction processing, data ingestion and visualization. Firstly, this approach creates broader ownership of digital initiatives, and secondly, the organization-wide synergies of digital solutions help lower the costs of these initiatives.

Leverage Cloud and Low/No-code tools:

The exponential increase in cloud computing power and the corresponding decrease in cost have made the development, deployment, and widespread adoption of digital tools much more accessible than ever. With this relative ease of access to cloud computing and storage at a fraction of the cost of an on-premise server — coupled with their ‘speedboat’ advantage — SMEs can move much faster with digital transformation compared to many established firms.

Use low and no-code tools like Microsoft Power Apps, Microsoft Power Automate Google’s App Sheet etc. For instance, Google App Sheet has built-in templates to create fully functioning CRMs, journal workflow automation, and Inventory Management apps. Similarly, for Data Preparation and extraction, SMEs can use Power Query, Power BI Datasets etc. depending on their size and needs.

These are just a few examples of how today SMEs can leverage low-cost Cloud and Low/No-code tools to build an entire tech stack without having a single on-premise server or deployment.

Start with Quick-wins and MVPs

Although it holds for all organizations, irrespective of their size, starting small becomes even more relevant to SMEs. Utilization of the restricted budget to its maximum is the key to ensuring CFOs can score more budgets and solicit executive buy-in. Start with micro-projects that create a big impact. A simple dashboard on Power BI visualizing daily sales, receipts from customers, payments to suppliers, cash-in-hand, and Inventory levels can create a huge impact. To start, you do not need to establish a full-fledged Data foundation. Data sets in Power BI would work just fine.

Similarly, using Microsoft Power Platform tools, you can simplify and streamline the month-end closing management process fairly quickly.

Quick wins unlock an important aspect where the teams start to see the real tangible benefits of automation right away and hence get mobilized behind the digital transformation. For a digital transformation success, having an engaged team, that believes in improving processes through automation, is of vital importance.

Choose success Partners wisely

No matter how much we try to embed Transformation into ‘business-as-usual’ the daily grind does take over. Sometimes it either seems a bit too much to do with an already lean team or it might not be the core strength of your finance function. In that scenario, it will be wise to choose a success partner who can help advise you on your Digital Transformation journey. Do not make the mistake of taking everything on your own. Partnering with outside experts can help you get an outside-in perspective and an independent view of your current digital maturity.

Digital Transformation is much more than just implementing a few tools or an ERP system. It needs to be deeply rooted in your business. Digital is how SMEs should do their business and manage operations. According to a Small Business Digital Transformation survey, SMEs who have evolved digitally have seen eight times more revenue growth than their counterparts.

With limited resources, a systematic approach as outlined above, can help SMEs drive huge opportunities through digital transformation, unlock significant efficiencies, and explore new avenues of business growth — all with the CFO as a co-pilot!