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Business transformation: revolutionising finance and payroll functions

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Business transformation: revolutionising finance and payroll functions

boardroomsuperadmin Business Insights, Payroll

Adapting to change is vital for the survival of any business, and if you’re exploring how to respond to the changing landscape in your market, you will have heard the term business transformation.

Business transformation describes the fundamental and significant changes that an organisation undergoes to improve its operational and financial performance, competitiveness and strategic position. It can involve transforming technology and digital applications, people, culture, organisational structure, processes and strategy.

Successful business transformation requires strong leadership, effective communication and the commitment of the entire organisation to embrace change; in short, it requires an effective change management strategy and execution.

A subset of business transformation is another industry buzz phrase; digital transformation. It is common knowledge that the effective use of technology improves business efficiency, reduces costs and ensures compliance. However, adjusting to the expectations of digital-savvy consumers can be a major challenge for businesses in Hong Kong.

This article discusses the imperatives of digital transformation in relation to payroll and finance functions for Hong Kong businesses and the challenges this entails. It also explores solutions, with advice for business leaders and entrepreneurs on how they can successfully embrace the transformation of these key functions for the future health of their businesses.

How digital transformation is revolutionising finance and payroll

Digital transformation in finance and payroll has become critical in the modern business world, where AI and automation are improving efficiency and transforming these functions into strategic decision-making departments.

Advanced data analytics in finance allows for more precise forecasting and informed decision-making. Machine learning, for example, can analyse market trends and customer data and reduce or prevent fraudulent activities. Forward-thinking industry leaders are also looking to digitalise processes using automation to transform manual finance functions in order to boost productivity.

In payroll, automation and cloud-based systems are reshaping employee compensation. Real-time processing ensures accuracy in payroll calculations and can adapt to various tax laws. Additionally, self-service payroll portals increase transparency and employee satisfaction by allowing individuals to manage their payroll information.

Payroll and digital transformation
Ken Wong, Managing Director Asia, Payroll at BoardRoom, shares his views on this digital transformation in relation to payroll.

“In the past, the process of paying employees has meant you’re calculating working hours, adding in the allowances, subtracting deductions, calculating the statutory contributions and then paying the employees at the end of the month. Often, a simple spreadsheet or off-the-shelf software has been used to manage all these calculations.”

But this process is time-consuming and prone to human error, says Ken. Payroll issues have become more complex, and staff and organisations want and need more convenient ways to manage payroll that comply with ever-changing regulations and offer real-time data. The complexity of managing payroll is also heightened for corporations operating across multiple countries with differing local regulations and cultural norms.

Among other forms of digital transformation, cloud computing and data analytics are becoming increasingly popular tools that Hong Kong businesses use. Cloud technology and automation are transforming payroll systems, leading to more integration and transparency and reducing the risk of human error.

“In short, the need for real-time data for instantaneous responses and requirements to stay abreast with regulations and changes means your simple spreadsheet or your off-the-shelf software does not cut it anymore,” Ken concludes.
Finance and digital transformation
Finance functions such as accounting are also rapidly evolving, says Yang Shuzhen, Accounting Director at BoardRoom. “Accounting generally is very paper-based, which creates a range of problems.”

Documents can get lost or misfiled over time, which may result in audit issues. Hard-copy documents and files are accessible only from one location, which makes them time-consuming and cumbersome to manage. “That has triggered the digitisation of accounting documents through technology such as OCR (Optical Character Recognition). Maintaining soft copies is so much easier and it means supporting documents are all saved with the transaction itself. It simplifies and consolidates files, which is also much more convenient for reviews and audit checks.” says Shuzhen.

The increased need for greater transparency, efficiency, productivity and accuracy is driving the digital transformation of processes, especially in accounting and payroll, functions that are traditionally resistant to digitisation, digitalisation and automation. The digital literacy of staff, external stakeholders and customers has also added to expectations that organisations and businesses will have cloud-based processes that make interactions instant, accurate and accessible.
Digital transformation

Overcoming legacy system challenges

There’s no doubt that digital transformation is key for businesses to succeed in the future, but there are barriers to success. The key challenges businesses face when attempting to update legacy systems and processes include:

Resistance to change
  • One of the most significant barriers to digital transformation in finance and payroll is overcoming the fear of change, particularly concerns about increased errors and a lack of control if processes are changed or automated.
  • There's also a tendency to stick to 'the way things have always been done’ without understanding why.
  • Educating staff about the benefits and rationale for change, including legal requirements and regulations changes, can help. For example, the belief that to be compliant, all employees must receive a physical payslip when, in fact, soft-copy payslips are perfectly acceptable.
Skills gaps and resource constraints
  • The skill gap presents a significant challenge in implementing digital strategies. Many companies struggle to find skilled personnel for digital transformation, especially when resources are already tied up in legacy systems.
  • Skills shortages are preventing many companies from realising their ambitions too. A 2022 survey on technology adoption found that while 73 per cent of respondents in Hong Kong said their organisation had a digital transformation strategy, 35 per cent could not find the staff to implement it.
  • Prioritising training and strategic investment in new technologies is key to overcoming skills gaps and short-term resource limitations.
Integrating automation into existing technology
  • Businesses often attempt to integrate new technology with old systems, which can be counterproductive.
  • A complete overhaul, rather than mere integration, is sometimes necessary and a simpler solution to truly harness the advantages of modern technology.

    • Despite these challenges, the benefits of embracing technology in finance and payroll are undeniable, with automation simplifying operations and enhancing accuracy and compliance. Reinforcing this is the fact that more than 90 per cent of survey respondents reported that their organisations would be adopting more technology by upgrading existing technology and increasing investment.

    Overcoming legacy system challenges

    Strategies for navigating digital transformation

    Organisations can overcome legacy pitfalls and enact meaningful change that leads to digital and business transformation by implementing appropriate strategies. Organisations can adopt a number of strategic changes.

    • Start to shape a growth mindset by incorporating small changes such as transitioning from paper-based to digital record keeping. Small, successful changes lead to bigger mindset shifts among team members over time.
    • Rethink the allocation of budget and invest in future-focused systems rather than trying to maintain or update expensive legacy systems.
    • Empower leaders with clear visions and goals who can communicate those goals to their teams and provide regular updates on progress, challenges and successes in team meetings via staff newsletters or internal web portals.
    • Engage with professional service providers such as BoardRoom, who can assist organisations to adopt and administer more efficient payroll and accounting systems and accelerate their digital transformation journey.

    Advanced analytics and business intelligence in action

    Adopting advanced analytics and reporting tools through a business transformation process is a fundamental shift towards strategic decision-making. Digital technologies enable organisations to unearth actionable insights, leading to better planning for future needs as well as cost savings.

    Shuzhen advises businesses that if they can upgrade their systems, even gradually, they can start creating comprehensive data sets. Advanced analytics and reporting tools will then transform their accounting and payroll functions.

    For companies entrenched in legacy systems, the journey towards digital transformation doesn’t have to be overwhelming. Small yet impactful steps can be taken by transforming a single process or function with advanced analytics.

    Aligning business transformation goals with core business functions ensures that digital transformations are cohesive and effective. When businesses are capturing data, they need to understand why they are capturing it, what they want to analyse and why. This is where external advice is crucial for businesses as they navigate the digital transformation process.

    Advanced analytics and business intelligence

    The future of digital transformation starts here

    As the Hong Kong business environment continues to evolve, leaders and entrepreneurs will need to embrace digital transformation in their payroll and accounting functions to stay competitive and compliant. Such transformations can be challenging, but the rewards of increased productivity, transparency, cost savings and compliance are well worth the investment.

    BoardRoom has partnered with businesses of all sizes in Hong Kong to help guide them through their digital transformations, ensuring a smooth and efficient transition in line with their broader business transformation goals. Offering well-planned strategies that overcome legacy issues and drive business success, the BoardRoom team of payroll and accounting experts are ready to talk to you today to help you achieve your business goals.

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