What exactly does digitalization mean in a business setting?
What is Digitalization?
First, it is essential to understand that there's a fundamental difference between digitalization and digitization, as explained below:
Digitization involves transforming paper or physical documents into digital documents. For instance, converting a PDF invoice into an e-invoice can be considered digitization.
On the other hand, digitalization is a more complex transformation of a business model geared towards adopting digital processes while ditching analog/manual procedures. For instance, Accounts Payable (AP) automation would be regarded as digital transformation.
Digitalization in the context of your business involves adopting digital technologies that transform core operations in multiple areas, from handling financial processes to procurement and interacting with your trading partners, including customers.
That said, successful digitalization is a far-reaching process that involves more than adopting a new digital solution.
An effective approach to digitalization requires dedication and commitment from the entire team. That way, it becomes easy to determine which processes you can digitize and, most importantly, roll out digitalization without disrupting your day-to-day business operations, supply chains, or customer interaction.
Benefits of Digitalization
Digitalization brings a host of benefits to your company.
While these advantages may differ depending on your business functions, going 100% digital will always usher in the following five benefits: shifting from paper to electronic invoices, implementing e-procurement, or adopting digital supply chains.
1. Increased Transparency
Sanctioning a digitalization strategy like ERP or SAP system integration can increase visibility on the current processes, enabling you to pinpoint spending patterns and trends that you may not have otherwise uncovered.
The ability to analyze day-to-day data in real time allows you to zoom in on all aspects of your business that turn the wheels.
Another way to view this benefit is to consider the transparency between departments. For instance, in a digital workplace, customer onboarding and accounting teams can see which clients are behind on payments.
This way, both teams can seamlessly resolve the problem instead of waiting on accounting to loop in every debtor.
2. Cost Savings
Many organizations spend significant money and time maintaining outdated manual business processes and systems.
Undertaking a digital transformation can save money and time upfront by integrating more efficient and quicker problem identification.
Adopting digital supply chains, for instance, can reduce manual processes and administrative work on your team, freeing them from other tasks. In addition, it minimizes human error, which means gaining back the money lost from fixing those oversights.
Further, supply chain digitization creates value-producing opportunities such as automated invoicing, allowing you to get paid faster.
3. Better Decision Making
Digital transformation goes hand in hand with data management and analysis.
Leveraging digital technologies allows you to see what’s happening in your industry and customer base.
And because digitalization increases operational transparency, it provides a single source of information that all departments, including the managerial team, can trust.
By extension, this allows data-backed business decisions to create a more robust overall company culture. This explains why 39% of CEOs have prioritized digital transformation for their CIOs.
4. Improved Cash Flow Management
More than 85 percent of business leaders expect digitalization to improve cash flow control and reduce Days Sales Outstanding (DSO).
Integrating a cloud-based ERP or a dedicated setup like Microsoft Dynamics 365 in your accounting system, for instance, can help provide a clear picture of your cash position.
A digital solution can help improve cash flow in the following ways:
- Generate late purchase order reports to let you know what isn’t shipping.
- Generate purchase and planning reports, allowing you to know what you need to restock, what’s in excess, and the best time to restock.
- Automate workflows, saving you time.
- Enabling you to keep up with overdue invoices.
- Access to instant, accurate, real-time reports of the money flowing in and out of your business.
5. Fewer Errors
Some human errors might seem insignificant but can cause your business to lose millions yearly.
For instance, at the height of the Covid-19 pandemic, Citigroup credit department employees made a clerical error, sending nearly $1 billion to Revlon Inc.’s lenders, who were involved in a legal tussle with Revlon over unpaid monies. Of course, the lenders weren’t willing to give back the money, prompting Citigroup to file a lawsuit.
Factors like lack of attention and fatigue can result in mistakes like your employees needing to remember to complete simple tasks, sending invoices to the wrong client, or typing mistakes that can impact terms in an agreement.
Implementing digital technologies allows for streamlining workflows, resulting in fewer human errors. And, because you can execute business processes faster thanks to these streamlined workflows, your organization can save on operational costs.
How to Get Started with Your Digital Transformation Strategy
To achieve the benefits of business digitalization, you’ll need to set a foundation that benefits your company and trading partners.
Determine Areas That Would Benefit from Digitalization
The best approach to digitalization is to analyze your business processes one by one to determine which ones to digitalize.
For instance, are you still receiving and sending paper invoices? Transitioning to e-invoices can help eliminate monotonous tasks like manual data entry, physical invoice verification, and paper storage by enabling automated e-invoicing directly into your ERP system.
As a result, you’ll save money, speed-up invoice processing, and reduce errors significantly. Besides, with all your invoice data saved in a central location, you can search and compare information in a few clicks, something that’s possible with paper invoicing.
Get Your Team Involved
After you’ve identified a business process to digitalize, it’s time to bring your team on board.
Remember, digitalization is a collective operation that requires participation from everyone on your team.
The idea is to ensure everyone sees the bigger picture and how your organization gains by digitizing financial processes.
When everyone is involved, it becomes easier to execute your digital transformation strategy to fruition.
Team up With the Right Service Provider
Successful digital transformation creates connected systems that streamline crucial business aspects like finance and operations.
When rolling out your digital initiative, partner with a reliable and experienced service provider like Unimaze to integrate with your existing ERP or other accounting systems.
By working with electronic business experts that can implement digital business processes without disrupting your system, you can go 100% digital swiftly and, by extension, start to leverage your transformation sooner.
What’s Your Next Move?
Talk to us!
The ravaging Covid-19 crisis has made it clear how vital digitalization is to the survival of businesses.
While the benefits of digital transformation extend well beyond this challenging period, the time to go digital is now.
Unimaze is a leading electronic business service provider focused on fostering a digital ecosystem through complete e-procurement automation and e-invoicing processes.
We’ve created a procure-to-pay solution that ensures your business doesn’t have to deal with the inconveniences and shortcomings of analog processes.
Book a consultation session to kick-start your digital transformation journey today.