This article was first published in the September 2017 China edition of Accounting and Business magazine.

It’s a workday afternoon at the end of April. Wei Meizhong, CFO of Zhejiang-based Dahua Technology Co, is waiting for his flight to Hangzhou in a KFC outlet at Beijing International Airport. He has just bought himself a set meal via the smartphone-installed Alipay, collected the e-invoice for this purchase by scanning the QR code on the bill using his Wechat, and uploaded it to Maycur, the mobile expense reimbursement platform used in his company.

He then quickly browses all the pending items for his approval in Maycur, and signs off on the application for the travel expense reimbursement of 8,000 sales reps in his company for the previous month, which is contained in one consolidated invoice from Ctrip, a travel services provider. This contrasts starkly with the 40,000-plus separate invoices for a monthly travel expense reimbursement that he has had to deal with in the past.

‘With infinite iterations of mobile internet technology nowadays, financial management in Chinese companies is taking on a more interesting and smarter look,’ says Wei. Born in the 1970s and with a passion for technology, he is one of a new breed of financial professionals who update traditional financial management practices as technology evolves.

At CFO World, we have interviewed market-leading CFOs in China over the past three years, who observe that smart finance is now a future in the making. For the leading CFOs in China, this disruptive revolution in finance presents three key challenges – to perceive the change, to seize it and to lead it.

Perceive the change

Since July 2016, catering businesses in China that have applied for VAT e-invoicing have no longer been able to provide paper-based invoices, with the regulatory authority reiterating the legal validity of digital platforms. Thanks to support from Wechat, the  smartphone ‘super-app’, more Chinese customers are willingly on board with e-invoicing. It is not a dramatic change, but it will nonetheless disrupt the business model of accounting and overhaul all the established logics of financial management.

The prevalent use of e-invoicing unifies the flow of capital, invoices and information from the start of a business operation, fundamentally elevating the responsiveness of the accounting system and enabling it to synchronise with the workflow.

In addition, the e-invoice is generated with the extra benefit of wiping out the mistakes that commonly blot manual work, which further leads to automatic generation of the original account books. In the light of this, CFO World makes the startling prediction that ‘e-invoice will usher in an era of authentic accounting in Chinese enterprises’.

Lastly, when it comes to the preservation of primary-source documents, electronic account books based on e-invoices preserve cost and traceability, which aid the audit process, as well as ensuring that all transactions are recorded in a transparent manner. The sheer magnitude of oversight by e-invoice will compel Chinese companies to embrace the dawn of full compliance.

All these changes are also a plus for regulatory authorities and audit firms. Jon Raphael, chief innovation officer at Deloitte & Touche recently wrote: ‘In the near future, artificial intelligence technology can be used to identify, extract and process all kinds of financial statements and relevant documents attached to the audit confirmation letter, and complete the audit process in its entirety, engaging no auditors.’

Seize the change

In the transition towards smart finance, the first item on the agenda is redeploying the mobile internet-based operational system. For one thing, the open access and ease of use of mobile internet mitigates the conflict of stakeholders and operators across different links in the process. For another, the financial shared services sector, after holding out for more than a decade with seemingly bleak prospects, has been enjoying explosive growth for three years running thanks to the empowering mobile internet, with more Chinese companies voluntarily employing financial shared services to enable a brand-new transformation of financial organisation.

Considering the pervasive application of electronic transaction documents in accounting practices as well as the convenience provided by supply-chain-wide electronic transaction data exchange, financial shared services is expected to be the catalyst for a more substantive return on investment in operational cost reduction.

ZTE’s Financial Shared Service Center, already in service for a decade, puts things in perspective. One fundamental change ZTE has made over the last few years is to embed third-party application modules for day-to-day expense management, such as flight ticket and hotel booking and office supplies procurement, in its operational system against the bigger picture of the broad-ranging application of mobile internet and cloud computing. These modules give ZTE the ability to handle electronic transaction data exchange in its localised supply chain of in-house expenses (similar to the application of internal e-invoicing), followed by online bank payment to expeditiously reimburse associates. No paper-based invoice is needed in advance throughout the cycle, and the centralisation of invoicing effectively reduces the workload.

The model of the financial shared services centre is indeed the organisational reform agent demanded by our transition towards smart finance. First, basic functions like accounting are distributed to other departments, giving high-calibre finance talents more time to focus on business operations and strategic development. Second, the integration of business operations and finance in the financial shared services centre, built on the founding block of data flow, accelerates the pooling of data assets – originally scattered around  different areas of the business – in the ‘mining pit’ housed in the shared services centres, an arena where smart finance can distinguish itself.

Lead the change

At the end of the day, how will CFOs in Chinese companies fare in this smart finance journey?

Since its inaugural issue in 2005, CFO World has studied the effective deployment of the functions of CFOs in China. The last dozen years have revealed a notably deeper involvement of CFOs in corporate operations and management, which is a natural reflection of their position as the hub of operational processes and a transition for the finance team from accounting to management.

From Chen Hu of ZTE to Wei Meizhong of Dahua Technology, the profile of CFOs as preemptive leaders in smart finance transition is clearly drawn. The presence of smart finance that leverages technology to drastically drive operational efficiency will improve the efficiency of the finance function and allow a large number of financial chiefs in Chinese companies to add to their digital skills-base.

At CFO World we are convinced that the coming five years will see the fruition of Smart Finance 1.0, whose transition is empowered by ‘mini-improvements’ backed by the instrumental dividends of mobile internet in the hands of CFOs in Chinese companies and the release of productivity from financial shared services centers.  

Tian Maoyong is publisher of CFO World magazine