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Is this the future of the finance function?

Finance is evolving. But what does this mean for you, your team, and your organisation?

Before we dive into some of the key themes shaping modern finance teams, let’s explore why finance is changing now, because these forces give context to what we see on the horizon.

Brexit, Covid, automation – those are three major forces impacting many businesses right now. For some businesses, Brexit is bringing new markets into play while making others less attractive. And as Covid recedes, businesses are eager to bounce back to pre-pandemic activity levels. Automation is enabling new levels of efficiency, which is forcing many businesses to acknowledge that their competitors are doing more with less.

“Leading finance departments are guardians of enterprise value creation, demonstrating stewardship of their own spend by lowering absolute costs and shifting work towards more value-added activities.”

– McKinsey: Finance 2030: Four imperatives for the next decade

 

How exactly are these forces affecting the finance function?

Embedding across the business

For years now, there has been pressure on finance teams to step out of their comfort zone and become more integrated with the business. And this trend is only continuing as organisations recognise the fundamental importance of building a business that is financially efficient in every domain.

This may require financial analysts to work more closely within specific teams to fully align team-level priorities with the company’s core strategy. In addition to strong interpersonal skills, your financial analysts will need a willingness to explore new facets of business performance and to develop a deeper understanding of functions like product development, marketing, sales, and IT.

“The finance function of the future will have a refreshed purpose, enabled by people, technology and data – but not as you know them.”

– EY.com

From pure accounting to management

The understanding of the finance function has been evolving for decades now, with more and more organisations understanding the value that finance teams can bring, far beyond the core processes of managing money and statutory reporting.

Finance has a complete view of the business, something that is immensely valuable to senior leaders. In most cases, the CFO or finance director can – and should – work alongside the director or CEO to influence strategy.

Moving away from pure accounting and becoming more involved in management, reporting and strategy, may require additional skillsets, including data analysis, reporting, presenting, and even training.

For example, forward-looking finance teams may need to create and deliver monthly performance reports to senior executives. Or they may identify issues surrounding procurement which need to be addressed with refreshed policies and internal training.

Instead of simply responding to activity and accounting for the flows of cash and capital, finance is heading upstream to intercept problems and influence strategy.

“Finance leaders further differentiate themselves by spending a greater portion of their time on value-added activities, such as financial planning and analysis (FP&A), strategic planning, treasury, operational-risk management, and policy setting.”

  • McKinsey: Finance 2030: Four imperatives for the next decade

Achieving more with fewer resources

While the receding pandemic appears to be morphing into a booming economy, many organisations have been squeezed during the Covid crisis, either in the form of reduced income, or because of staffing issues (including homeworking, isolation and illnesses), and are now operating on reduced budgets. Just as organisations want to bounce back, there is pressure to control costs, to do more with less.

59% of CFOs worry about a rise in COVID-19 infections affecting returns to work.– PwC CFO Pulse Survey

Finance teams can approach this in several ways, either focusing on value creation or cost reductions. In practical terms, this might mean analysing current processes in departments like procurement, accounts payable, accounting and sales, to identify inefficiencies and opportunities to streamline and automate.

If software can receive, analyse and process your incoming invoices, and also understand, allocate and record payments going out, then you may be able to reassign accounts assistants and technicians to value-adding activities, such as monitoring cash flows, reporting and analysing activities.

As your finance team evolves alongside your changing technology and shifting priorities, you may need to re-evaluate the types of professionals you recruit. For example, managing and monitoring automation solutions does not necessarily require a fully trained expert, but you need to know that future hires are prepared to embrace a new vision of what finance means, and interested in further training to add these skills to their personal portfolio.

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