5 ways finance teams can stay ahead of the curve
In September 2015, industry analyst David Axson wrote “Finance 2020: Death by digital,” and predicted that by 2020 finance would be entirely unrecognizable from the accounting departments of the past. Consider what’s happening in finance: Complex legacy systems are being replaced by cloud-based platforms that allow entire enterprises to create up-to-the-minute reports that used to take weeks to prepare. And machine-learning and robotic systems that seemed like science fiction now ruthlessly automate so much of the finance function that finance teams are on their way to spending 75% of their time on predictive analysis and decision support. Artificial intelligence will soon be reliable enough that finance teams will comprise AI-assisted statisticians, data scientists, behavioral economists, and even anthropologists.
Anyone who didn’t take Axson seriously in the last year and a half is likely now a step behind. New research by the American Institute of CPAs (AICPA) and Oracle identified five ways the most forward-thinking, successful finance teams stay ahead of the pack.
1. Develop automated accounting operations
End-to-end processes (such as procure-to-pay or hire-to-fire) are increasingly being migrated to global service centers, where they are streamlined and automated. Machine learning and embedded controls improve efficiency, promote better risk management, and improve compliance. Together, these technologies help the finance function to become more efficient and agile.
“You leverage the scale of a shared service but at some point, you should also be able to have a very, very high degree of automation,” said Khozema Shipchandler, CFO of GE Digital. “And to me, what that really means for the finance team is that they can spend all of their time on forward-leading activities like strategy, like making our products more competitive price or cost wise, helping the operating team win in the marketplace. And so the whole nature of what a finance team tends to focus on is change.”
2. Provide decision support and performance management analysis
The finance function is shifting from reporting on past performance to providing in-depth analysis of potential strategies and business models. This change in focus requires finance to have a broader range of subject matter expertise as well as communication and leadership skills. Modern financial organizations work on cross-functional teams, providing complex data analysis and strategic recommendations to lines of business as well as company leadership. This partnership between finance and the business cascades the CFO’s influence, helping to ensure that decisions are based on solid analysis of information from across the organization, and that performance is managed in the interest of the company’s stakeholders.
3. Become subject matter experts
The finance function has found a new voice in this paradigm — a voice of authority based on a analytics expertise, as well as the opportunity to benefit from best practices by streamlining more traditional, transactional finance tasks into shared service centers. Today’s cloud-based technologies allow finance to study data from across the organization, identify patterns, and work closely with the business to develop strategies.
“We are data geeks here – we have a maniacal focus on cost containment,” says Brett Sweet, CFO of Vanderbilt University. “In addition to that, we look at many financial and non-financial KPIs to measure how we are doing against our peers and even against other industries.”
4. Embrace predictive analytics
Modern finance organizations are adept at using predictive analytics to generate new insights, but the financial planning and analytics (FP&A) team must be able to recognize whether financial and non-financial key performance indicators used across the business are achieving the company’s desired outcomes. Having the wrong KPIs can lead to “dysfunctional” behavior where performance targets are met yet critical areas like brand loyalty or user experience suffer.
“We use a digital command center to monitor our new KPIs in real time,” notes GE Digital’s Shipchandler. “In addition to monitoring traditional KPIs, we started incorporating with some non-financial metrics that immediately reflect on the financials. Things like product engineering, completion rates, cycle times, and product engineering quality.”
5. Focus on team management and development
The modern finance paradigm isn’t static; it’s going to be a state of ongoing transformation, unlikely to settle into an easy solution anytime soon. Finance function management should be revising the roster, retraining for new concepts, and remaining flexible.
“The most essential new talent will not be “finance” talent at all. Leading companies will hire statisticians, data scientists, behavioral scientists, economists and even anthropologists,” Axson writes. “This brings new value to the finance profession as a whole, opening up exciting possibilities for what tomorrow’s finance career can be.”
To improve finance function’s strategic influence and remain competitive, the state of transformation must actually become business as usual. Transformation has to be reevaluated constantly, measured, and managed to ensure modern finance functions remain agile.
The source of the original article is businessinsider.com