For many large companies, the challenge of meeting the internal control requirements of Sarbanes-Oxley, as well as the fiendishly technical transfer to international financial reporting standards, is over. Time to relax, pat yourself on the back and pour yourself a large whisky, perhaps? Not a chance, say the experts.

The worst may be over in terms of compliance, but the challenge of getting the most from your finance function has only just begun. ‘If you remember the late 1980s and the early 1990s, the focus in finance departments was on taking out costs,’ says Scott Parker, a partner at KPMG and head of its financial management business.

‘In the mid-to-late 1990s, people were increasingly focusing on finance becoming a business partner – not just counting the numbers but getting more involved in the business and decision-making process. Recently, there has been a huge focus on control and compliance. We are now at a pivotal point,’ says Parker.

It’s a compelling story, and a neat way of looking at how the modern role of the finance director and chief financial officer came about. They are not just number-crunchers, but strategic heads, focused as much on cost control as on counting costs, and responsible for the governance challenges of the post-Enron business climate. It’s enough to make any finance head sweat. ‘The reality is, the CFO has got to do really well and excel in those areas at the same time,’ says Parker.

So what is driving those changes? Parker says the increasing involvement of investors in seeking clarity about what they are investing in is one such challenge. ‘Investors are looking for greater insight into the business in which they are investing. CFOs are spending a lot more time talking to investors and analysts than they did in the past. As a rule of thumb, CFOs can now expect to spend as much as 20% of their time talking to analysts and investors,’ says Parker.

In part, that has come about because FDs are uniquely placed. With concerns about the potential gremlins that could be hidden away in a business, investors want to get some reassurance from finance, which looks scrupulously at cost control, and is most likely to be first to spot the weaknesses, know where the cost overruns are likely to be, and perhaps identify growth areas.

‘An area of particular concern is the accuracy of forecasting,’ says Parker. ‘CFOs are rebuilding trust with the capital markets.’ Company directors are likely to be knocking on the finance director’s door, too. ‘The board is increasingly going to want more of your time thinking about the key decisions.’

The strategic role is something that observers have been seeing across the board. BAA, until its recent sale to Spanish group Ferrovial, is one example. Margaret Ewing, the company’s finance director, split the airport group’s finance function into two: a group looking at compiling the numbers, and a group making key decisions and looking at it strategically.

Those splits are fairly evident, Parker says. One development has been towards getting stronger people into the finance function itself. ‘There’s a growing importance on a really strong number two,’ says Parker. After all, someone needs to run the department on a day-to-day basis if the finance director is unable to, advising the board as well as investors. Today’s second in command is doing the job the finance director did 15 years ago.

Parker believes that finance functions are under a lot of strain at present. ‘Finance people are spending an awful lot of time trying to collate data,’ he argues, when really they are capable of doing much more. ‘The phrase we use is that a lot of finance functions are full of acrobats with their feet stuck firmly on the ground.’

The question is how to achieve this more strategic role to get information to people quickly so they can use the skills and experience they have to produce the insights they are capable of.

And it’s going to get worse in some senses, according to Steve Maslin, head of assurance at Grant Thornton.

Having had a degree of success in controlling the remuneration of directors by pushing for disclosure and influence on the remuneration committee, investors are now thinking of doing the same for audit committees. ‘There’s a big push by investors to have a vote on the audit committee report,’ says Maslin. ‘I think that they are going to push it over the next few months.’

Parker has a few ideas on how to meet their demands. In many cases, better use of technology could be one solution. Many people, he says, are still using Excel when more powerful tools are available.

Another challenge is the across-the-board demand for people to raise their game. ‘The real priority is to upskill people. You need to increase people’s capacity so they can accomplish more,’ he says.

Finance functions have to do more analysis too. ‘In a lot of organisations, doing finance is still seen as people looking at financial information. The reality in most businesses is that the financial information is only part of the story.

‘You also need to know: where are we on market share, on investment returns, and on advertising? It’s not pure financial returns. If you want to understand performance you need a wide range of key performance indicators,’ says Parker.

‘Finance is well placed in that it has got skills and expertise, the discipline of making sure that any information is pulled together with a high degree of integrity.’

And then there is compliance – the increasing rigour of which has been the story of the profession for the past few years. Accounting firms have grown much richer from advising on those issues as companies have paid soaring fees to deal with new demand.

Maslin says there is a need to embed the principles and use them to understand the business. Far from seeking to slim down finance functions after having met the compliance challenge, businesses are keeping people on to maintain their systems and to make the best use of them, he says. ‘You have to know the control systems are living and breathing,’ Maslin says.

The cost of doing so can be reduced, though. ‘In my experience, most companies are trying to figure out how to comply more efficiently and reduce the cost of compliance,’ explains Parker. A new KPMG survey shows that FDs are expecting compliance to cost more going forward, not less, and this is a worry for many.

Businesses need to reduce the cost of compliance to standardise, he thinks. Some businesses will be complying, but not in a standardised way. So they might have 50 businesses, and 50 purchase-to-pay systems associated with each one. ‘The risk in that environment is greater. There’s no reason why you can’t have a single, standard global process enabled by a single piece of technology,’ says Parker.

The shared services model is also worth considering. Shared services centres consolidate activities from multiple business units into one low-cost location. Such centres are often based in Eastern Europe more than in India and China for European multinationals.

‘The low cost of labour in other countries is one incentive. The other thing is access to multilingual labour forces. The difference between US corporates and UK/EU corporates is that the US companies can open offices in India because English is spoken by many. A more complex range of languages is needed for European businesses, and the number of countries in which you can access those language skills is not as common,’ says Parker.

The shared services model is four times as popular as straightforward outsourcing at the moment. And where it used to be simply back-office functions, we’re increasingly seeing regular reporting activity centralised in such places.

Drinks company Diageo is one company that has led the way with shared service centres, having set one up in Budapest, Hungary. It does much of the reporting and analytical types of activities, Parker says. ‘Finance has to balance three things: maintaining and consolidating trust internally and externally, running an efficient operation, and providing insight to business performance.’

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