Finance function: what the future holds

Back in 2000, KPMG Financial Management made a number of predictions about
how the finance function would look and operate in 2010. In the white paper
titled Future of Finance: a guide for business users, the most alarming
prediction was that the finance function would no longer exist.

While not all of our predictions have been fully realised, there’s no
escaping the fact that finance, and the nature of business as a whole, has
changed significantly in the last ten years. Influenced by the rise of global
markets, giant advances in technology and changes in the investment landscape,
the finance function of today is much more than the ‘bean counter’ of the past.

There were a number of other predictions contained within the paper, most of
which have to a greater or lesser extent come true. For example, many
transactional processes would be outsourced; responsibility for some financial
activities would reside within the business; the roles of the CFO and chief
operating officer would merge and finance would become a true partner to the

What has not changed, however, is the fundamental role of finance. Finance
still needs to provide insight to the rest of the organisation, ensure effective
control and risk management and drive its own and the organisation’s efficiency.

Looking ahead to 2020, we expect these objectives to remain the same. What
will be different, however, is the proportion of time and effort spent on each
and how they are delivered.

We have got to where we are today due to a combination of market forces. We
have seen the collapse of Enron and the massive knock-on impact of
Sarbanes-Oxley on risk management; we’ve witnessed the stealthy pace of
globalisation and the rise of the emerging markets. Each of these events
provided huge
challenges to the business environment and has driven change right across the
finance function.

In response, finance focused much of its efforts and change activity on
creating a robust financial control environment and leveraging global cost
saving opportunities through the creation of transaction-based shared service
centres. As a consequence, finance ended up with less time to undertake its
insight role and to proactively drive financial performance. Now, increasingly
aware of this lack of focus, organisations are seeking to recover this lost time
by embedding financial controls in technology and refocusing team efforts on
enhancing financial performance management.

The 2020 challenge

By 2020 finance will have become ‘decision-support’ staff or ‘business
partners’. Unfortunately today many of the skills and capabilities to undertake
these new roles are missing. Over the next 12 years finance professionals need
to be converted from spending 85% of their time extracting financial data and
15% adding insight, to 95% of their time adding insight. To achieve this, they
need additional training and support.

With a strong eye on the numbers, the finance professional of 2020 thinks and
acts like a business entrepreneur. Proactively working with the business, they
consider the internal and external business environment. Applying their
understanding of key issues and drivers across the industry, they identify
potential opportunities and risks to the business. In short, the future finance
professional is as much a strategist as an accountant.

If you are looking at being one of these strategists there are a number of
steps you can take now to ensure you are well placed.

Make it simple: Drive the global simplification agenda and
enable the business to benefit from global processes run on a standard suite of
systems underpinned by a consistent data set.

Share excellence: Seek opportunities to fully automate
existing processes and drive migration of lower value, mid-office activities to
centres of excellence and shared service centres.

Challenge the business: Review the role of finance in
driving decision-making so that you have a clear understanding of ways in which
finance can add value.

Time to skill up: Ensure that your finance team has the
right skills and competencies and consider changes to your current training and
development programmes to ensure they are relevant for the 2020 environment.

Walk in their shoes: Encourage rotation between finance and
the business to gain valuable insight into how you can better support them in
delivering the organisation’s strategy.

A day in the life of a finance chief in 2020

Ellie has been with the firm for nine years. From shop floor in Frankfurt; to
behind-the-scenes transaction processing for its mail order arm in New York; to
investor relations in London before becoming head of a shared service centre in
Taipei, she’s an all-rounder as far as Dingo is concerned. Although not
qualified as an accountant, her appointment as FD is the culmination of her
earlier exposure to the operational and financial sides of the business.

8am: ‘Update for Ellie Graham’, shrills Ellie’s computer-based assistant
(known as an avatar). MBA holder Ellie, newly appointed FD at retail
conglomerate Dingo, has just returned from a successful role in Asia Pacific
where she headed up the region’s buying operation.

9.30am: Ellie puts in calls to Mumbai and Seoul to find out exactly what’s
been going on in their respective operations. Fortunately, digital dashboards
have taken the guesswork out of predicting potential issues. These days, they
are automatically flagged for her.

11am: Online meeting with finance operations director. Discuss the closure of
shared service centres in India and Vietnam, and identify new technology
solutions to do the jobs of people more cheaply.

2.30pm: The avatar informs Ellie that a competitor’s shares are in freefall.
An investor spotted that the organisation failed to meet carbon reporting
standards in a ‘competitor’s online statement’, meaning they now face
prosecution in several countries. The organisation has seen 50% of the value
wiped off its share price.

4.30pm: Innovation meeting with head of business development to discuss
recent acquisition of two Eastern European opticians. Although a new line for
Dingo, the businesses’ support functions are already integrated into Dingo’s
shared service centres and their systems migrated and hooked up to live digital

6pm: Dingo’s daily results are downloaded directly to the market. As Europe
closes, analyst confidence in Dingo remains calm despite the almost inevitable
collapse of its rival.

Rodger Hill is a partner and UK head of financial
management at KPMG

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