PREDICTION 1: CFOs become more strategic
The core work of CFOs – corporate governance, stewardship, compliance and financial management – will increasingly be outsourced to shared service providers or automated by sophisticated accountancy software. As this happens, the CFO will have more time to concentrate on guiding the strategies of their companies. CFOs are a unique position of dealing with almost every aspect of an organisation’s operations – everything from marketing and sales through to manufacturing. This provides them with the insight to help guide an organisation’s direction. CFOs will become enablers to business growth, helping departments make the case to the board for worthwhile projects that are strategically advisable. Rather than just making sure investments stack up from a financial point of view, CFOs will make sure they make good business sense too.
Prediction 2: CFOs will view IT as a profit-centre
IT has traditionally been seen as a cost, and the role of the CFO has been to limit this cost as much as possible. The penetration of online – or cloud – software will change this and allow IT to act as a profit centre. This means IT resources will eventually all be bought on a subscription model, moving from the balance sheet to profit & loss, from capital expenditure to operating expense. As well as making it easier for CFOs to forecast, this model will also increase agility and the performance of their IT infrastructures (as they are outsourced, they are open to competitive pressures, which usually improve quality). Importantly, it will also allow a greater variety of projects to be undertaken. CFOs will be much more easily able to justify the costs for short-term pilots which, if successful, can be developed to drive business growth.
At present, business spend the vast majority of their IT budgets on maintaining legacy systems. In the future, CFOs need to work to change this situation. Cloud and other trends, such as bring-your-own-device (where employees bring their own laptops/tablets to use at work), will help them do this. This will mean there is more money available to spend on innovation in the business – wherever the money is required.
Prediction 3: CFOs need to account for their company’s data
As businesses realise the value of the data they hold, it will become incumbent on the CFO to ensure it is accounted for appropriately and utilised effectively. CFOs need to put in place robust strategies to extract maximum value from this data. While technology is important, CFOs need to come up with data strategies that stand above it.
Looking at the term ‘information technology’, CFOs need to spend more time in the future considering the ‘information’ part of the mix, and then consider how the ‘technology’ part can enable it.
Crucially, CFOs will need to find ways to account for their data. Data analytics will mean that data can be interrogated to extract greater insights than ever before – these insights can deliver tangible business benefits and therefore need to be measured. Just as today we look for a return on investment, CFOs in the future will need to look for a return on the data they hold. Work must start now on how we will measure this.
Prediction 4: Asset stripping will make a return
With the value of data on the rise, I envision a return to the asset stripping of the past. Just as canny accountants realised in the 60s that some businesses had kept their property valuations at historical levels – leading to them being bought purely so their infrastructure could be sold off at its true market value – it is possible the same will happen to modern businesses if their data is not valued in the correct way. A company’s list of subscribers, for example, could be very useful to a business in a similar space, and well worth the price of an acquisition.
The CFO will need to keep a running tally of what data assets their business holds, and come up with robust and accurate ways of measuring its current and future value.
Prediction 5: CFOs will become more aware of the financial implications of data loss
Security is vitally important, yet all too often underrated. Securing your company’s data needs to take into account a variety of threats, from natural disasters which may knock out your systems, to security breaches from cyber-criminals. CFOs have a role to play here in helping to understand what happens if their company loses certain types of data.
There is clearly a compliance and regulation role to be had here, but over the next few years the CFO will also need to pay attention to commercial impacts: understanding the financial cost of losing certain types of data. Finance chiefs will need to attribute value to the different sets of data their companies hold, and then budget for varying security levels, according to the value of the data. Rather than paying for a one-size-fits-all maximum security policy on all data, this graded approach will help companies save money while ensuring their most valuable data is afforded the best protection. This model is a more intelligent approach to security which will help CFOs make cost-based decisions on what measures to undertake.
Steve O’Neill is CFO EMEA North for technology business EMC
Sean Evers of Sage reviews how accountants can make the transition to offering advisory services to clients
Peter Terry joins the North West advisory team
The average cost of fraud increased 35.4% to £3.9m in 2016, compared to 2015 data
Tallat Mahmood appointed to corporate finance team of Top 20 firm