Finance Team

Adapt or die: the new role of the Finance Team in 2020

Written by
Renata is Content Marketer at Rydoo.

Technology is transforming the structure of companies in many divisions, from accounting to human resources; most internal corporate activities are now digital. The moment has arrived to adapt to new duties arising from disruptive technologies, as well as to choose where finance teams should go from here.

This blog post is the last piece of a 3 pieces series. Although all of them can be read separately, we know you won’t miss the opportunity to learn more about “Disruptive technologies that are changing the finance team today” and “The modern technology wave through companies”.

Where do finance teams go from here?

Industries would already be fully digitized if it were as easy as choosing a provider and reaping the benefits. Finance leaders need to understand the opportunities and how they can apply them to their business before due diligence can even begin – they need a clear vision and the resources to put that vision into action. What problems will technology solve and what will working life be like following its integration?

That said, most businesses already know they need to change. The pressure is there to become more efficient and drive companies forward: It comes as little surprise that 81% of organizations are in the middle of a major redesign initiative.

But what changes are being made? How is technology changing completely the way finance teams works and making them rethink technology’s place within a company? Maarten at TriFinance put it more succinctly, “The awareness is there, but no one knows what the future will bring.”

How Finance Teams Can Take Advantage of Automation

Rather than processing historic data, the finance team can use digitized data – often produced in real-time – to forecast results, conduct in-depth analyses and provide recommendations.

Budgeting, book-keeping, and cash management are being replaced by capital budgeting, pricing strategy, and product development. If finance teams want to move on from data processing, they need to start improving business outcomes by building and applying knowledge and identifying risks and opportunities.

A finance team in the automotive industry, for example, would process data from a wide array of sources – sales, materials invoicing, marketing expenses. But imagine these are all processed by cloud core financing. By incorporating data from purchasing, material bills, supply-chain costs, marketing, and sales, the finance team can model the profitability of each vehicle model including all of the variants in the production schedule throughout the year. This allows the business to understand which models, with the relevant variants, performed best in which markets – allowing management to make the right production, marketing and pricing decisions.

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Airlines could also use this kind of analysis to monitor various aspects of route profitability, round-trip profitability, and passenger and class-of-service profitability. When accounting for route capacity, plane location, and fuel demand, businesses can create a finance department that helps inform decisions on airplane leasing and deciding which routes to fly.

These are just two examples of the way finance teams can help make important strategic decisions and pull together different areas of a business – areas that can often appear to work in silos when in fact they are intimately connected.

The way data can now be centralized, and efficiently sourced, reconciled, and validated allows the finance team to compile the relevant numbers and make quick and accurate forecasts.

Data size and temporal constraints also no longer present an issue – it’s now possible to go back years. Generating more accurate cost pricing with significant levels of data could be another tool at the finance team’s disposal.

The days of processing data and raising errors will soon be a thing of the past – getting the data right will not be enough. The time has come to challenge the company’s direction, really analyze decision-making and identify opportunities. The data may be processed in the cloud, but the finance team needs to make itself seen and heard.

Is there a role for data science and business interpretation?

Although smaller and medium-sized companies may not be ready for data science, larger organizations with large quantities of data can really benefit from data modelling. There’s just too much data for single accountants to deal with, so it makes sense for data scientists and business interpreters to become key roles within a business.

The data scientist has two primary functions: mining data (examining large tracts of data to pull out new information) and data synthesis (combining results from a number of sources to deliver a clear answer on the overall impact of a particular variable). The business interpreter is more qualitative in nature, often translating analysis into business terms and delivering presentations to management. We have already discussed data science and business interpretation in this paper, but in the context of these functions being a part of the finance team’s regular work – not as separate roles.

But, if data science is to be used to the extent that it warrants its own role within a company, what are some of the benefits?

Real-time analytics

Data processing has always been done in batches of information that is backward-looking. As automation technology has advanced, it’s now possible for data scientists to gain insights into a company’s present circumstances – they can track data that is always updating and changing and draw conclusions that can help the business in the here and now.

Consumer analytics

Real-time analytics also allows data scientists to draw insights from consumer behavior and make decisions that may enhance a business’ profitability. Insurance companies, for example, use consumer analytics to measure customer lifetime value and increase cross-sales.

Fraud detection

As transactions increase, so does the potential for fraud. But with the right systems behind them, data scientists can now keep track of fraudulent activities. For example, credit card fraud can be detected more quickly if algorithms can accurately spot anomalies.

New Role of the Finance Team

Who will be working in the finance department from now on?

Neel Mandalia, Head of Finance Transformation at investment-management firm Brooks Macdonald, made it clear that accountancy experience and qualifications would likely continue to jump off the page of applicants’ CVs. And Maarten at TriFinance felt that people who know the business inside and out, and understand bookkeeping, would still take pride of place in finance teams: “You notice that the ‘dry’ accounting rules are still important for a modern accountant.”

But he did go on to say that

The analytical insight into processes and systems, and how they are interconnected, is becoming at least as important as accountancy.

According to him, “There’s a shift away from a finance team staffed by accountants performing bookkeeping duties to one that includes accountants, controllers, business process analysts, and process owners. The structure has become more functional.”

The need for analytical insight is changing the outcomes businesses expect from finance employees – these are now judgment-based roles. But that head for numbers and deep understanding of the business cannot be replaced. As Maarten put it to us, “The ideal employee will still understand the business and what is required to make that business grow. But they’ll understand the technology and how to get the most out of it.”

Given that we are in a transitory period for finance teams, we expect to see more temporary project-based technology professionals in finance departments, as more systems are automated. These roles will likely be staffed by consultancy firms with specialist knowledge.

But accountants within the finance team will need to understand this technology and how it can help them move to a more wide-ranging, central role within an organization – they won’t just be accountants anymore. Strategic decisions based on thorough analysis will be how employees add value – they need to be more outward-looking and customer-focused. New legislation and technology also mean that life-long learning will be of increasing importance in the years to come.

The changing role of the CFO

The CFO role has always been vital in any business, but it’s also essentially an administrative one. CFOs oversee their finance departments, ensuring that everything is correct and compliant. All this is about to change. 75% of business leaders expect technology to either impact or entirely reshape their business over the coming years, and the role of the CFO will perhaps be most affected by those changes.

According to the latest McKinsey survey, CFOs are already seeing their roles expand – on average they now have six functions reporting into them as opposed to four. We are undoubtedly in a transitional period. The pressure is not only there to manage new and unfamiliar responsibilities, but to continue to carry out the old ones – tasks peers still consider vital to the running of a company.

If transformation is done right, CFOs can oversee the capture, reporting, and prediction of future performance – supporting better decision-making and growth. It’s all about moving from processing to insight and analytics. But proactivity is important here. CFOs need to look for ways to enhance processes and grasp opportunities – they can’t leave it to the marketing and IT departments. The implementation of new technology needs to be very close to the top of their to-do list, though most are yet to initiate an enterprise-wide agenda. Only 23% of CFOs are initiating transformations.

But it’s the activities CFOs are well-placed to oversee during transformations that are considered the most valuable, especially measuring the financial performance of the transformation – not surprising, as the cost is the main reason given for restructuring in the first place. Improving margins and cash flow through transformation initiatives is also highly valued.

CFOs need to move to the front office of the organization and – like the wider finance team – start thinking about their role as one of analysis that brings different elements of the business together and puts the customer first.

New Role of the Finance Team

It’s time for the finance team to plot its own path

Many businesses have a long road ahead of them when it comes to digitizing their data and redesigning their finance function to support the wider business. But there is so much that can be achieved. Besides, there is no turning back to a world of book-keeping and paper forms. Indeed, new companies are forming right now with no legacy issues and no painful transitions. They are using data to analyze the risks and opportunities to their businesses, and many can do it from day one.

Cost savings and efficiencies are the short-term wins that come from automation technology. But with a CFO that pushes the transition to the digitization and takes their team out of its silo – putting it at the center of the business – there is a bright future for the finance department.

Building knowledge, providing real insight, and driving the business strategy: with digitization and a world of data at their fingertips, it’s time for the finance department to take center stage.

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