The Finance function capability and responsibility has grown significantly in recent times. As businesses face increasingly disruptive influences the Finance function is expected to take on a broader and deeper set of strategic responsibilities than ever before.
The core function of Finance remains, the delivery of business value through the efficient management of financial resources, taking a role in driving business productivity, and meeting reporting requirements (performance, tax, regulatory).
Finance functions can be forgiven in recent times from becoming distracted by the increasing regulatory burden, particularly in the Banking and the Insurance industries (be it BaselIII, SolvencyII, GDPR, IFRS17….), the very mixed global economic outlook, the potential of an escalating global trade war (with the impact of tariffs and duties), the prospect and implications of Brexit for firms operating in the UK and Europe, and the coming to an end of an era of cheap finance. However, while these events will continue to require attention, there is a pressing need for the Finance functions to re-focus on their business leadership role.
In the past, Offshoring, Shared-Services, Outsourcing, and Centralisation have all played a key role in Finance function productivity. Going forward it is going to be cheaper, better, and faster technology that is going to re-shape the Finance function be it delivered internally or through an external third-party Transformation partner. The Finance function will need to;
- Continue to ‘up their game’ in strategic business partnering, supporting faster decision-making based on deeper and more robust intelligence.
- Develop a Finance operating model that appropriately balances global, regional, and local activities, and focuses on its core competencies. This will also mean the Finance organisation structure is going to need to change, moving beyond the traditional function boundaries with a greater focus on end-to-end processes and activities, and a greater business alignment.
- Embrace Transformation tools particularly Robotics Automation (RPA) which will eliminate the vast majority of transactional based Finance process and activities – even where Outsourced and in Shared Services today – whether this is led internally or whether an external third-party provider is used to deliver this. Finance activities in particular, such as General Accounting operations, cash disbursement, revenue management, tax, finance controlling, and reporting (internal and external) are ripe for rapid automation which if done properly will release significant resource capacity, reduce transaction costs, while increasing speed and accuracy.
- Increasingly re-invent and re-engineer Finance processes to fit new technology, rather than trying to fit technology to traditional processes that were designed to leverage human thinking. These processes will need to be looked at from an end-to-end perspective and not as tactical initiatives looking at isolated process components.
- Recognise that Shared Services will continue to play a greater role in the Finance operating model, with a drive to harmonise, simplify, and standardise common processes across the organisation. The constraint for many organisations that needs to be addressed will be where Finance is run on multiple platforms and / or multiple instances. Where consolidation and integration is not economically viable then RPA tools may provide a partial answer.
- Acknowledge that Finance & Accounting Outsourcing (FAO) will continue to grow significantly. For transactional based processing the cost lever will be less about simply wage arbitrage ‘doing the same with lower cost labour’ but on leveraging the Outsourcing provider Transformation Tools and capability to deliver underwritten benefits and outcomes. Further, FAO will move up the value chain as it takes an increasing role in functions such as Treasury, Risk Management and Audit.
- Provide greater focus on risks and controls. Transformation tools such as RPA, Cognitive Intelligence, and Data Analytics have the potential to improve controls while reducing both internal and external compliance costs, however these technologies will also pose other challenges, from process integration and system compatibility issues to data protection, and security concerns.
- Urgently better leverage the wealth of data in reporting, and translate this into actionable intelligence and insight – providing real value adding to the business leadership and operation.
The impact of the Finance function evolution will be a need for Finance professionals to develop their skills to meet the challenges of the rapidly changing environment and to recognise the changes required to manage new technologies, and to provide true business partnering. Equally, attracting, building, and retaining talent will look different in the future. Roles and competencies will need to be redefined and future leaders will need a broader skill set and greater exposure to the wider business.
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