There’s major change underway for finance organizations everywhere. How will your organization cope with this transformation? According to the panel of Financial Excellence with Game Changers, a program presented by SAP on The Voice America Business Channel, finance can shift the focus from what was to what could be.
The program was moderated by Bonnie D. Graham, with a panel comprising David Axson, managing director at Accenture Strategy and lead, Global CFO Strategies Practice; Bo Lykkegaard, associate VP for the Software Tracker, Public Cloud Services Tracker, and European Enterprise Applications Research at IDC; and Birgit Starmanns, senior director for Product Marketing, SAP S/4HANA and SAP Fiori, at SAP. The following is an excerpt from the Feb. 2 episode.
Bonnie: The finance function in most organizations has traditionally focused on the past. You know, expense control, spreadsheet-driven accounting, and management reporting. Fast forward to now. With technology, it can become a predictive analytics powerhouse as well as a go-to source for adding new value to the business. However, a fundamental shift in mindset has to come with this transformation. How will organizations cope? David, talk to me.
David: Looking backwards has been the finance mantra for a long time. After all, the very word accounting means that you’re accounting what has already happened. The beauty about looking backwards is the detail. The more detailed something is, the more accurate it tends to be. Things add up.
However, as soon as you shift your perspective and begin to look toward the future, all bets are off. In fact, the more detailed your forecast or the more detailed your budget, the more variances there will be. Being comfortable with ambiguity is an interesting mindset change for a finance professional.
With long-term planning, we may be thinking 15-20 years into the future. Adopting that future mindset means that we need to think about variability and uncertainty. With these elements in mind, it may seem that forecasting isn’t ever going to be accurate, so why do it at all?
Well, forecasting is not necessarily futile. What it does is provide you with a frame of reference to understand coming changes. What matters is how quickly you identify these changes and what decisions you make because of them, rather than the purity of your forecast or the accuracy of your budget.
Bonnie: Enlightening. Something you mentioned was the idea of ambiguity. Is that something that’s supposed to be in the DNA of anybody in the finance profession? Is that an ouch?
David: It’s a huge ouch.
As CPAs, we’re trained to think we’re precise and accurate. Now we’re told that no matter what we do, no matter how much energy we pour into a budget, the only thing certain is that it will be wrong.
If you’re going to be an effective finance professional today and in the future, yes, you’re going to have to look backwards. However, you’re only going to look backwards to the extent that you can inform your view of the future. I think it’s actually incredibly exciting and liberating. For some people, it’s hugely uncomfortable.
Bonnie: Reality check, everybody! It’s not always number clear. It doesn’t always add up to what you expect. Bo, your thoughts?
Bo: Finance, in many organizations, is all about spreadsheets and manual consolidation. This can’t continue. Finance departments need to change drastically if they want to stay ahead.
At IDC, when we look into the future of finance, we see its essence to be less transactional, having less focus on legal reporting and more on a strategic and business-oriented level.
We’re seeing a change – from finance being a “doer” of the transactional and traditional, into becoming much more facilitated and a true owner of the financial process. A lot of these traditional tasks will be automated.
We’re expecting a lot of organizations to adopt new cloud applications and technologies. This gives them the opportunity to really go global with their financial systems, maybe even enabling a “self-service” finance model. How about that? Why do finance people need to be involved in expense management, procurement, and reporting when these can be automated?
Bonnie: Isn’t that scary? We talked about ambiguity, and now you’re saying jobs may be threatened. Just a quick thought about that. How much is going to be automated and what’s going to happen to people entering the field?
Bo: It’s really about redirecting the efforts into things that are much more valuable to the business. I think there will be a problem for finance clerks who are happy just doing repeatable transactional tasks. But there are lots of opportunities for those who really want to get closer to business operations. For them, there’s a bright future.
Bonnie: I think that’s definitely where we’re heading. Since we’re talking about Finance 2020, I’d like to get Birgit’s take.
Birgit: I’m finding that business models in general are changing, and finance needs to change with it. Finance can’t continue to just go ahead and do the old processes over and over.
Barriers for entry are lower in the digital environment, and we’re definitely seeing new business models. The big news in San Francisco is that Yellow Cab is about to file for bankruptcy. Uber and Lyft are edging them out.
Bonnie: Wow. Who ever thought that would happen?
Birgit: Right. We need to be able to evolve how we run our business. Run it more like a startup, which is something I heard in a meeting yesterday. Every business should consider looking at how startups manage to be so agile and innovative.
Another big thing is that finance needs to evolve its language. Limiting finance speak to “Here’s a balance sheet and a P&L statement,” and leaving it at that, is not going to cut it anymore. It should be something along the lines of “Imagine if we can do this. Imagine if we invest it here,” and being more predictive, to help figure out what the financial implications of business decisions are.
This is what it could look like. Don’t just go back to balance sheets, but look at planning and predictive modeling and show the company where it can go. And the important thing is to do this not with just a spreadsheet, but with language that marketing, sales, manufacturing, operations, HR, everyone, can understand. You know why? In one of the CFO.com surveys that we did in the past, one of the biggest issues with self-service was that other business areas did not understand what their financial information meant. Finance can be an educator in that role.
Bonnie: Very interesting! With what everyone has mentioned so far, finance professionals have to live with ambiguity, they have to become teachers, leaders, innovators, visionaries, and they have to have imagination.
Birgit: We’re still going to have to provide financial statements. That’s not going away. So does finance divide into two sub-departments – one operational and another that’s more strategic? I think it’s critical that we have that strategic part of finance. You have to be able to figure out how best to look forward and identify what the business drivers are.
That will definitely involve a change management process. It will also probably involve some educational processes as well. Yes, the role of finance will be expanding.
This excerpt from Financial Excellence with Game Changers on the Voice America talk radio network Feb. 2, 2016 was adapted for the Digitalist Magazine. It is available on demand. Upcoming topics in this series:
- The New CFO Agenda: Taking Care Of Business While Finding – And Funding – Opportunities
- Balancing Innovation, Risk, Security, and Privacy: Walking The Tightrope
For more insight on this topic, please read the latest Accenture research, Finance 2020-Death by Digital and Architecting the high-velocity finance organization.
To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, review the finance content hub, which offers additional research and valuable insights.