The finance function: Don’t look back
Blog //10-10-2022

The finance function: Don’t look back

by Kevin Reed, Freelance journalist and consultant

Can the finance function ever truly ‘get ahead’? There has been an ever-increasing focus on finance to be more than a backward-facing department of number-collators and guardians of compliance-based reporting.

You could look at any of the major finance publications going back 25 years and read of the growing importance of the Finance Director/CFO in driving the strategic goals of the company, backed by a function that will not only put in their hands reliable and forward-facing data, but also disseminate that information routinely and often to other departments, helping micro and macro decisions be better made.

Clearly, reading these features would not have been so easy before then, what with the Internet only becoming a part of our daily lives in the mid-to-late 90s. ‘Online’ is a critical aspect of how we live. It’s no different for businesses, in either how they interact with customers or in the running of the business itself.

It is, therefore, disheartening to have read some of the standout stats from the Advanced Finance Trends Report 2022:

  • A ‘disconnect’ between those using the Cloud, those not, and those that don’t see it as a priority for their organisation;
  • Workflow is still a problem for finance – including the age-old issue of accessing quality (and timely) data; and
  • Automation/AI not viewed in a particularly positive light.

I’ll touch on more of the findings as we go along, but it’s not my job to parrot them all back to you. What I will do is try to understand why we’re at a position where optimal, integral, and strategic finance functions seem to still be a way off.

There’s no simple point in time to start but, as stated earlier, we’ve seen great leaps in technology (including online and via the Cloud) since the mid-90s.

Concerns that systems would ‘fall over’ when we hit 12am on 1 January 2000 – the so-called Y2K bug – saw great investment into software solutions and platforms. Many large-scale companies, particularly those with an acquisition strategy, are using multiple solutions, and on many versions – of which there are plenty of instances of 20-year-old platforms still underpinning finance.

Where the ‘IT plumbing’ is complicated, our old friend Excel is still a critical layer in reports production and the sharing of information. Unfortunately, this also means manual entry, potential security holes and – critically – multiple versions of the truth.

On a positive note, tech advancements have seen the stock of the finance function and CFO rise. A need to control and understand the financial implications of business decisions has seen many organisations disseminate finance people at a local level, creating the term ‘business partnering’.

However, we have also had a relatively ‘chilly’ economic environment since the banking crisis of 2008. Finance functions have been squeezed, as businesses look to run as lean as possible, with some layers removed altogether.

During this time there has been another, fundamental, tension: as business has increasingly looked to finance to support development and decision-making, finance has had to face up to more compliance and responsibility. Tax grows ever-more complex, external reporting becomes more narrative-driven and deeper, while the finance chief has often become a de-facto pensions director.

Perhaps then, we shouldn’t be greatly surprised that Advanced’s report shows finance functions struggling to hold everything together, to progress, and to work optimally?

Perhaps the reasons above are symptoms that lead to some 60% of respondents stating they don’t currently use any software to gain a real-time view of important metrics? Or 18% still hindered by manual tasks? Only 3% don’t do any work outside of normal hours?

The simple answer is yes. However, we must also take into account that Advanced has done a good job in interviewing finance staff at all levels – that means there will be some discrepancies based on seniority or task. We see that a higher proportion of senior finance team members believe they’re already using the Cloud, compared to younger staff.

And it’s not all bad. Some 40% expect AI to be used to make critical business decisions by 2030 – we must make an assumption that is a sign of expected technological advancement. Some 27% of respondents are focused on technology and see the Cloud as a priority for adoption – in fact 43% expect to adopt Cloud financial management solutions in the next year. Automation and analytics will be core to those investments.

In a world where business is expected to be ‘good’ to the planet - its staff and others (while growing, succeeding and at least being compliant with rules and regulations) - the finance function continues to be critical in that process.

But, in an increasingly complex working environment – which includes an ongoing recruitment/retention crisis – finance appears to be working hard to stand still.

I would like to see business be a bit braver and invest in the finance function, making it the hub of critical business information. This will require Finance Directors and CFOs to be brave, too, in asking for this investment.

The question isn’t so much about creating information – the issue is that we have too much of it. Free up finance to be the hub, the data curator, that it could be. Otherwise, I fear that we could look at these trends reports in a year (or ten) and continue to see similar findings.

 

Be sure to read the Finance Trends Report to see the full set of results, and share your opinion of the responses given. 

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Kevin Reed

Kevin Reed

PUBLISHED BY

Freelance journalist and consultant

Kevin Reed is a freelance journalist with more than 20 years' experience covering professional services. He is a former editor of both Accountancy Age and Financial Director, including a period covering accounting technology. Kevin has also written for the management consulting and financial services markets. Current roles include consultant for Foulger Underwood and chair of the Women in Accountancy and Finance Awards.

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