The finance function’s importance in driving company profitability has grown drastically over the last decade, and is set to increase even further in upcoming years. In a global survey of finance professionals by CFO Research, published in September 2015, 89% of respondents said they expect the finance function’s influence on their company’s business decisions to increase over the next five years, with 31% saying they expect their influence to increase substantially.
In order to facilitate this new importance, finance leaders need to ensure that they are putting technology and digitization at the heart of their thinking. Eight-five percent of those surveyed agreed that, over the next five years, their companies’ success will increasingly depend on their ability to adapt to the rapid pace of change and greater business complexity, yet just 44% believe their finance functions are currently well equipped to produce meaningful business analysis and reporting that can keep up with this pace. The only way that they will be able to this is if they fully exploit technologies such as intelligent automation, the cloud, and analytics.
Finance has always been at the forefront of technological adoption. CFOs have already used hardware and software to some extent to streamline and automate core processes, enabling significant improvements in finance operations and more time for analysis as opposed to traditional ‘bean counting’ tasks. Mobile computing, online collaboration tools, and cloud computing allow greater freedom for finance professionals to work flexibly, from anywhere at any time. They also provide new capabilities for storing and analyzing the vast swathes of data that finance functions are accumulating so it can be leveraged to better company performance.
Despite these obvious advantages, however, many are not using it to the extent they could be.
According to the CFO research, 75% of the respondents believe their companies must get better at making effective use of much larger, unstructured data sets, and 79% say their companies must develop or acquire capabilities in advanced analytics that they do not currently possess. That is to say, the kind of sophisticated analytical tools and methods that can predict outcomes, which is vital for decision making, as well as improving risk assessment, and modeling of complex business scenarios.
Obviously, finance functions need to ensure that they have the knowledge and skill set in place to best make use of these technologies. Failure to constantly maintain and develop knowledge of technologies beneficial to finance function operations also comes at great detriment to a function’s ability to run effectively. They also need to predict what these are ahead of time. Late adopters risk losing tremendous ground to competitors who get in before them. CFOs and their finance teams need to collaborate with CIOs and those in IT departments to build this knowledge. A reciprocal relationship can also help to overcome some of the other obstacles that may be standing in the way of smooth technological implementation. There needs to be a company-wide commitment made to obliterating the silos that stand in the way of integrating data, and that leverages fast, flexible, and powerful new cloud-computing technologies. CFOs are also in control of the budget, so they need to know which departments to allocate technology budget to, and which technologies are necessary investments, which can best be guided by IT.
Such a partnership between IT and finance is also vital for selecting the right tools. It’s unreasonable to expect finance professionals to be technology geniuses, and tools with low skill requirements will allow for quicker and easier implementation by finance professionals.
At the moment, finance risks being left behind by more digitally savvy lines of business when it comes to providing management with the insights vital for company growth, and losing its status as a vital business partner. CFOs and their finance teams must aggressively seize the opportunities being afforded them by new digital technologies to prevent this from happening.