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Top Trends In Finance 2016

What elements are going to have big impacts on finance in the next 12 months?

14Dec

The CFO is overseeing a sea change. New digital technologies are putting paid to the way that finance departments have traditionally operated, enabling greater productivity, and a new role within organizations. According to analysis carried out by Accenture, by 2020 80% of traditional finance services will be delivered by cross-functional integrated teams.

Over the course of 2015, we saw CFOs navigating the early stages of this seismic shift. Next year will see finance departments face new challenges in driving organizational change. We’ve looked at some of the trends that we are likely to see have an impact on finance over the next year.

CFO & COO Roles Becoming One

The role of the COO is in decline, with just 35% of companies now employing one - down from 48% in 2000.

The position has been in decline for some time. General Electric, for example, got rid of the COO role in 1983, and spread the duties across the C-Suite. McDonalds is another. Its COO, Tim Fenton, left the fast-food firm last year for health reasons, and instead of bringing in a direct replacement, McDonalds handed operational oversight to CFO Pete Bensen.

As more and more tasks are automated and the CFO adds value in different ways, it makes sense that companies looking to become leaner assign many of the COO’s duties to them. Of 200 of the world’s largest companies, 15% of CFOs are already involved in operations, and they are best positioned to deal with the economic and governmental pressures. As companies look to become leaner and more agile, this trend will continue in 2016, and CFOs must be prepared to cope with the new responsibilities.

Use Of Big Data Increases

According to a survey by Deloitte, 18% of organizations say that their CFO is now in charge of analytics - coming second only to the ‘business unit or division head’. The applications for finance departments are many, including forecasting financial performance, pricing products and services, strengthening operations, identifying new markets, improving margins, as well as assessing and monitoring risks. These are all the responsibilities of the CFO, and advances in the associated technologies over the next year should see its adoption by finance teams increase further.

Growth Of FinTech

The great recession of 2008 was a turning point for banking, bringing the level of trust consumers held with brand name financial institutions crashing to its lowest ebb.

Recovering from this has been difficult for banks, but it has also created a huge opportunity for FinTech companies. Recently, in its monthly global payments report, McKinsey determined that the industry will continue its growth, following ‘an extraordinary year in 2014.’ Investments in FinTech startups quadrupled from just over $3 billion in 2013, to over $12 billion in 2014. Payments, in particular, should see upheaval, as startups pounce on clear opportunities for increased efficiency and inclusivity.

Financial Data Moves To The Cloud

Take-up of Cloud technology has grown at an incredible rate over the past few years, and been embraced by a number of business functions, from payroll to HR. However, finance is proving to be behind the curve. In 2014, The Chartered Institute of Management Accountant found that just 19% of firms use Cloud technology to record daily finance transactions, compared with 31% for CRM and 59% for other business processes. There are a number of reasons for this, particularly due to fears surrounding data privacy. However, these fears are increasingly being allayed by Cloud providers, and CFOs are realizing the benefits. Accenture research found that 85% of CFOs say they plan to increase their investment in the cloud in the next two years, and over a third expect the investment to increase by over 25% during that time.

Hiring Challenges To Worsen

Almost all industries are facing a skills shortage of some variety, but FP&A and technical accounting skills are proving particularly difficult to come by.

A Savant Recruitment report, '2016 Employment & Skills Outlook for Accountancy and Finance', has revealed that half of UK senior finance professionals expect attracting and retaining key talent to get harder in 2016, despite a 16% rise in the number of finance and accounting jobs across the UK. The report also found that 75% of hiring managers expect the rising difficulties in finding these professionals to increase over the course of the year, and, as a result, 71% will struggle to cope with rising workloads next year. Only 5% expect the situation to improve.

These figures should worry finance leaders, but there are solutions that they could be looking at. New technologies mean that many of the skill sets still being looked for among candidates are now irrelevant, and it could be that a simple adjustment is made in expectations. Finance centers of excellences in organizations can help resolve these skills shortages, and it is likely that we will see organizations take steps to implement such schemes over the next year.

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