Uncertain times highlight need for change at the CFO, finance levels: Deloitte

An increasingly uncertain business climate means finance departments have just four to five years to modernize if they are to meet the rising expectations of the organizations they serve, suggests a report issued Tuesday by Deloitte.

Chief financial officers (CFOs) “need to unlock the value of their finance teams by shifting them away from generating data to producing insights that better support the organization in making important business decisions,” notes Modernizing Finance: Why the time is now and how Finance can get there.

“Many finance teams are constrained by outdated software tools, incongruent processes and a lack of automated controls for the reliability of information that results in a lot of manual workaround and wasted time,” Mike Goodfellow, a partner at Deloitte Canada, says in a statement from Deloitte. “They need to set out a vision of where finance needs to be in four to five years, supported with a game plan to achieve that objective,” Goodfellow says.

However, he notes in the report, “finance teams are bogged down in generating data, rather than producing insights to better support their CEOs in making important business decisions.”

Citing results from a survey of more than 1,000 finance leaders who attended the company’s Finance Trends conferences across Canada in late 2015 and early 2016, 84% of respondents said they should be working as partners with the C-suite to shape the organization’s strategic direction.

Despite the view, though, just 25% of polled CFOs reported that they had the time to devote to strategic activities that help shape and define their organization’s operational plans. In addition, slightly more than half of those respondents – 51% – still spend the majority of their time in steward/operator roles.

CFOs see a number of key impediments to being a catalyst/strategist, the report shows.

What is holding CFOs and finance back from spending more time on strategist/catalyst activities?

The problem for most finance functions “is that they are struggling to keep pace with the continually expanding number of KPIs (key performance indicators) they are being asked to report on. That, together with poorly aligned processes and the outdated technologies they use to gather information on those KPIs, makes it difficult, if not impossible, for these finance teams to get off the reporting treadmill and take on other tasks,” states the report.

Finance “could develop scenario-based stress tests that assess the impact of changing economic and market conditions and help your organization determine an appropriate strategic and operational response,” Goodfellow notes in the report.

“Enhanced systems would enable finance to capture and summarize relevant information, including financial and non-financial performance. Finance might also provide modelling scenarios and predictive analyses that address different capital allocation decisions, return on investment implications and various cost of capital models,” he points out.

To meet the growing asks of the organization and bring greater value to it, the reports suggests that finance teams need to do the following:

• identify where finance is today and determine the capabilities it needs for the future;
• create a compelling vision for finance that is aligned with, directly linked to and supportive of the overall corporate vision;
• define the characteristics and attributes that describe and can be demonstrated in the actions and activities of the finance team members as they bring the vision to life; and
• develop an actionable roadmap consisting of 180-day “sprints” that describe what finance needs to do to move towards its desired future state.

Perhaps, the biggest difference in what finance of the future will look like is that there will be no paper. “Finance teams will be using cloud-based applications on mobile devices to transact their business, and highly standardized, simplified workflow-enabled business processes to handle the rest,” the report states. “Day-to-day transactional finance – from payables, receivables and invoices to treasury transfers, journals, capital expenditures and the close cycle – will be managed centrally in shared services centres,” it notes.

“With operational processes automated and integrated, CFOs will be able to devote greater attention to delivering data-driven insights that enable them and their C-suite colleagues to make smarter decisions. Using integrated planning models and sophisticated analytics tools, Finance will be able to undertake rapid, scenario-based planning, cost modelling and risk simulations with forecasting cycles shortened to the point where same-day turnaround is the norm,” the report adds.

“Many organizations, for example, now have ‘risk czars’ or chief risk officers who are responsible for monitoring the risks facing the organization, including currency, foreign exchange, competitive, demographic, environmental, regulatory changes, new standards and other factors, and assessing the impact those risks may have on the organization’s strategy,” the report notes.

“CFOs will increasingly serve as their organization’s chief economist, scanning the wider landscape to monitor larger macroeconomic events and interpreting what they could mean to the business,” it adds.

“Finance is on the cusp of a major change that will result in it being markedly different in just five years’ time,” Goodfellow says in the statement.

“The good news is that Finance won’t need to throw out all of its current systems and processes and starting over from scratch. This is much more about evolution than revolution,” he adds.