2023: Finance Functions Need To Change With The Times

5 mins read

4 January 2023

Rapidly evolving technology, regulatory constraints, and relentless economic pressure may be hindering firms from making needed investments to ensure their survival.

The pressures on finance leaders are relentless in today’s interconnected world.  CEOs demand deep, forward-looking financial information to help them assess risks, identify new opportunities, and handle economic shocks and volatility. The company’s present and future value as well as the caliber of its insights are now linked to one another which gives rise to necessary changes involving technology. 

Unfortunately, a lot of finance functions still cannot provide the information necessary to navigate through the current hostile landscape. This is because digital transformation initiatives have not gone far enough. Finance might be viewed as a “traditionalist” team rather than a trailblazer in new ideas as a result, many finance teams still focus primarily on acquiring data rather than evaluating it. Many are still quite involved in typical transactional responsibilities.

So how can finance leaders get back on track with digitization? Here are 4 priorities that will help; 

1. Redefining Resilience 

The biggest obstacle to better risk management is a lack of useful data. Numerous firms are entrapped by antiquated technologies and internal silos that contain rich data that may revolutionize risk management. Few companies are able to access that data easily, integrate it with other data sources, and create the data models and predictive capabilities needed to change their methods. Systems problems in medium-sized businesses are the main impediment to better risk management. Lack of technology and tools to streamline the audit process is the main hurdle for this market.

These days, corporations deal with a massive amount of data daily. The business that can properly use that data and evaluate it can take a step toward improving how it manages risk. Predictive analytics can be used by businesses, for instance, to identify which clients are more inclined to pay their invoices on time, a factor that can have a big impact on cash flow.

To advance, finance leaders must make sure they have the systems and data management strategies necessary to locate the appropriate data, ensure its high quality, and deliver it to those who must make crucial risk-based choices. Having access to the data is obviously just the beginning. In addition to having a culture that values data-driven risk analysis, organizations will require the abilities to analyze data and create risk analysis models. Senior leaders, particularly CFOs, must be willing to speak out in favor of risk assessments for this to happen. Redefining resilience will depend on finance executives who practice what they preach.

2. Redefining Intelligence

Advanced data analytics can transform fundamental duties for the finance function. It could improve the accuracy and sophistication of revenue forecasting. Financial data can be combined with non-financial data (consumer data or data from other company systems) to produce fresh insights and provide input for scenario planning. However, not all finance teams are at the forefront of analytics, despite other departments like marketing maybe being.

Challenge Of Integrating Finance And Non-Finance Data

  • Compared to routine, highly structured financial information, non-financial information is frequently unstructured or semi-structured and may require substantial modification before use.
  • Silos in organizations and technology may make it challenging to obtain non-financial data.
  • The use of non-financial data, such as customer information, is frequently constrained by specific regulatory requirements.

Finance executives must recognize the areas where merging financial and non-financial data can be beneficial in order to address this problem. To do this, decide what inquiries you wish to make of the merged data. Finance leaders can create an investment case for the necessary IT systems, analytics tools, and analytics capacity by having a clear understanding of where value can be generated and the insights that can be gained.

Finance leaders must make sure that their team takes on a significant stewardship role in enterprise data if they want to advance data intelligence. Working collaboratively with IT to convert systems and release data locked in organizational silos and outdated systems is required for this. Beyond system change, determining which datasets—financial and non-financial—are most beneficial to the firm is another important task. Finance may collaborate with other teams to establish trust in the accuracy of those datasets once they have this clear picture. In this manner, enterprise intelligence is redefined using trustworthy, solid data.

3. Collaborative Leadership

Finance is being challenged more than ever to give the company strategic insight, the foresight to capture opportunities, and the ability to control volatility and risk. The finance team must interact and work together with a wide range of stakeholders in order to accomplish that effectively. Different working styles will unavoidably contribute to the development of connections and collaboration; nonetheless, it’s important to accept these variations in order to prevent issues.

CFOs must establish relationships with their operations counterparts, CIOs, and CHROs in order to take advantage of the mix of financial and operational data. CFOs, CIOs, and CHROs must all concur on the metrics and performance indicators that will direct their efforts in the area of data insight. They will therefore need to establish shared performance metrics to enable collaboration and efficient management of opportunity and threat. When CFOs have a comprehensive understanding of the company’s digital strategy, they can collaborate with CIOs to invest in the correct technologies and with CHROs to ensure that the talent is in place to take advantage of those technologies and that the proper KPIs are in place to focus efforts.

Future success in our increasingly digital economy depends on adopting a more collaborative mindset and way of working. The chief financial officer (CFO) must be seen as more than just the head of finance as their position becomes increasingly significant. CFOs must comprehend how their concentration areas relate to those of other executives inside the organization as part of this expanded position. CFOs must establish structures and procedures, such as regular cycles of meetings and calls, to foster effective C-suite collaboration. 

4. The Right Talent

Even while there are technical advancements to improve the finance department, CFOs may not have a team that can take advantage of such technology. In fact, many finance departments acknowledge they lack the personnel and skill sets required. This is owing to the fact that many of their current employees have traditional financial abilities, and they have difficulty finding qualified candidates due to the fierce competition in the market. In such a competitive climate, CFOs can increase the pool of available finance expertise by hiring from unconventional sources, such as individuals with various educational backgrounds.

In the current environment, several of the top finance positions are hiring individuals with degrees in the liberal arts or sciences, such as physics, rather than the conventional college graduates they might have had in the past. Additionally, this broadens viewpoints and helps find employees who can develop into business partners rather than just managing finance delivery procedures.

When it comes to the traditional financial capabilities of present personnel, CFOs can fill up these skill gaps by investing in training and development that hone digital and advanced analytics abilities. Finance executives will be in great demand in a digital economy if they combine a strong background in finance with knowledge of fields like advanced analytics, artificial intelligence, and blockchain. These executives will be needed to oversee the digitalization of finance as well as to analyze the effects of technological advancement on the company’s business model and expansion plans.

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