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The Future of Finance Organizations

The Future of Finance Organizations

As the world becomes increasingly digital, the business environment is characterized by constant innovation, rapid industry transformation, and evolving customer preferences. These changes are forcing the finance organization to adapt. No longer are finance professionals in the shadows, crunching numbers and reporting historical financial performance. Today’s finance leaders are counted on by executives to help shape and implement the company’s strategy. This growing strategic role will expand in the future. In this post, we will discuss three areas where we believe finance organizations will experience the greatest evolution over the next five years.

An Increased Focus on Strategy & Value Creation

As digital capabilities within finance organizations evolve, the move from manual to automated processing of financial transactions is accelerating. This movement is redistributing the amount of time dedicated to certain tasks within the organization. Based on a Gartner survey of 150 finance leaders, robotic process automation can save a typical 40-person accounting team from 25,000 hours of avoidable rework1. As companies add additional digital capabilities such as machine learning and artificial intelligence, the amount of hours freed up for other work will increase. Successful finance organizations are using these newly available hours to shift their focus to higher-value work such as working alongside business leaders to set the direction and strategy of the company.

This shift to a more strategic and advisory role might come seamlessly to CFOs and other finance executives who have spent years working with other leaders to define business strategy and objectives. However, other members of the organization may not be ready for the shift. Finance leaders need to prepare the organization to transition from reporters of information to providers of insights and from doers of monthly and quarterly processing to forecasters and prognosticators that develop scenarios to help prepare for business changes and risks.

Shift from Financial Analysis to Analytics

In order to bolster the transition to advisory roles, finance organizations must improve their financial analytics capabilities. Falling computing costs and rapid advancements in algorithms and artificial intelligence alongside the already vast amounts of available data are helping accelerate the transition. However, despite these positive trends, finance organizations are having difficulty successfully integrating financial analytics into their organizations. In fact, according to Gartner, nearly half of business decisions misinterpret financial analysis, which can lead to up to 1% in loss revenue per decision2.

Finance organizations that successfully use financial analytics in their organizations, do the following:

  • Start Small: Build momentum by identifying pilot programs that can deliver positive results with minimal investment and effort
  • Connect with Business: Design programs alongside business managers so that analytics show a holistic view of performance and operations
  • Foster Engagement: Develop engaging analysis that encourages dialogue and discussion, not static reports full of difficult to interpret information
  • Apply Governance: Create strong data governance structures that allow for integration across financial, operational, and external data sources

Advancements in financial analytics will make finance organizations more agile and nimble. Questions that previously would take days to answer can be answered instantaneously. Likewise, AI-driven scenario planning can analyze thousands on business outcomes and provide recommendations faster than it used to take to create a single scenario.

This rapid acceleration in analysis will cause a shift in traditional financial cycles. Capital planning, once a static and annual process, can now run continuously. Traditional monthly and quarterly planning activities will be able to be completed in real time. This dynamic and real time financial planning will allow finance organizations to further elevate themselves in business strategy discussions.

Accelerated Risk Management (Placing the Right Bets)

Alongside the increased speed of financial planning, risk management decisions will also accelerate. In order to keep up with the rapidly evolving and changing business environments, companies must constantly innovate and experiment with new ideas. However, innovation and experimentation do not come without risk. Companies need to invest in innovation, and it is up to finance leaders to help guide the company into placing smart bets that lead to improved operations and business growth.

In order to inform decision making and increase the likelihood of making the right bets, finance leaders need complete, accurate, and timely information. The best way to deliver on these needs is through an organization that can quickly turn analysis into insights and insights into decisions. Successful risk management also requires staying current on new trends and technologies. Finance leaders do not have to be early adopters of new technologies; however, they should stay on top of current trends across the industry. Doing so provides them with another important data point to use when placing investment bets. Most importantly, to successfully navigate in an environment of accelerated risk management, finance organizations must have organizational structures that support information sharing, empower individuals, and challenge the status quo. Without an organization designed to support critical thinking, leaders are unlikely to make informed decisions.