Innovative technology is having a fundamental impact on how each business function operates, but I would caution against becoming preoccupied with the technology itself. There is a lot of hype around artificial intelligence (AI) and automation, but in the finance function it is not the only factor that creates value.
Certainly, AI and automation are prompting a long-overdue shift in mindset among finance professionals, particularly CFOs, which will bring about wholesale change to the office of the CFO. So how do CFOs prepare the finance function (and the business) for this shift? And what is the end goal to which they are aiming?
Integrated data
There are two main functions of finance – making the numbers add up and forecasting the future. The former is traditional, and could loosely be described as the realm of the finance director.
Despite much talk of change, many CFOs would probably say an awful lot has not changed
Here, technology is having a significant impact as AI and automation help streamline repetitive, mundane tasks with systems such as smart invoicing. In the future, the goal should be that this side of the function becomes a utility.
However, getting to that point will not necessarily depend on which technology you adopt, but on how you ensure you have a complete, integrated picture of all the data across your organisation.
With the arrival of software as a service, different lines of business have been empowered to adopt tools to collate and analyse data. Sadly these applications do not always talk to one another. The key must be that all the basic functions – accounts payable, month end, payroll, etc – are integrated.
This involves significant change and some disruption initially, but over time it becomes more of an evolutionary process.
This is crucial to enable the modernisation of the second function of finance: forecasting the future. As the CFO, the purpose of integrating all this data is the creation of rock-solid foundations for such forecasting.
Having solid foundations will enable you to answer key questions:
- How do I drive the business forward?
- How do I create value?
- How do I drive operational efficiency?
Data consistency
Some of this work strays into the territory of line of business leads and senior executives, which could easily be taken the wrong way. But the goal should be to become the business partner to the chief product officer, the chief technology officer, the chief people officer and the chief marketing officer.
Getting to that point will take time and diplomacy to gain the trust of the lines of business, which could be hard won in the first instance.
The CFO must explain to the business why there needs to be consistency and integration in all the data across the business and, therefore, why the CFO needs oversight of operational as well as finance information. The CFO must insist on the business agreeing to a single data governance framework.
Mindset shift
Despite much talk of change in the ‘office of the CFO’, many CFOs would probably say an awful lot has not changed. Partly, this is because the historical role for finance has been one of accounting and auditing; in equal measure, it has been because the technology has taken a long time to catch up with the data.
It is critical to build trust to demonstrate the CFO is not part of the compliance police
However, particularly in finance, planning and analysis (FP&A), the technology is maturing, and competitive market conditions mean that CFOs cannot avoid the change that is coming.
It will require a mindset shift to take more risks and will demand a deep understanding of business strategy and operational goals. It demands a greater emphasis on relationship building, negotiation skills and emotional intelligence to convince the business to come with finance on a journey.
It is critical to build trust to demonstrate the CFO is not part of the compliance police and, equally, to challenge their peers, which requires intellectual curiosity to really understand the business and competitive landscape.
IT-literate
The CFO also needs to be more IT-literate, able to understand how different datasets work together, and ready to use this knowledge to drive the business forward. CFOs who can do this will be digital natives, and their IQ will be matched by their EQ.
It is a tougher challenge for mid-market companies to attract this calibre of individual simply because of the salaries they can command, but there are ways to approach this hurdle with creativity.
Business analysts already have a data-driven approach, and their roles can be expanded over time, which could be an exciting career opportunity for an ambitious candidate.
Change is coming to the CFO’s role, and those who will succeed realise this is not solely about the technology
Equally, if you get the integration piece right and streamline your enterprise resource planning (ERP), human resources and FP&A applications, you could reduce expenditure and redeploy that budget to hire the right kind of analytical finance staff.
Make no mistake, change is coming to the CFO’s role, and those who will succeed realise this is not solely about the technology. Yes, it may be a disruptor and also an enabler, but the first priority has to be to build the right foundations based on a single view of the data. This should be combined with a willingness to embrace new skills and take risks.
Get it right and the CFO can play a crucial role in helping businesses create value and drive operational efficiencies at a time when organisations need to identify every opportunity for competitive advantage.
