Converging the future of finance

By in Opinion

Organisations who can converge the front office with the back office are more likely to succeed in an unknown future.

That’s according to James Harkin, Asia Pacific Director at Workday Financials, who says the future work, workers and workplace needs a back office that can support a completely radical changed business model in the front-office.

The CFO is tasked with taking the lead on this responsibility and are increasingly being asked to wear many hats – but what tools do they need and are they being given the right ones to enable them?

The Real CFO spoke to James at the recent Elevate event, about their Future of Finance survey findings and discussed how these compare to our own experiences.

What does the future finance team look like?

“The finance function has certainly moved from their transacting nature of the past. Our survey responses show that CFOs are being asked to be advisors to the business. There’s also a recognition that those businesses embracing digital are becoming better at playing with the IT function.”

James says their observations are that while the finance function is changing, those who can meet the demands through greater collaboration and shared objectives will succeed.

“We are increasingly seeing a service-led economy, and this relies heavily on the people aspect.”

“The majority of cost and the majority of revenues are people related. In the past, there was a lot of resistance to talk to the HR function or share technologies with the HR function. But now, given how closely interlocked people and financials are, there’s certainly a lot of that being brought together.”

Workdays findings support The Real CFOs past discussions, that the future of finance will require a deep relationship between CIO and CFO, and heightened collaboration and shared objectives for success.

“Finance is a service function – so there is a cost to the business – if the CFO can work together with the CIO to reduce the cost of that function to the business then they are both heroes.”

“On the other hand, IT must enable business too.”

“For IT, it’s having the right infrastructure. Asking the question – do I have the back office do the front office tasks?”

“It’s really about them going beyond and providing not only for the finance function of the business but also, enabling the business to do what they want to do and be agile to the market – not saying you can’t go into that market or launch that product because we can’t’ support it.’

Do CFOs understand their roles and the need for cross-functionality with IT, for example?

“They definitely understand their roles. The question is, are they enabled to deliver against it?”

“There’s probably a couple of things that inhibit them from doing that. One is the responsibility of doing mundane financial transaction processing. If you look at all the benchmarks, the cost of maintaining the finance function is far too high. So they are preoccupied with in doing the routine, which stops them from doing what they really want to do.”

“The other side is the skills and tools they have. They don’t have the tools to do the strategic advice that they are being asked to do – to give the guidance on cyber security, to give advice guidance on planning.

James says much of the finance function is still relying on skills that are out-dated, and organisations are continually attracting old skills, without enabling the new ones.

“How do they develop those skills? How do organisations attract the skills that are needed for today and tomorrow, when in many cases they are offering them jobs to use old-fashioned technologies, which don’t even attract new skills. It’s not a virtuous cycle – it’s a vicious cycle!”

“It’s not a virtuous cycle – it’s a vicious cycle!

What are the skills needed to translate data into insights?

James says it’s not the skill, but rather the operational data which is key.

“Most organisations are still just struggling to get the converged data. Although, there is definitely a skill element, I think most organisations are still more rudimentary in terms of being able to have the data, to have the insights.”

“Many organisations have been very focused on getting data in terms of what we refer to as “the what.”

What was my revenue? What were my expenses for this division?”

“What we are seeing is the operational data being able to answer the why?”

“Why did my revenue go up last quarter? Was it because we saw a seasonal variation because it was particularly good weather…?”

“That information typically sits outside of the financials systems. So, the skills come from the people who can clearly ask – what are the drivers behind the financial data and where can I go and get that data? Then answer – how can I combine it effectively so that I can get insights (ideally in real time).”

You also identify the importance of immobilising capital in the finance function – can you explain?

“We’re seeing a fundamental change in work, workers, and workplace. We really don’t know what the future holds. But we need to ask; how can the technology support the changing business models?”

James says the cycle of planning, executing and analysing is critical and it can’t be broken apart.

“The changes in work are the moving away from routine to become supporters, advising the business to get more insights.

“When we talk about workers, it’s seeing the adoption of AI – workers may be augmented to the existing workers.”

“And workplaces – where are doing the work? How does that scale for seasonal variations?”

“Being able to keep planning, executing and analysing our capital as a continuous cycle is necessary. If we start to break those apart then they can’t support future business models; and if we break apart the organisation from the financials or the people – if they are reorganised – how do you reflect that financially so the financial systems don’t inhibit them from making the reorganisation.”

So why has there been a lag in the finance function to uptake technology?

James says the lag in the finance function is with good reason.

“There’s such a responsibility for CFOs as custodians of recording financial performance involving a lot of regulatory compliance. So, they are going to be inherently reluctant to change when they have spent a lot of time making sure that what they are doing is performing the way they need it to perform.”

“Everything ultimately gets reported financially – so they are really the heart and lungs of an organisation, it’s not like it’s a peripheral thing.”

“There’s an analogy; that it’s like heart surgery, to rip the finance function out. It’s such a big undertaking and if you get it wrong; and you’re not paying suppliers and you’re not collecting revenue; then there are such profound implications on the financial performance of the organisation.”

“But in finance, going back to them as custodians, there is a huge reticent to acknowledge that the data could be securely managed by someone else. I think there is an acknowledgement now that it’s not a question of where the data is stored – particularly from a financial perception – but how the data is stored. I think that is validated in the data we have here from our research.”

James says that while across the globe there has been much contention for the finance function to digitise, they have observed the APAC region leading the way.

“There’s been a real reluctance to move finance to the cloud. However, our study shows that 50 per cent of finance leaders across APAC are now saying they expect finance to move to the cloud; and one third say it’s an immediate priority to do in the next 12 months.”

“I think part of this is that they now recognise that the back-office is inhibiting them from doing what they want to digitally in the front office. They now recognise they can no longer be an island of resistance – they must support what the business is demanding of them, they have to transform.”

So how do CFOs overcome the risk and fear of cloud?

James says there are two aspects. One is the need for education that CFOs can relate to and audit themselves against; the other is to not underestimate the power of community, with a lot more legitimacy surrounding what your peers are doing and their experiences

“First, there needs to be that education – how do we manage that data? To what standards to we hold ourselves accountable? What international standards to we adhere to?”

“Second, the sense of community. For example, at Workday, everyone uses the same service, everyone has the same customer experience. So, as a community, they can talk to other CFOs and get their experience.

“Overall, success in the future depends on effectively bringing together financial data and non-financial data to answer the ‘why’ of business over the ‘what.”

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