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Finance needs to change and CFOs can lead the transition

Clock

Posted on April 29, 2016

There is a growing expectation gap between what organizations want their Finance teams to provide and what those Finance teams are actually capable of delivering. Organizations are looking for financial insights, forecasts and other information to understand the impact of different financial scenarios in a volatile business market. However, many Finance teams struggle just to complete the financial close in a timely manner, reporting growing numbers of KPIs without offering many insights into any of them.

Finance departments have only four to five years to modernize themselves if they are to meet the growing expectations being placed on them by organizations that face an increasingly uncertain business climate. CFOs need to unlock the value of their Finance teams by shifting them from generating data to producing insights that better support the organization in making important business decisions.

Who is impacted?

CFOs are well aware of the expectation gap that exists. A survey of over 1,000 finance leaders who attended Deloitte’s Finance Trends conferences across Canada in late 2015 and early 2016 found that 84 per cent of the respondents said they should be working as partners with the C-suite to shape the organization’s strategic direction. This includes developing scenarios based on different capital allocation decisions, return on investment implications and various cost capital models. However, just 25 per cent of CFOs said they had the time to devote to strategic activities that help shape and define their organization’s operational plans.

What can be done to close the gap

CFOs need to take charge of and manage the change in their Finance departments. That includes setting a vision for Finance that is aligned with, directly linked to and supportive of the overall corporate vision. They also need to assess their Finance team’s current capabilities, and determine capabilities it will need to acquire for its vision, and then set out an actionable roadmap to achieve them.

All Finance teams can immediately begin to close the gap between their current capabilities and what Finance needs to achieve in future by focusing on three areas:

  • Converting data into meaningful, easy to understand finance insights – Replacing Excel-based analysis with more efficient, flexible and powerful data visualization solutions will give Finance the ability to track and communicate key metrics and allow stakeholders to get under the surface of reported data to understand the “why” and not just the “what.” This capability also gives Finance the opportunity to better define and report corporate performance.
  • Improving the speed and efficiency of the financial close process – Technology is just part of the solution, it also requires addressing people and process issues. Finance teams are making progress by ensuring that people better understand the interdependencies of the process, reprioritizing workloads, and documenting the process in a detailed close calendar that sets out clear responsibilities and accountabilities.
  • Providing forecasts and other forward-looking management information – Automated, cloud-based forecasting is a cost-effective solution that can be integrated with legacy financial systems to give Finance better control of the forecasting process. Forecasts can be done by each department and rolled up into an organization-wide forecast presented as dashboards and reports.

Finance is on the cusp of a major change that will result in it being markedly different in just five years time. 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, but it needs to start now.

To learn more about the current expectation gap and how finance functions can be modernized to close that gap, download Deloitte’s report: “Modernizing finance: Why the time is now and how Finance can get there.

If you have questions about the report, please contact us at financetrends@deloitte.ca

If you have questions about how the Deloitte’s Assurance and Advisory Finance team can help your finance team, please contact Mike Goodfellow, Audit & Advisory partner

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