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Transforming the finance function to be at the heart of decision making – Charles Tilley

10 Dec 2019 12:00 | Deleted user
The Accountant – The Future Professional Accountant in Business. Autumn 2019 (MIA Publication)
Transforming the finance function to be at the heart of decision making
Understanding how professional accountants will continue to be relevant in a future shaped by digital transformation and broader perspectives of value creation has been my focus over recent years as chair of the Professional Accountants in Business (PAIB) Committee of The International Federation of Accountants (IFAC), which involves the Malta Institute of Accountants, represented by Stephen Muscat.

Our work culminated in A Vision for the CFO and Finance Function: From Accounting for the Balance Sheet to Accounting for the Business and Value Creation, which sets out the future desired state for an effective finance function; and CFO and Finance Function Roles for the Next Decade, which looks at the roles that will enable finance and accounting professionals to remain integral to their organizations.
To develop this future-fit series, we have interacted with various business and finance function leaders on exciting change journeys with a common destination – at the heart of decision making.
Finance and accounting teams can no longer survive as a back-office function and others in the business are demanding more from their finance and accounting colleagues. But transforming finance functions to be at the heart of decision making and value creation is challenging and cannot be achieved overnight. While many have made strides toward greater efficiency and reduced costs, they often struggle to transform the finance function into a business-facing function that supports and enables decision making across the organization.
Fewer people are needed to support transactional and reporting tasks. More focus is now needed on areas of opportunity, such as leveraging data and planning a path to long-term value creation through transformed business models.
The challenge for finance and accounting professionals is that the financials only tell part of the value creation story. Value is created and destroyed beyond the balance sheet. Strategic and operational factors, often intangible and difficult to monetize, make up much of total enterprise market value. Drivers of future cash flow that represent key areas of opportunity and risk are varied and include factors such as governance and culture, social license to operate and brand reputation, innovation and intellectual property, talent and human capital, data, operational excellence and quality business processes, and customer and supplier relationships.
Understanding and communicating only the 20 per cent or so of value that is represented on the balance sheet is not a path to continued relevance.
In today’s digital world, the CFO and finance function need to help navigate, measure and communicate what matters to long-term success while meeting expectations from investors and boards for short-term performance. This involves analysing and interpreting information related to all areas of value creation and helping to understand and deal with trade-offs. It also involves providing an objective view (“the sanity test”) in significant decisions and proposals.
To move the finance function from a transactional, reporting and compliance focus to one that guides and enables decisions across an organization requires four enablers of change: a customer focus; the right mix of talent and skills; mindset; and being digital and data-driven.
To deliver useful insights to its internal customers, the finance function must be outward looking with a clear understanding of its internal customer needs at board, management and operating levels.
It is also important to understand external customers and their experiences and interaction with the organisation. How value is delivered to customers influences the finance function contribution in terms of information and insights, business case evaluations, back-end processes and systems.
Digital and Data-Driven
Digitalisation and technology are reshaping the transactional and reporting environment and taking out cost as headcount reduces. Recent research from the McKinsey Global Institute shows that 40 percent of finance activities can be fully automated, and another 17 percent can be mostly automated.
However, an efficient finance organisation is not enough. To drive growth and value, it needs to enable interconnected and digital end-to-end business processes and systems. It also needs to invest in digital tools to help the organisation to enhance customer value and competitiveness in the marketplace.
Talent and Skills
Developing a workforce that can deliver value-added roles involves learning and development strategies that enable finance and accounting professionals to deliver business partner and specialist roles. Both big picture thinkers and specialist expertise are needed.
Growth and Change Mindset
Involves establishing a culture that encourages behaviours and actions to embrace growth, change and innovation based on continuous improvement, challenging existing practices, agility through experimentation and iteration, curiosity and exploration.
These enablers are essential to the finance function being agile, integrated and customer-led and one that can deliver:
  • Actionable insights to support strategic and operational planning and decisions.
  • Performance analysis to steer the organisation toward achieving objectives, targets and long-term profitability, as well as to ensure alignment between strategy, planning and delivery.
  • Enterprise risk management to manage uncertainty, opportunities, and risks in the context of business objectives and the external environment.
  • Effective communication and storytelling on all aspects of an organisation’s business model and value creation.
  • Trust and confidence in the governance of the organisation, and in quality of data, processes, systems and reporting through adequate control and security.
  • Integrity and professionalism to encourage ethical behaviour and decision making throughout an organization to ensure sustainable value creation.
To support you have a meaningful discussion on how and where to develop your finance function, we have also developed an accompanying assessment tool. This will help your board and management to review how far the finance function has progressed to business partnership.
The next stage of our journey involves working with IFAC’s International Panel on Accountancy Education to further understand and identify the skills, future career pathways and learning and education needed to support future-ready professional accountants.

Charles Tilley became chair of the IFAC Professional Accountants in Business (PAIB) Committee in January 2014, after being nominated by the Chartered Institute of Management Accountants (CIMA). He is a former member of the IFAC Board and chaired the IFAC Business Reporting Project from 2008 to 2011 and the UK Treasury Best Practice Panel from 2006 to 2007.

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