How CFOs can leverage data to transform the role of finance functions

To meet the changing needs of the post-pandemic era, finance needs to look at building data collection and analytics capability.

In brief :

• Measurement of and reporting on non-financial KPIs will become core functions for the finance function.
• The finance function needs to take a forward-looking and insight-driven approach by moving away from reactive responses and transactional activities.
• To help finance embrace an agile way of working, businesses will need to provide finance professionals with new technical skills and support a shift in mindset.

With the lifting of the remaining pandemic restrictions, businesses are moving on from short-term tactical planning to focussing on the key drivers of long-term value. They are also placing increased emphasis on dealing with external pressures such as rising expectations from customers and stakeholders in relation to environmental, social and governance (ESG) factors as well as dealing with inflation, price increases and supply chain challenges.

Businesses need to manage these drivers and pressures and understand how they impact performance and long-term value. That requires a finance function that goes far beyond traditional financial reporting in the service it provides to the business.

We expect to see a shift in the activities it performs. It will move away from reactive responses, transactional activities and backward-looking analysis and become more collaborative, forward-looking and insight driven. It will break free of traditional boundaries and spread its influence throughout the organisation.

Profit and loss statements, balance sheets, cash flow and simple variance analyses will no longer suffice. Organisations will require in-depth insights that allow them to make the connections between actual business activities and long-term value that help make better informed decisions. Failure to deliver those insights will see finance being supplanted by other functions in the organisation.

Build capability to strengthen the core

If finance is to meet these changing needs, significant investment in data collection and analytics capability will be required. But any additional spending will need to be justified based on the bottom line benefits it can bring to the business.

That new capability will be deployed to play a much bigger part to play in driving strategy, evaluating business options, and guiding the allocation of resources across the business.

In particular, finance will need to address the following areas:

Core financial value

Traditional financial statements will need to be delivered more efficiently, in more detail, more quickly and, where possible, more accurately. The potential for self-service reporting across the business should be explored to free up the finance team to provide greater insight in other areas.

Enterprise-wide value

Finance must use its connections across the wider business to understand how operational metrics are driving value. This will enable the finance function to play a lead role in optimising other areas including the supply chain, production, commercial operations, and customer experience.

ESG

Businesses are under increasing pressure from consumers, investors, and a range of other stakeholders to demonstrate their ESG credentials. In this new reality, measurement of and reporting on non-financial KPIs will become core functions for the finance function.

Financial planning and forecasting needs to be agile to cater to differing scenarios and facilitate what-if analysis.

However, the finance function will need broader support from the organisation if it is to deliver on its new much wider mandate.

This will enable finance functions to harness advancements in technology and data to help drive effective decision-making across the business. They will be able to employ advanced analytics techniques to optimise relationships between a growing number of datasets and make insight more valuable and easily accessible. Overlaying that, machine learning and artificial intelligence can be applied to uncover historic trends and correlations and make predictions on future outcomes which would not be possible using traditional methods.