The Future of Finance

During recent years several significant industry giants have commented on the future of finance, including KPMG. In 2010 their Future of Finance report made predictions for 2020 commenting on the likely financial landscape and the role of the CFO. In this article we summarise these predictions, assess how many have come to fruition and look at the challenges facing SME’s with regard the implementation of this degree of change.

The key aspects of achieving successful financial management in 2020 revolve around:

  • Improving efficiency through the use of IT, including standardising and automating processes
  • Lowering costs through outsourcing, offshoring and the employment of shared services
  • Converging skill sets within the role of the CFO or Finance Officer to ensure a pre-emptive and holistic approach to financial business management

According to a prediction from KPMG’s report, ‘In 2020, successful organizations focus on what they do best. They relinquish activities that do not add value in order to achieve sustainable and competitive advantage.

The Undeniable Necessity of IT

IT now plays a dominant role in all aspects of business management including:

  • Marketing, service delivery and customer experience
  • Employee satisfaction and management
  • Compliance and security
  • And of course, finance

According to a report published by Deloitte, key technologies for current and future financial function include:

  • Blockchain – Provides transparency and increases the speed of exchange, level of security and integrity of the data.
  • Robotic (Automated) Processes: Reduces labour across all routine transactions.
  • Cognitive Computing: Performs self-correcting repetitive tasks, reducing costs and improving accuracy.
  • In-memory Databases: Provides enhanced visibility into information and processes.
  • Cloud: Improves efficiency of data entry through a single platform improving access to efficient data models.

Organisations cannot afford to ignore the advantages that IT offers both in terms of their own business operations and to permit interactions with companion business.

However, despite predictions regarding cost savings from improved efficiency, implementing this kind of technology necessitates a significant investment in terms of procurement, integration and management.

While there is no doubt that this level of technology is at work in business today, does it remain the province of global enterprise? It seems clear that in order to maximise the benefits of IT, available in 2019, organisations of all size must make financial provision for procurement and adequate support mechanisms, such as Managed Service Providers.

Reducing Transactional Costs

The successful business model in the 21st century is complex. As such organisations need to learn to delegate not only tasks but perhaps entire operations. KPMG predicts that businesses in 2020 will lower their transactional costs through outsourcing and sharing services.

Outsourcing significant aspects of business such as Finance, HR and Customer Services is already commonplace in 2019, and virtual assistants provide support for a multiplicity of professionals around the world.

What’s more there is a greater emphasis on compliance with company procedures and cultures than in the early days of outsourcing, and competition is high to deliver or exceed in-house level services utilising outsourced resources.

Organisations competing in the same market may also consider developing back office systems to enable a convergence of data, thus pooling their resources. Converging data and processes benefits the customer, the investor and the regulator. It promotes standardisation, efficiency and enables an increased understanding of business performance. This is a reality that perhaps needs to be driven by individual organisations themselves. Businesses must choose to maximise their potential through shared resources on an industry level. This does not appear to be a facility that has been exploited by SME’s at present however, the opportunity and kudos is there should someone decide to take up the mantle.

Your Future CFO?

It is already clear that the role of the finance officer has evolved exponentially in recent years, in line with the explosive impact of IT. This is a trend that can be expected to continue in 2020 and beyond.

The current and future CFO role must incorporate many aspects of business management, which bleed into finance. This includes foreign policy and business practice, global regulations and compliance, and environmental impacts enabling organisations to combat their carbon footprint.

CFO’s may take a greater involvement in client liaison. Given the increased transparency of company performance and greater investor awareness, businesses must seek innovation to retain clients and extend their portfolio.

Deloitte state that the modern CFO must perform the combined role of a catalyst, a strategist, a steward and an operator.

This is a level of support that has been achieved in 2019, with finance officers taking a much more involved stance in their role. Although it is clear that automation and standardisation will reduce the level of transactional tasks, financial officers and accountants will always be required to oversee, analyse and anticipate.

The Final Word on The Future of Finance

The predictions and statements made in the referenced reports seem to have been realised with a significant level of accuracy. However, not all of the opportunities are readily available across the entire business sector.

  • Capitalising on IT requires significant resources and although its potential cannot be ignored, discrimination is required when choosing which aspects to employ.
  • Reducing costs through outsourcing should be explored fully and seen as key aspect of individual business development; maintaining total control of all aspects of your developing business is impractical.
  • Pooling resources within an industry sector can only aid all participants however needs to be driven at industry level.
  • The role of the CFO is greatly evolved and all organisations should evaluate the level of service that they currently receive in order to maintain the most effective and holistic service.

The modern business model should be subject to regular scrutiny, and where required utilise industry related guidance on the evaluation process, to ensure that the business avails itself of all current and future opportunity.