Bean counters? Hardly. Aided by technology, the CFO of the future plays an integral role in everything from business strategy to digitalisation.
There was a time when the primary concern facing senior financial decision-makers was the company’s financial performance, usually considered from a rearview mirror perspective. That is changing as digital tools broaden the scope of the role, seeing the financial function is assuming greater prominence.
All told, the CFOs of the future are expected to possess a far more versatile skill set than their predecessors; one which incorporates strategic thinking, analysis, business acumen and, of course, accounting.
This is according to Sage, which recently teamed with World Wide Worx to research how exactly the role of senior financial personnel is evolving and how technological advances are fostering these changes. The research included a sample of more than 300 respondents from medium and large businesses, ranging from professional services to financial services, general business and not-for-profits. Almost all had a stake in their company’s digital transformation, whether partial or complete.
The ultimate finding of the research was as simple as it is profound: technology is to the modern CFO what smartphones are to Instagrammers. In other words, it is entirely impossible to contemplate the evolving role of the CFO without looking at how technology is driving those changes.
Then and now
One of the most prominent changes to the role is that CFOs are fast becoming change agents within their organisations, says Sage’s Pieter Bensch.
He compares the three ‘generations’ of CFOs: CFO 1.0 – which he dubs ‘the historian’ – is concerned with a retrospective view of the organisation. This is because the focus here is mainly about reconciling profit and loss, and making sure that the company’s books reflect all developments. Limited by a traditional view of data and past performance, this professional is constrained in their ability to provide an outlook for the future.
CFO 2.0 has a distinct upper hand over this backwards-looking colleague. These people operate in real-time, with a greater emphasis on analysis thanks to the deployment of automated finance processes, data sets and technology aiding financial management. This is where most organisations find themselves today, according to Bensch – but, although it’s certainly an improvement, this scenario falls short by failing to take into account any vision of a possible future.
This is where CFO 3.0 really comes into its own. Thanks to the combination of artificial intelligence (AI), machine learning and robotic process automation, these ‘visionaries’ are able to access techniques such as predictive analytics, making it possible to discern a way forward for the organisation.
Where are we now?
Of course, forecasting a future is all very well. But, as the COVID-19 pandemic has shown us, such forecasts are far from infallible.
The pandemic has changed the profession in ways besides adding an element of uncertainty, with the tasks and duties of the CFO evolving considerably in the five months since South Africa was placed under lockdown.
This is to be expected, given that the conditions of the workforce have changed significantly, too. Sage’s research reflected that, since March, CFOs have become increasingly involved with the management of a remote team. Linked to this is an even greater accent on cybersecurity, data security and compliance. Make no mistake – these were already concerns before the advent of the pandemic but, as Bensch points out, the responsibility has been made more complicated by the scattered, decentralised nature of the workforce, which presents a larger attack surface. In fact, half of those included in the sample voiced their concerns around managing the risk of cybersecurity and fraud – a challenge which 75% opine has been mitigated by the implementation of cloud-based financial management technology.
But this isn’t the only worry that has been thrown up by remote working: 27% of the research respondents who are involved with remote worker management said that compliance is their key concern. It is the biggest shift in the role of senior financial decision-makers in decades, according to Bensch.
There is yet another dimension to this picture; one which adds even more levels of complexity to the CFO role: despite the recession, 49% of businesses involved in the study have recorded strong organisational growth over the past year, and 78% are expecting to see further growth still. Many of the CFOs interviewed attribute this growth to the company’s take-up of technology, which has freed them to shift their focus from number-crunching to more pressing concerns, such as updating business processes and gearing the organisation to meeting the changing needs of stakeholders. In fact, as many as 90% of businesses report that they have adopted emerging technologies.
Employees, on the other hand, have shown themselves to be less enthusiastic. This means that, increasingly, CFOs have to act as digital champions, working hard to encourage a more receptive attitude amongst their teams. Once that’s been achieved, their expertise and guidance are required to ensure that those teams are using new technologies in a way that extracts the most value. This relies on knowledge sharing, so once again, CFOs find themselves entering new arenas; this time making sure that there is coherence between culture (and especially a culture of knowledge sharing) and strategy.
Machines are not the enemy
The alacrity with which business is embracing technology points to another factor: the days when AI was feared as a usurper of jobs is over.
On the contrary, most respondents indicated that they believe it has a critical role to play in the organisation’s success. For instance, 40% of those interviewed said that they believe that AI and machine learning can improve financial planning and forecasting, while 89% are excited to see their day-to-day accounting tasks becoming automated. Added to this, 86% maintain that their businesses will be better able to manage risk and identify new opportunities thanks to technology.
This confidence in technology makes sense, given that one of the key challenges facing CFOs is the management of vast streams of data, as well as keeping up with legislation that is continually changing. The research reveals that two in five CFOs consider remaining abreast of new developments in the realm of legislation to be one of their key hassles.
Technology’s ability to enhance productivity is a major factor here. But efficiency is a key factor, too: Bensch points to the benefits of making decisions around risk and opportunity in real-time, for example.
Added to this, automated period-end reporting and corporate audits mean that there is less time to close in the process. This is something welcomed by two-thirds of the CFOs interviewed. They noted that while changing the way senior financial decision-makers operate at board level, this also has important implications for how businesses interface with automated taxation processes and open banking systems; a trend which is set to become more frequent going forward.
Interesting to note is the fact that South African CFOs appear to be more progressive in their attitudes towards AI than their international counterparts. This is borne out by the 64% of CFOs who spend much of their time analysing data rather than collating and processing it, compared to the 50% of UK financial managers. Further evidence is the South Africans’ eagerness to embrace all that AI has to offer, while UK industry players still show concern that jobs will be lost when companies adopt bots wholeheartedly. In South Africa, 73% of CFOs say their companies are ready for this change, while a further 90% maintain that any future success hinges on the implementation of financial management technology. More stats worth noting include: 75% of CFOs are confident that their job security will remain unaffected by automation, and 88% show no concern that AI will mean fewer jobs.
Leading the charge
Interesting, too, is CFOs’ willingness to drive the change. Sage’s research shows that most have accepted that their role cannot be divorced from digitisation; if anything, their contribution is of the utmost significance.
According to Sage’s research, nine out of ten CFOs are heavily involved in their organisation’s digital strategy, while 15% have taken on full responsibility for digital transformation. This is a noteworthy departure from the model which sees this function coming under the auspices of the CIO. Significant, too, is the evolution of the finance function to become a central part of the business strategy, as budgetary approval is an intrinsic part of any digital strategy.
The CFO of days gone by probably wouldn’t have imagined such a dramatic shift. It’s clear that the job description has evolved in other ways, too, with 21% of CFOs playing a part in the development of business strategy and objectives, and 14% lending a hand to the management of government affairs and relations.
When all’s said and done …
Clearly, CFOs are facing slings and arrows from all directions. Bensch summarises critical concerns at present: topping the list is changing stakeholder needs, followed by using technology to modernise business processes, staying informed about changing regulatory requirements, managing risk around fraud and cybersecurity and managing remote teams.
Bensch attests that technology can help in each of these areas. Indeed, if Sage’s findings are anything to go by, it would be impossible for the CFO to perform competently without digital input. It is all the more true since many of the changes ushered in by the pandemic are unlikely to be reversed. For example, while many employees will return to the office once infection levels are safely under control, there are probably just as many who won’t – and so ccybersecurity concerns are here to stay. And that’s only one aspect of a very different world that CFOs will continue to grapple with.
With this in mind, Bensch notes that there are three areas that businesses should be ready to hand over to automation – or pay the price in reduced productivity in the finance function. First comes data analytics. Already, two-thirds of senior financial decision-makers have harnessed the benefits of these tools, enjoying benefits, such as accurate analysis, which aids better decision making.
Then comes cloud-based accounting platforms; again, a technology that is already making an impact, with three out of four large businesses operating either hybrid or fully cloud-based systems. Of these, four in five companies say that cloud-based solutions enhance financial management. At the same time, 80% have experienced greater agility and cost-effectiveness, as well as better security and improved protection for financial data.
Finally, compliance automation solutions have been welcomed by 80% of respondents in Sage’s research, with half of these saying that they have seen improved business productivity as a result.
The ultimate takeout? We’re about to see a marriage; a great one at that, with technology uniting with the finance function − for better, rather than worse, with those who have already embraced the trend reporting less human error, streamlined processes and risk mitigation. Real-time audits, accurate forecasting, faster governance and improved governance are also likely results.
These advantages will become all the more important as CFOs brace for a world that sees many of the challenges we’ve recently faced either entrenched or compounded – a world where a more robust finance function is sorely needed. CFOs are set to leave a greater impact on this world through their increased participation in business strategy.
The shifts that have taken place since the onset of the coronavirus crisis were not, in fact, new. However, they served to make them more salient, relevant (and less easily ignored) than ever before. And if digital transformation is going to make handling the challenges that arise subsequently any easier, then they will surely be warmly welcomed.