Over the last 18 months, the finance function has been embarking on a period of rapid transformation, heightened by the impact of the global pandemic. In a recent webinar, Rakesh Duggal, senior manager at Deloitte, joined Annette Melatti, Workday’s senior director, solution marketing for the office of the CFO, to explore the trends shaping the future of finance over the next five years.
In this article, Melatti asks Duggal to take a deep dive into those areas and discuss how finance leaders can incorporate them into their everyday work.
During the webinar, you discussed some of the things keeping CFOs up at night. How significant are these challenges?
Our report, “Finance 2025: Digital Transformation in Finance,” highlighted how the shock of the pandemic accelerated eight areas that are redefining finance. CFOs are looking at how they partner with the business and how they can change the current ways of working—of partnering to add more value. Within the finance organization, they’re looking at how they modernize their technology without significant debt and build future-proof processes that are scalable and adaptable to change.
What are some of the trends Deloitte found in the “Finance 2025” research, and how are CFOs embracing them today?
I think it’s important to break them down. It’s important to start with the further evolution of the finance factory. Transactions will be touchless as automation reaches deeper into the finance operation. What that means is technology is going to eliminate the handoffs in transaction processes. It’s going to replace the manual work that often accompanies moving transactions across finance silos. You might say it’s the journey to frictionless finance.
Next we have to look at the role of finance. With operations largely automated, finance is going to double down on business insights as well as service. Their skills will need to change. There’s a shift to more analytical insights that are derived from data as new combinations of technology and human workforces become ingrained in the workplace.
The third area is the finance cycle. Finance will go real time, and periodic reporting and key indicators such as revenue, expenses, cash flow, and inventory are going to become continuous. Operations and decisions are going to be based on real-time analytics as opposed to periodic reporting. Although many would argue that those decisions were not made on that old period of data, but rather on offline updates that finance teams churn through in between cycles.
Self-service is also on that list of eight trends in Deloitte’s “Finance 2025” report, isn’t it? How should finance be thinking about that?
That’s right. The fourth area is self-service, and that is going to become the norm, especially as digital tools proliferate. Some finance functions have traditionally been very uneasy about this, particularly because of the security models that are going to be required to work across a platform, but we are going to see an increase in demand for finance users doing more for themselves.
Number five is all about finance operating models. New delivery models are going to emerge as automation fuels a more diverse finance workforce. And when you think about the diverse workforce, think about the integration of freelancers, gig workers, crowdsourcing. Companies are going to assess the benefits of automation against onshore and offshore operations as well. On the whole, finance is going to require significantly more collaborative operating models than they have today.
The final three trends are really important, aren’t they, particularly for the evolution of finance?
You might say these are trends that have been around for some time, but I think they’ve taken on a new meaning over the course of the last few years and will into the future.
Number six on the trends list is enterprise resource planning (ERP). What we’ll see is finance applications and microservices are going to be challenging big and monolithic ERP. Instead of solely focusing on transaction recordings, ERPs will be focused on analytics and insights to support their evolution. New-age applications will support finance to enable faster decision-making through real analytics.
The next area to focus on is data. Finance will be required to deliver more accurate data, and quicker than ever before. Data governance is going to be an important thing here, and really, no one does enough of it. Organizations should do the hard work of getting all of their data houses in order so that data can be shared across teams to drive value, especially as those data sets are going exponential.
The last trend I think is going to be the most important: how businesses deal with their workforce and workplace. Employees are going to be doing new things in new ways, and retraining the employee to have a customer service mindset is key. More focus is going to be placed on growing talent who can tell the story versus crunch the numbers. Finance is going to have to adapt, or they’re going to risk missing out. All of this needs to be done in a model that is more geographically flexible to accommodate remote workers.
Digitalization is clearly at the core of these changes, but how is it impacting traditional problem areas, such as operational finance, which has historically taken the bulk of resources?
At the root of all these trends are digital forces. Business processes are being executed as a combination of human interaction with technology, and access to varied skills and talent is broad and strengthening. The key for finance is to become more agile and use data as the currency to produce valuable insights.
Transformative technology is what enables these forces, and it’s driving finance to achieve some of the significant opportunities across the finance spectrum. For operational finance, this is supporting three opportunities—the first one being touchless transaction processing.
As an estimate, 90% of transaction processing is going to become automated, and routine tasks such as data searching and validations entering will be performed by finance bots or digital activity.
The second area is the availability of real-time data. The labor-intensive and time-consuming close as we know it right now will cease to exist, and instead, accurate financial information will be available to leaders and managers 24/7.
The third one is the opportunity for centralization. As all of this happens, resources are going to be moving to physical and virtual command centers or finance factories, as we talked about earlier. And the need for operational skills will decline while the need for strategic and technology skills will continue to rise.
Does that level of automation and increased efficiency then lead to a more strategic finance function and better collaboration with key stakeholders?
I think you’ll see that, yes. On the business finance side, there are huge opportunities surrounding the quality of analysis. The key words here are predictive, insightful, and integrated.
Predictive means that focus is going to shift from reporting on the past to predicting the future, and finance will proactively identify opportunities to improve performance and engage with businesses to address them.
When we say insightful, we refer to the fact that automation and self-service reporting are going to free up capacity for insights generation. And finance will expand its use of visualization, as well as narrative, to help the business user better understand and make sense of financial data.
And when we say integrated, we’re talking about the greater linkages between finance and operational planning and analysis. And self-service functionality will be enabling greater access to data for business users.
Finally, specialized finance will have opportunities to increase efficiencies and add capability. It will be more efficient through automation, and that will improve the accuracy and speed of repetitive tasks, such as routine tax reporting, as well as through ecosystem-wide blockchain adoption, which is going to reduce processing time and costs and may even eliminate entire processes. Specialized finance will be more strategic through a shift in focus from transactional tasks to high-value areas such as tax strategy, treasury, and risk scenario planning, including more predictive analysis. And it’ll ultimately be fortified by new capabilities such as automated controls and predictive hedging strategies that will improve the ability to respond to events and better protect company assets.