It’s never a bad time to look forward to changes that might have an impact on the business… especially financially. Many CFOs find that they’re faced with four primary areas of focus in 2020: People, money, data and technology, with some overlap among the four. Here we’ll briefly cover our predictions for the challenges heads of finance will likely face in the coming year.
Challenge 1: Attracting and Retaining Talent
Finding new ways to thrive despite a very tight labor market continues to plague businesses overall in 2020. But the finance department is discovering that it’s increasingly challenging to find people to build out their teams. Ten years ago, the three areas finance hires were judged on were accounting, auditing, and compliance. Today, they still need to have those three skill sets, but they also need deep expertise in data and analytics.
CFOs need employees who understand data visualization and are flexible thinkers. Typically, the CFO and senior finance executives have acquired these newly required skills at a greater rate than the department at large has, creating a gap in knowledge between the top and bottom of the organization. In fact, it is not technology or data that is limiting the pace of transformation within finance—it is the lack of people with all the right skills.
Challenge 2: Cost Issues
CFOs have long been the keeper of the checkbook and creating cost structures, but the task of controlling costs has become increasingly complicated yet still essential to long-term strategy. Growing costs continue to outpace revenue, making it a challenge to transform sustained growth into prolonged profitability — especially while navigating the mixed economic indicators nearly every business is confronted with.
Today’s CFOs face:
- Structuring costs to drive a specific competitive strategy
- Managing costs relative to external benchmarks and investor pressure
- Acting on cost-related risks and opportunities resulting from the business cycle
And they’re asked to do this all while under pressure from their investors to control costs and from business leaders to fund growth opportunities.
Unfortunately, this pressure can result in knee-jerk reactions trying to protect shareholder returns when it comes to managing cost pressures and uncertain times. Often, they’ll reduce head count, switch to lower-quality supplies, or delay capital and innovation investments. These types of initiatives may keep senior management happy, but they often have a negative impact on employee morale, brand value and eliminate the resources needed to achieve long-term goals. It’s a fine balancing act, but some companies have seen extraordinary returns for their organizations by being successful at it.
Challenge 3: Disconnected Data
Few things are more of a time-waster than having the information you need housed in multiple, disparate databases and spreadsheets and not immediately at hand. A setup like this results in low-value, often manual processes and creates a huge drag on the department’s agility. Heading into the Roaring 20s, it’s important to have a single source of truth (SSOT) so that everyone’s on the same page when they need to be. Having one place for all of your finance data helps ensure that the entire department is getting the same information. It also makes pulling reports much faster and easier.
Challenge 4: Working with Emerging Technology
New accounting standards such as lease accounting for government entities (GASB 87) will make it a business imperative to ensure accounting software is integrated with ERP software. And the future of finance is all about evolving and innovating: Blockchain, AI, new tech…. Cloud-based technology is where it’s at. But some CFOs still have considerable hesitation about switching from the legacy back-office systems they know and love out of concerns around reliability, security, and the potentially steep learning curves needed to train end-users. That learning curve, however, comes with significant cost savings, so it’s worth the effort.
The growing acceptance of cloud-based apps in the finance arena enables companies to access faster, better computing power often at a lower cost than before. In fact, finance departments often find they can streamline transactional activities by using the cloud, finding additional precious time to focus on strategy.
Forward thinking CFOs are looking to artificial intelligence to help the finance department provide more value with less effort. By providing rapid response to the needs of the business, the finance department can catapult from outmoded data processing to strategic partnering.
Unbelievably, only 34% of finance tasks are automated according to Accenture. But they estimate that 60-80% of historical accounting activity can be automated; it’s just not. The CFOs surveyed expect less than 50% of all finance tasks to be automated by 2021, largely in part to employee resistance to working with non-human colleagues. Plus, their Catch-22 is that with the speed technology is evolving, the fear of technology becoming outdated before the return on investment is realized is maximized.
The bottom line is that the overarching challenge for CFOs in 2020 is sort of a reverse Venn Diagram showing lack of inter-connectedness among the four challenges – between datasets, between people, between new and old tech, and between management and stakeholders. When everything is connected, people, processes and technology work together to form a streamlined and successful finance team and overall business.
How COVID-19 Is Impacting the Labor Market
As the demand for labor shifts and the unemployment rate rises, workers and employers adjust.View the Impact
Stay Up to Date
Sign up to receive our latest research and expert advice.
Check your inbox for an email confirming your subscription. Enjoy!