Finance in the digital age

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BENJAMIN AZADA

BENJAMIN AZADA

May 9 was probably the first “digital” election in Philippine political history. During the campaign, our Viber and WhatsApp groups kept on goading us to vote for one candidate and not another. Facebook and Twitter feeds became campaign battlegrounds. Friendships were temporarily severed (though hopefully they have re-added each other again by now). And on Election Day itself, people were amazed at how fast the results came in through electronic transmission.

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All this was made possible because of digital technology. And as one would expect, this level of immediacy and engagement is becoming the new normal. The consuming public expects real-time information and service when they interact with retail businesses, service providers and financial institutions. When we tweet a complaint, we expect an instant reply. When we want to book a flight for a last-minute weekend getaway, we go online and expect to be done in minutes.

Finance’s challenge
This trend, in turn, is putting more pressure on Filipino CFOs, as they seek to remain relevant in addressing the heightened expectations of business leaders. I’ve spoken with a number of Finance professionals over the past few months, and I keep on hearing a consistent theme: senior management demands real-time analytics, coupled with innovation and value-added insight. (And, by the way, they want it on their phones or tablets.)

But how can finance functions step up the challenge when data is locked up in legacy systems and “data islands,” or worse, Excel spreadsheets and PowerPoint slides on a junior accountant’s laptop? Or when staff aren’t tech-savvy enough to harness the tools they already have? Finance departments in the Philippines are often too preoccupied with basic transaction processing—A/R, A/P, G/L—to give sufficient attention to business partnering and decision support. And far too many accountants spend their days reviewing, reconciling and correcting financial information.

All this points to the need to reinvent Finance. So what’s a CFO to do?

Finance function of the future
First, from a technology perspective, finance functions will need more modern, flexible systems. Adopting cloud technologies and data visualization tools will drive collaboration and help businesses make decisions quicker by empowering business units to do analytics on the fly. Robotic Process Automation will reduce the need for human intervention in routine, rules-based transactions.

Second, from an organization perspective, CFOs will need to establish the right structure enabling true business partnership to happen, where greater focus can be given to planning, budgeting, performance analysis and decision support. This will involve splitting the department into two separate fields: Operational Finance and Commercial Finance. Operational finance’s role will be to execute basic finance activities as efficiently as possible while ensuring sufficient controls are in place. Some basic accounting processes may be outsourced to third parties that do it better, while others may be reorganized into a Shared Services Center to drive standardization, control and efficiency.

Commercial finance, on the other hand, will be in charge of the “business partnering” aspect of finance. Their main objective will be to work closely with the business, providing useful analysis and insight. They will harness business intelligence and big data to help the business make informed decisions, and work together with Operational Finance under an integrated data and reporting framework with a “single source of truth.”

Third, from a talent perspective, it’s pretty obvious that the skill sets required for Operational and Commercial Finance will be very different. Operational Finance staff will need to have a good handle of operations management concepts such as Lean and Six Sigma, knowing how to remove bottlenecks from the process and keeping quality, consistency and timeliness high on the agenda. Commercial finance staff will have to develop a good understanding of the business and be adept at problem solving. They’ll need to learn to communicate with impact, having the guts to challenge line management when needed.

Transforming the finance function is no small feat. It will require redefining the finance operating model and “rules of engagement” with the business. It will mean changing processes, technology platforms and data structures. At its core, it will demand the finance and accounting professional to do things very, very differently.

So the CFO of the future will need to be, first and foremost, a Change Leader, articulating a clear vision of the future finance function, and getting the board and her middle managers to rally around her cause. She’ll have to balance demands of the change program with the day-to-day running of the department. She may have to bring in new talent, and equip existing staff with the skills needed to be able to operate in the new environment.

It’s all about your customers
But why go through all of the trouble of transforming finance? Just to satisfy the leaders of the business? Ultimately, it’s about the market. Customers will be loyal to brands that keep their promise by delivering what they want every time. Without the partnership of the finance function, businesses will not have the information they need to make well-informed decisions on how to respond to changing customer demands.

… And then you’ll start getting swamped with complaints on your Facebook page.

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Benjamin Azada is a Principal from PricewaterhouseCoopers Consulting (Philippines), Inc. Email your comments and questions to markets@ph.pwc.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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