Finance 2030 – how far have we progressed?
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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At the start of a decade, many will make predictions about the future. It’s no different for the finance function. Standing at the beginning of 2020 many made predictions about Finance in 2025 or 2030. We’re now closing in on those predictions and it’s time to stock. How are we doing 5 years down the road. Later, we will dare to make our predictions for what the finance function will look like in 2035.?
This is the essence of our new articles series “Finance 2035”.?
In our first article, we will review the predictions made by others at the start of the century by tapping into the work of McKinsey, BCG, Deloitte, KPMG, EY. It’s a genuine opportunity to review our progress, celebrate our successes, and discuss how to overcome barriers we’re still facing. Additionally, it’s a great tee up for making our predictions five years further into the future. We won’t make a detailed walkthrough of each of the predictions made by these prestigious consultancy firms, rather touch upon some of the main points and make references where relevant.?
Seven overall themes emerged, when we reviewed these predictions:?
1.?Digital transformation: Finance was expected to make significant headway on the digital transformation and make headway on the data challenges even though Deloitte noted that by 2025 “Companies will still be struggling to clean up their data messes”.
2.?Insight generation: Finance was expected to generate clearer, faster, and richer insights, which should be driven by “training in analytical, data visualization, and debiasing techniques” (McKinsey).
3.?Powered by Advanced Analytics: All touched on Advanced Analytics as a significant driver of value as the main enabler for CFOs spearheading strategy and innovation (KPMG).
4.?A re-imagined workforce: Deloitte headlined their 2025 prediction on workforce as “Employees will be doing new things in new ways, some of which will make the CFO uncomfortable”.
5.?Beyond Finance: Cybersecurity and ESG were highlighted as two main topics beyond Finance that CFOs should take charge of. On cybersecurity, EY noted that CFOs should “Partner on cybersecurity”.
6.?Strategic business partner: BCG notes that Finance is still the “Custodian of Performance” whereas KPMG highlighted the CFO as a “strategic partner and key advisor across the enterprise”.
7.?Cheap AND good: To be a world-class finance function or what we denote a #FinanceMaster, finance functions should be cheap AND good and that’s still the mantra going towards 2030. McKinsey even dubbed it a “false choice” to choose between cost and performance.?
Clearly, these were ambitious predictions, but to be fair, a lot should also be possible in the span of a decade. What none of these predictions took into consideration was the advent of Generative AI. In contrast, other predictions such as blockchain-based accounting is nowhere near being realized (if it ever will…).?
Let’s get started with the review.?
A small step for a finance professional but how giant a leap for the finance function?
Go into the average finance team and they probably won’t feel the last 4,5 years have changed a whole lot even with COVID-19 disrupting the way we work. However, a lot of activity has taken place so let’s see how far this has taken us.?
Ad 1. Digital transformation
We talk less about digital transformation today compared to five years ago. That’s a positive sign, as it indicates that we have moved from the buzzword stage to reality. No doubt COVID-19 played a big role here. Accenture noted for instance in their oft-cited “CFO Now publication” from 2021 that the rate of automation of transactional processes in Finance had increased from 34% in 2018 to 60% in 2021. Most finance functions probably struggle to recognize this number, but the movement is real. And if 60% was the 2021 number we can probably agree that the number is even higher today.
We can also debate what digitalization means in the first place. Is it moving from paper to Excel, as the founder of CFO software said to me a few years back or is it something else? In the context of these predictions, it mostly equates to automation, which is a crucial activity to free time for more value-added work. However, looking ahead it should probably be more than automation and be insight-generating on its own. More about that in future articles.?
Ad 2. Insight generation?
While it pains us to say so, we’re somehow still waiting on the insights. We’ve experienced what could be denoted as a “dashboard explosion” and with tools like PowerBI any finance professional can create a dashboard. However, dashboard ≠ insight and we still need to become better at separating what’s important from what’s not. Moreover, we haven’t seen a big shift in the usefulness of management reporting, where our experience is that 95% still needs significant improvement.?
At BPI, we would like to make our contribution to insights generation and are currently writing a book about financial communication for non-finance executives. Here we will share a simple recipe for generating and communicating insights. That said, we still need a lot more training before we go significantly beyond operational insights.?
Ad 3. Powered by Advanced Analytics?
Advanced Analytics has for many years been a pipe dream for most finance teams, but unfortunately, we haven’t advanced much on this agenda in the past 5 years. ?Unfortunately, Deloitte was right when they predicted that companies would still be cleaning up their data messes by 2025. We also highlighted this in one of our deep dive articles recently “CFO, your time to get on top of data is running out ”. You cannot do good analysis with bad data.?
This leaves CFOs and finance functions short-handed on the richer insights that McKinsey was predicting. It also limits Finance’s impact significantly, as we struggle with sharing insights beyond the obvious. We still have half a decade to solve this challenge, but we must wonder if we haven’t solved it in the past 15 years how we could we do it in just five years? We’ve suggested that Generative AI could play a role , but we’re curious to hear your thoughts as well.?
Ad 4. A re-imagined workforce?
COVID-19 made a huge dent in these predictions, as we got introduced to hybrid and remote work. This opens new ways of building the finance function, sourcing talent from locations previously unreachable. However, it’s also caused challenges with team building and stakeholder relationships. The jury is still out on whether these new work forms are making the finance function better or worse.?
What we observe in terms of the re-imagined workforce, is a high willingness among senior finance leaders to invest in upskilling their teams. You could argue that this is the whole foundation that Business Partnering Institute builts on. However, it will still take time for finance professionals to adapt to a new reality in the finance function, where automation and artificial intelligence will do a lot of the work humans previously did. This remains a critical priority through the end of the decade.?
Ad 5. Beyond Finance?
This varies greatly between regions as for instance in the EU finance teams are busy implementing CSRD whereas in other regions there’s not as big a pressure on the ESG agenda. What’s been true about this prediction though is that Finance has been handed over a large part of the ESG agenda when it comes to reporting. Previously this would have been in CSR or pure Sustainability teams but now that the reporting needs to be audited Finance has been called into action.?
Naturally, if Finance doesn’t go beyond reporting you can argue that Finance isn’t really going beyond Finance. That’s why we have advocated for Finance to elevate ESG to the strategic level . Here we still have some way to go but once the reporting challenges are solved, we will push finance teams to go even further.?
Ad 6. Strategic business partner?
Few would argue that the CFO oversees driving strategy in most companies today. That means we’re not where we want to be. We have highlighted a path for CFOs to show more strategic leadership . The challenge is that becoming a strategic business partner is like the epitome of all the other themes coming together. Until that happens, it’s a tough sell for CFOs to say they should be in charge of strategy.?
Still, it should be the ambition of all finance professionals today to generate and share insights beyond the operational and tactical realm. We have highlighted it as a staircase below to illustrate some of the differences.
Ad 7. Cheap AND good?
This is a relative moving target. A decade ago, there were cheap AND good finance functions earning the world class badge. Today those finance functions exist and in ten years they will exist too. However, as highlighted by McKinsey, the finance cost as a % of revenue for leading finance function has decreased from 0,77% in 2009-12 to 0,57% in 2016-2019. That’s a 26% reduction in seven years. If that reduction was to be replicated, leading finance function by 2025 should have cost to revenue ratio of 0,42% and by 2031 a ratio of 0,31%.?
Is it possible? Most likely. The Modern Finance Function showcase by Microsoft is a good example of this. In the period from 2009 to 2018 Microsoft’s revenue grew 89% whereas finance headcount only grew 14% . This is an admirable ambition for all finance functions and as a minimum, they should try to replicate the percentage reduction over each three-year period.?
Is the finance function also good then? In reviewing progress on the other themes, it’s fair to say that we haven’t realized the ambition. How do we know when we have? Try this small exercise. Ask your CEO if s/he would rather invest in ten salespeople or ten finance people or invest in new software for operations or new software for finance. Until the answer is “Finance” on most occasions we can dare to aim higher!?
Can we still make it in 2030??
Yes, of course! Will we make it? Probably not. At least a lot more progress needs to be made and also more than we have made in the first 4,5 years. You can argue if there’s an inflection point on the digital transformation path that will boost all other priorities. If so, we need to reach this within the next few years to realize the bold predictions made for 2030.?
领英推荐
Today, the best actions you can take to make it by 2030 is to work hard on the CFO’s top priorities for 2024. We have outlined them here and shared advice on how to tackle each of them. You will have to stagger the work you do on these priorities though.
Once that’s on a good track start investing in upskilling your teams to ensure they can reap the benefits of the investments you’ve made in digital transformation. This will help them elevate themselves towards becoming strategic business partners and taking the next steps in artificial intelligence. We know there’s a lot of work ahead of you and we’re rooting for you and stand ready to help realize the bold predictions for the finance function in 2030. Do you think the predictions made were realistic? Do you think we have made enough progress so far in this decade? What do you predict Finance will look like in 2035?
This we the first article in our new series, "Finance 2035 - what Finance will look like a decade from now". Remember to subscribe to be notified when we publish future articles. You can catch our previous series "Hacking the Annual Wheel in Finance." below.
If you want more trends in finance and accounting, you can read our previous series, "The Top 10 Priorities for CFOs in 2024." This series explored what critical issues CFOs should focus on in 2024.
Catch the insights from our latest series, "The Modern Finance Function," here.
Continue reading below for more articles about trends in finance and accounting.
Anders Liu-Lindberg is the co-founder and a partner at Business Partnering Institute and the owner of the largest group dedicated to Finance Business Partnering on LinkedIn, which has more than 12,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ”, a long-time Finance Blogger, a LinkedIn Learning instructor , and a Top Voice on LinkedIn with 350,000+ followers.
Financial Management Graduate | Finance & Control | AaltoAI
3 个月I liked this piece. Simple and clear yet informative reflections on the situation. Thanks! I will definately read the 2035 predictions as well. And I will post my reflections on this article too. ?? ??
I will help you to be more effective everywhere and in everything, I am not afraid of changes related to the sphere of activity. My life credo is “to be useful for myself and humanity”.
3 个月A great opportunity for reflection! It will be interesting to see how these forecasts shape our strategy for the next 10 years.
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3 个月The future of the finance function is crucial.
Team Manager, Financial Analyst @ Financial Sector, Banks | Master's in Economics, Banking Strategy, M&A, Cross-Border Transactions, Corporate Banking, Risk Assessment Expert
3 个月Finance and Financial Services are also banking. Banking is radically transforming. McKinsey believes that the future of banking will be contested by banks and nonbanks in five cross-industry competitive arenas: everyday banking, investment advisory, complex financing, mass wholesale intermediation, and banking as a service (BaaS). In the next decade, revenues for all these arenas could grow by as much as three to 30 times.? Many traditional banks face stagnant or decreased revenue and profits. The average global banking ROE was around 9.5 % in 2021—a significant recovery from 6% in 2020, but a sharp decline from 15% prior to the 2008 crisis. By 2030, we project that it will fall below 7.2%. Another concern is data breaches and the scale and cost of business disruptions caused by data breaches. In its report, The Cost of a Data Breach 2024, IBM reported that 40% of data breaches involve data stored in multiple environments. Breached data stored in public clouds incurred the highest average breach cost at USD 5.17 million. The average global cost of a data breach in 2024 was $4.88 million, up 10% from last year and the highest ever.
SMU
3 个月Yes, AI