Through the Looking Glass: Finance in 2025

Thanks to everyone who responded to my blog about the finance operating model of the future. Here’s what I learned.

In the future, the forces of demographics and automation will affect the finance function’s role and capabilities on four primary dimensions.

• Finance will play a more advisory role.
• Finance will fulfill many of its tasks using automation and robots.
• Finance will have different talent requirements.
•  Finance will offer enhanced analytics capabilities

In the end, in comments and conversations, these common trends or themes emerged: 

Finance is going to become more of a business advisor and move away from transaction processing.  “The role of Finance will never go away because finance is the common language that we translate everything into to run economies and enterprises,” writes Andrew Codd, a consultant, in a blog he shared.

Terry Brooks, a principal at FP&A Partners, added that data automation and intelligence have tremendous potential for enabling faster, deeper, better information.

“I see the role of finance professionals continuing to be an integral part of the management team. We add the human element to decision making. Decisions made based solely on the numbers aren’t good management.”

The decision support, business partnering aspect of finance will become more critical. “The role of Finance function is going to transform from just a back-end support to a function that is driving business commercially,” said Himanshu Nagpal, a senior accountant at Baxter International Inc. While transactions can be automated to a certain extent, business decisions are taken on a risk vs return basis.

Automation will replace many finance activities. “There’s no question that transactional finance work will be more automated,” wrote Pete Geiler, a veteran FP&A professional. “Automation will affect processes like financial report production and forecast consolidation.” But he doesn’t think that means professionals like accountants will be out of a job. “The theory of accounting will always need people to think/debate rule changes. Interpreting new rules requires thinking - which will take much longer to automate,” Geiler said. Already, many companies have automated much of their transactional work and RPA is beginning to offer new ways to automate processes without having to completely overhaul legacy financial systems.

Finance professional will require new skills. There’s no question that increased financial transaction efficiency is in store for finance. In a separate conversation, Anthony Scaglione, CFO of ABM Industries, said, “We will see smarter data capture up-front and easier and less time-consuming processes happening at the back-office like consolidation and invoice matching. The result will be not just a substantial reduction in staff at that level but a dramatic shift in the required skill set for the finance professional.”

As more tasks are automated, finance professionals will need deeper understanding of client work processes, better knowledge of cost drivers/metrics and a mindset more like a consultant, according to Geiler. “Knowing how and what to say to clients to get them to decide a course of action is important today and will be more of a key skill in the future.”

Analytic s will be the main "product" of finance. Probably the biggest impact technology and the new workforce will have on the finance function is in analytics. It’s how finance will fulfill its mission of delivering more value-add services. Machine learning, big data, cognitive computing, and AI, will all be actively listening, collecting data and spotting trends before humans can and setting off warning signals for management, according to Codd. And they will be on the job 24/7. 

An emerging model for 2025

According to Codd, with better data integration from multiple sources, the Finance operating model of 2025 should be near real time visual and drillable to highlight trends and immediately explore data to drive insight. “Finance should own the analytical definitions and methodologies to be used across the organization. Finance BU staff will continue to be critical as the "ear to the ground" to reflect changes in assumptions in the operating model. IT and data integration will become more important skills for an FP&A professional, to bring together data from multiple sources to provide meaningful analysis.”

Nearly everyone agrees automation will take over a lot of finance’s work and emerging technologies like AI and cognitive computing will probably mean more automation than we can imagine today. The question is: How will these emerging technologies affect the placement of finance activities and the current four-pronged operating model (e.g. corporate, GBS, COEs and Business Unit/Field? Where will finance add the most value?

The emerging new model reshuffles the distribution of activities and staffing levels. Richard Reinderhoff, a finance expert expects finance will transfer many of its activities to the business reducing the number of finance staff at the BU level. He already sees companies transferring finance roles into the business units, like supply chain because they are closer to the real world. Reinderhoff expects finance to focus primarily on commercial subjects like revenue recognition and pricing and some business planning reporting. “Specialists will be trained in the few finance business tasks (as an add-on role) and local financials will slowly be replaced or move "up" to HQ,” he said.

Meanwhile the role of GBS will be dramatically reduced, according to Anders Liu-Lindberg, finance transformation leader at giant European shipping and energy company, Maersk. Large GBS operations will likely shrink as more of their activities are automated, giving way to smaller, specialty CoEs which will direct policy, like vendor selection for activities like analytics or policy setting; the actual analysis will be primarily handled on a self-service basis at the BU level. Technological tools will allow users locally to ask increasingly complex questions and drastically reduce the time it takes to make decisions, while accessing more data.

From our perspective at Hackett we, too, expect that overtime, the size of the GBS will shrink as it becomes more of a coordinator of process optimization as a greater share of its current activities are automated via RPA, giving way to specialized COEs. Meanwhile the role at the BU level will depend on the specific needs of an organization’s industry as well as initial maturity. Today, we see variations in models based on politics, company and industry requirements, and Finance’s brand and role.  It isn’t surprising to see the Finance Operating Model of 2025 may yield a common look (e.g. thin corporate and GBS, strong COEs) yet vary in terms of investment in the BU/field.