Predicting the future is a notoriously inexact science. At best we make well-educated guesses based on past experience and current trends, and at our most optimistic we make Back to the Future II (I’m still crossing my fingers for a Hoverboard that works on water).
But predicting the future is exactly what finance departments are tasked with doing. In the shorter term, financial analyses help predict how the business will perform in the coming quarter, while in the longer term a more comprehensive analysis of the company’s data informs long term market strategies. With so much riding on these predictions, the CFO and finance teams are under mounting pressure to make future predictions a much more accurate and consistent exercise.
New digital technologies like cloud and big data are helping finance professionals to deliver on these expectations, allowing them to link up information from systems across the business in near real-time so they can gain a more complete picture of the organisation’s health and future trajectory.
CFOs are being asked to play a growing part in defining the company strategy, using their insight into the organisation’s finances to drive more intelligent investment and growth decisions. As organisations move their finance applications to the cloud—gaining the ability to combine many more data streams into their analyses and conduct them more quickly—CFOs will gain a better picture of how individual lines of business are performing, and of where operations can be tweaked to deliver value.
The expanding possibilities of modern data analysis will also give finance teams the ability to spot new market opportunities based on macro-economic trends, financial risks and market pricing, among many other new factors. For instance, analysing commodity costs in an emerging market could help a company choose the best time for a new product launch in the country.
The same goes for anticipating risk. A more unified approach to data analysis that links line-of-business data to enterprise resource planning (ERP) and enterprise performance management (EPM) systems allows finance teams to provide real-time insight on whether a new service is being well received by customers. It also puts them in a better position to catch a potential issue before it materializes so the relevant department can address it proactively, or at least mitigate its effects.
Leading finance teams are also using new data streams to more accurately measure the value of their company’s assets, particularly of intangible assets such as brand and intellectual property that are becoming increasingly important indicators of the company’s health for investors. The consistent and accurate reporting of this data will become a staple of the modern finance department in the coming years.
The broadening of finance’s capabilities will also see it develop a growing role in helping lines of business drive successful strategies. This comes down to an ongoing democratisation of data within the organisation.
Recent research from CGMA and Oracle points to a future in which finance departments become brokers of management data rather than having a monopoly on the insight it contains. CFOs and their teams will not only collect and verify data but also distill this information and share valuable takeaways with individual business units.
A report from Accenture supports the above findings, estimating that more than 80% of traditional finance services—such as transaction processing, control and risk management—will be performed by cross-functional teams rather than the finance department alone by 2020.
If we accept the old adage that “knowledge is power” then, in the digital age, whomever can unlock the most significant insights from company data will command the most respect in the boardroom. CFOs have been making a case for themselves in this regard for some years now, yet there are still gaps to be bridged, as evidenced by the CGMA research, "The Digital Finance Imperative." As they transition to more advanced back-office systems, finance departments will begin helping the business plan even more intelligently for what the future holds—hoverboards and all.