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Written by Peter Chisambara
The traditional role of the finance function is that of ensuring accurate processing, accounting and reporting of financial transactions. However, in today’s volatile, uncertain, complex and ambiguous (VUCA) economic environment, reporting on the past is no longer enough. New advanced technologies are disrupting business models at the speed of lightning. For example, digital innovations such as artificial intelligence, machine learning, collaborative technologies and advanced analytics are already transforming the traditional role of the finance professional. Routine accounting operations and transaction processes are getting automated freeing up time for finance professionals to focus more on value-adding activities.
In this second machine age, finance professionals have to adapt and embrace the opportunities brought by this new wave of technologies. Digital technologies have the potential of transforming the finance organization into an analytics powerhouse capable of deriving strategic insights from large data sets and improve decision-making processes. Gone are the days of producing reports that are backward-looking and performance variance reports that are lacking actionable insights and recommendations. In order to drive business performance and help inform decision-making, the finance function has to improve and increase its influence across the business. One way of doing this is initiating conversations with others in the business, ask the right questions, identify root causes of existing problems and provide solutions in a collaborative way.
In many organizations, the majority of senior finance professionals have an accounting background and because of the article-ship training they went through, most of them are inclined to a rules-based thinking. Everything has to add up and the level of risk taking is significantly low. Unfortunately, this mind-set is a hindrance to breakthrough performance. In addition to their technical skills, today’s finance professionals must also develop a strategic mind-set. Successfully playing the business partnering role requires the finance professional to support the broader business strategy as opposed to focusing on narrow accounting objectives alone. in other words, finance has to drive business outcomes rather than simply report them.
To transition from history keepers to future story tellers, it is imperative that finance professionals have a clearer understanding of all the numbers they are reporting on. The value of analysis provided by finance is only as good as the business’ ability to interpret and act on it. If decision makers and other stakeholders lack trust and have no or minimal confidence relying on information supplied by finance to support decision-making, it means finance is failing to play its role. Finance needs to get deep into the numbers to really understand the various performance drivers of the business and ensure it manages the right things and sets the right goals.
Big Data and analytics are playing a critical role in helping organizations make sound decisions, improve performance and gain a competitive advantage. However, some organizations have been delusional to think that by collecting and storing huge data sets, they have found a killer recipe for success.
Unfortunately, this is just wishful thinking.
Read Part 2 of this article in the next edition.