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Beyond managing ongoing cost pressures, the finance function increasingly has opportunities to provide deeper insights as a strategic advisor for businesses. But evolution often isn’t easy. To take decisive action, CFOs and their teams need to leverage vast amounts of data to keep up with changes in regulatory reporting requirements and find new ways of creating value.
Without dedicated investment in enterprise data models and digital capabilities, many finance leaders will likely be challenged to deliver difference makers for their organizations. These include detailed analysis driven by new tech capabilities, advice on capital allocation, and centralized and integrated regulatory reporting. In addition, the competition for skilled talent remains tough, putting the onus on your organization to offer a culture and climate of innovation that appeals to skilled workers.
As a finance leader, you should carefully consider and clearly understand these shifting responsibilities and goals. Finance for finance — increasing efficiency in traditional finance functions and acting as your company’s scorekeeper — is still important. But finance for business — increasing insight throughout the organization and acting as strategic value creator — can be your key to future growth and success. To help achieve that, consider these four critical elements of the future of finance.
Digital finance with AI and analytics
Finance teams are focusing more on providing insight to businesses but may not know how to leverage leading technology for transformation.
Integrating technology into regulatory reporting
Many companies have limited data infrastructure and resources to react to and anticipate regulatory requirements, and their lack of integrated solutions results in wasted time and resources.
Capital and cash flow for growth
Rising interest rates and an uncertain business environment have increased the focus on cash collection and working capital — especially as M&A and other deals activity could increase — as well as automation in the order to cash and revenue processes.
Finance operating model
With an ongoing focus on containing costs while adding resources, many organizations are seeking third-party services to deliver non-core capabilities at a lower cost and often higher quality, while also addressing staff shortages by adding skills and expertise.
AI and analytics to drive profitability and efficiency
After decades of targeting costs, many finance leaders are reaching the limits of reductions and increasing their focus on new tech capabilities that provide deeper insights. That has intensified the competition for talent, prompting companies to automate manual processes and transform the financial planning and analysis (FP&A) function with predictive analytics and AI tools. The resulting organizational and operational models often include outsourcing and managed services.
If you think of finance activity as a triangle, transactional processes traditionally formed the large base. Tech advances such as AI and machine learning are inverting that triangle, enabling finance teams to offer actionable business intelligence. More and more, businesses count on finance to help provide better forecasting, profitability analysis and capital allocation insights.
As this transition from scorekeeper to strategic partner continues, CFOs should prioritize data fluency and pull from various business areas — from operations to risk to marketing — to drive operational decisions. In a successful data strategy, data cleanup and use case development occur concurrently, and AI will be integral to enabling faster execution.
What you can do
Increasing cash flow, capital and liquidity
With a growing focus on cash collection and working capital, many companies are prioritizing the transformation of the order to cash process. CFOs and their teams are exploring how tech investments to increase automation and control can accelerate finance transformation. This includes rapid assessments for order to cash and working capital, revenue leakage analysis, digital automation and process improvement.
Cash and capital positions are becoming more important as acquisitions, divestitures and other deals are expected to ramp up in 2025. Declining interest rates, the need to reinvent business models and shifting regulatory priorities all could drive transactions. Although there’s still a valuation gap between buyers and sellers, acquisitions can help provide cost synergies that make companies more efficient. Meanwhile, divestitures can help rebalance underperforming portfolios and generate capital that can be reinvested in core business offerings.
In this landscape, you should reevaluate your ability to consistently convert earnings to cash flow. Does your financial structure provide sufficient flexibility and reduce your cost of capital? Do you have sufficient visibility into cash drivers and levers you can pull to increase cash flow? With interest rates remaining low, you should determine how you can better put cash to work instead of simply holding on to it.
What you can do
Why CFOs are hitting pause on investment decisions
Source: PwC Pulse Survey, October 9, 2024
Meeting multiple regulatory reporting requirements
Led by OECD Pillar Two, sustainability and FASB DISE, emerging regulatory reporting requirements are increasing the need for transparency. Many finance teams are seeking more visibility into financial operational performance at a granular level and with more governance and control. Many companies record financials at a group level and use informal means to back into their legal entity reporting. They may also have multiple teams across the company developing disparate new tools, processes and policies for obtaining data.
Tackling these challenges requires greater functional collaboration, including accounting, tax, finance, financial technology, legal and others at a corporate and local level. A centralized approach to managing the systems, processes and policies for sourcing and reporting data through a common data model can improve accuracy and consistency. That creates a better experience for both internal users and customers.
Companies can use a common data model to:
- Clearly define data requirements across uses
- Provide ongoing governance for monitoring and adapting to new requirements
- Improve legal entity mapping
- Standardize master data usage, policies and processes
- Proactively collaborate across all functional teams
Without an integrated technical solution supported by robust policies and processes, many organizations could be left to collect manual offline schedules, absorbing time and effort in an overused control operating model.
What you can do
Source: PwC Pulse Survey, October 9, 2024
Evolve your finance operating model to get more value from managed services
Succeeding in the future of finance can hinge on reinventing your finance operating model. The need to reduce costs and risk; improve quality; attract, retain and develop the necessary talent; and make significant investments in technology is leading many finance functions to reconsider their operating and service delivery models, seek automation opportunities and refocus on value-added activities.
Transforming finance is often resource intensive, leading some companies to turn to shared or managed services for non-core processes. By freeing up management and staff resources in those areas, finance leaders can dedicate teams to more forward-looking work that can help increase the finance function’s value.
The key is to focus on outcomes. What opportunities do you see to centralize or standardize your service delivery? If you’re already outsourcing business processes in finance, what’s working well that could further reduce costs or fill skills gaps? How can different contract structures and pricing models in managed services help your finance teams provide more specialized finance expertise at scale and less cost?
What you can do
What finance leaders can prioritize over the next year
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