Finance needs to transform Finance needs to transform

In these times of technological innovation and disruption, a financial department must dare to redefine itself and embrace change, says Xavier Gabriëls, partner at KPMG Management Consulting, specializing in financial management. 

• Financial departments must learn to look forward
• Finance is evolving from descriptive to predictive and self-learning
• Repetitive tasks are being automated and robotized
• Data is important, but talent management is just as important
• CFOs must learn to think like venture capitalists

The traditional, more transactional role of 'bookkeeping' is transforming towards a much more strategic role in business operations due, in part, to automation and robotics. Data will play a key role here, but according to Xavier Gabriëls, there are many other factors involved.

Large organizations, in particular, are struggling with the question of how they can pick up the right signals in the market via market sensing, for example, and what to do with these signals. Are small organizations able to respond more quickly to change? "A speed boat is more agile than a big tanker," says Xavier Gabriëls. "More so, the tanker not only turns more slowly, but it also needs the information sooner so that it can begin making the turn in time." 

"Put in business terms: all too often, companies acquire and distribute the required market insights too late. The boardroom sometimes warns that a product is no longer profitable at a late stage, and this results in the Sales department continuing to sell the product. To capture that knowledge sooner, all kinds of partnerships are being concluded between internet giants and wholesalers. Examples include Amazon with Whole Foods and Walmart with Google."

The challenge for companies is to capture the necessary and available online and offline information in their processes, to interpret it and respond accordingly. The financial department of a company today does so much more than formulate a financial plan, ensure that the money is correctly spent and the budgets are not exceeded. But is that enough to be future proof? Xavier Gabriëls thinks not. "The financial department must transform. It should continue to guard costs, but must also learn to deal with uncertainty and be more forward-looking at the same time. I like to call it: from bean counter to bean grower." Finance can only fulfill this new role by automating repetitive tasks and making the organization more flexible with new technologies. This will give the CFO and their team more time to focus on more value-adding activities.

The good news here is that precisely those repetitive tasks contribute to bore-out and burn-out. By committing to automation and robotics, you will immediately reduce those lost work days while simultaneously stimulating people to properly utilize their added value.

Xavier Gabriëls: "The recent KPMG CEO Outlook showed that 72% of the CEOs expect that the next two years will be more critical for their industry than the last fifty years combined. There is a lot of resistance to change, but change is essential to survive. In the Fortune 100 there are only ten companies that were on the list a hundred years ago. Of those ten, only one company still does the same as then."

How can you turn a threat like disruption into an opportunity? "The financial department is well positioned to fully utilize potential in times of disruption, but only in close collaboration with other departments, of course. Ultimately, it is always with skills and people that you make the difference. Traditionally, the most value was acquired from the ground, later from capital and people, and now also from data. Hence the need for talent management: finding the right people who can handle uncertainty and interpret data correctly and implement them in a flexible fashion."

Xavier Gabriëls explains how finance is evolving from descriptive to diagnostic to predictive, and ultimately from prescriptive to adaptive. How should we picture this? "A forward-looking or future-focused organization converts data into information with the help of technology. This is done by analyzing patterns, for example, based on consumer behavior and historical data. A simple example: a company that specializes in fresh foods can know if it is a good moment to make salads or rather warm dishes based on the weather forecast, user data and historical data."

Thanks to digital technology, big data and cloud services, companies increasingly have more, better and real-time information about production, inventory and sales than ever before. "But most critical is making proper use of that information," says Xavier Gabriëls. "It is also possible to have so much information that it becomes unmanageable. With e-mail, we now also receive more information faster than we did in the past. But we can only really make a difference when we actually do something with that data."

Is total control an illusion? "Obviously, there will always be unforeseen circumstances," admits Xavier Gabriëls. "The major working point that remains, however, is to streamline that information as best as possible, according to the needs. A nice example of this is Waze, a user-driven, cloud-based and powered by historical data GPS app which is much more advanced than a regular GPS. A GPS will tell you when you will arrive. But Waze will tell you when you should leave, and ultimately, that is what you want to know. And that is also what we need in reporting. There is no CFO who wants to read a couple of reports of a hundred pages each and every day. They need a dynamic dashboard that shows them in which domains they need to take action."

What does the finance team of the future look like? Do we need to look for different profiles? "You certainly shouldn't just discard people with experience," says Xavier Gabriëls. "But the CFO does need to develop (new) capacities. They will become someone who thinks (even more) strategically. Ideally, they are a people manager, an inspirator, someone who can convey a total approach. The CFO must learn to think like a venture capitalist. What are their business drivers? How can I create added value? Which people buy a certain product and why? How can I bolster that?"

To make that transition, it will be essential for the CFO to surround themselves with a good team. "KPMG can help companies with this transition, of course, both via change management and with our innovation labs, by thinking it through together and making the financial structure of a company more flexible. We have a database for this with comparative information of over 5,000 companies from various sectors." 

What are the biggest pitfalls in this transition? Xavier Gabriëls names three. "The extremes that do not work are: doing nothing because you are 'too busy to innovate' and alternatively, wanting to make a tabula rasa. The third mistake often made is only working with technology and data. It is vital to get started with the people, the processes and the organizational structure."