Why the finance team is heading for a long-term relationship with IT

They may seem unsuited. They may even pretend not to like each other. But Finance and IT are heading for a relationship.

Finance teams have been undergoing a rapid evolution in recent times. Paper-based procedures have been increasingly phased out and previously compliance-centric teams move higher up the value chain to more advisory and strategic roles.

Since the coronavirus (Covid-19) pandemic, it seems digital change in society at large has been happening at warp speed.

So could digital change in finance be about to accelerate? And, if so, where will the change take us?

The future options

One view is that the finance team will simply become a highly efficient support function, focussed on compliance.

This role may seem comfortable and unthreatening, but it will restrict the value finance teams can add to the organisation.

It, therefore, threatens a loss of relevance. And more limited career opportunities.

A more radical scenario is that the finance function will emerge as a driving force that exerts influence throughout the entire organisation.

This options also has a price. It requires the finance function to fully embrace digital change and be open to a more challenging internal metamorphosis.

Embracing change

The 2019 report, Digital Transformation Of The Finance Function, from consultancy Oliver Wyman, paints a picture of finance teams presiding over operational and financial data (big data) and using advanced analytics and AI to help shape business decisions. “It turns [the finance function] into an eye-level adviser and partner to business units, guiding them in their decision-making process.”

This, for many businesses, is the essence of delivery in the context of the finance function – taking an active role in informing decision-making and providing advice.

“Finance functions have changed dramatically in recent years,” explains Mike Day, director of education at Xero UK. “We’ve seen this move from compliance to advisory, whether at a practice or within a finance department. And it’s ever more pertinent in today’s environment, where good cash flow management is critical to business survival. 

“By using AI to their advantage, finance advisors can offer useful insights by analysing operational and financial data stored in the cloud. This enables them to establish areas where they could drive growth across different product lines, and work out how scenario planning will impact the bottom line,” he adds.

Great expectations

At the heart of this is a question: what is expected of finance functions and accountants today?

Is it to balance the books, reduce costs and ensure compliance obligations are met. Or is the requirement to be more strategic?

Increasingly, it is the latter.

Deloitte’s Tech Trends 2020 report states:

“Finance should explore opportunities to tailor budgeting, funding, and reporting processes to better meet the business’s evolving needs for its portfolio of technology investments. This will likely include developing new methods for investing across time horizons, accurately measuring the somewhat unpredictable long-term value that products built with agility can generate, and accounting for value in ways that meet accounting and reporting standards.”

All of this leads to a requirement to strengthen skills around business acumen, interpretation, technology integration but also core presentation and communications skills – with the human factor being just as important as the digital skills.

Skill gaps

It’s in these areas around communication and presenting data that there is an increased need, according to Deloitte. Finance teams will be required to anticipate risks and opportunities based on their data, which will allow them to inform business decisions and build relationships with stakeholders.

This requires a coupling of strong data manipulation and softer skills and will see finance teams becoming more diverse, creative, flexible and collaborative.

Deloitte’s Tech Trends 2020 report sees finance team members working “hand in hand with business analysts and data scientists to interpret data, address challenges, solve problems, and identify business risks and opportunities”.

Learning the language

Finance specialists won’t need to become data scientists, but they will need to learn their lingo. They must understand the key concepts of data science, and be able talk to data scientists in their own language.

“The challenge for us is finding the digital accountant, rather than the traditional one who wants to work with pen and ink, because that’s not required anymore,” says Dave Travis, managing partner for Baldwins in the North East. “I think you’ll see far more advisory requirements among firms and businesses. They’ll need to have wider skills and experience in how to develop businesses and the strategy of the business. They have to be able to help, not just produce figures.”

“It’s that interpretation of the numbers and explaining what they actually mean,” he says. “It’s providing trends analysis over the last few years, asking if loans can be restructured and similar services.

“It means we have more opportunities to develop careers among our teams, and providing them with the opportunity to specialise in discrete areas of the finance function.”

The eventual partnership of Finance and IT

Supplying finance teams with real-time data will inevitably mean that finance and IT are drawn closer together.

However, this may not be a relationship of mutual attraction – at least initially. Indeed, there may even be tensions over differences. IT teams seek to innovate and finance teams seek to spend wisely. This can be particularly evident in development initiatives where agility and speed are important.

“Finance processes are typically still tied to a project mentality, where the fallacy of predicting the future for unique product development (with unknown unknowns) is locked into a project plan with associated fixed project funding,” it said. “Instead an ‘agile’ approach is capacity funded with a focus on maximising outcomes,” according to Tech Trends 2020.

Over the next 18 to 24 months, Deloitte expects “more IT and finance teams working together to develop flexible approaches for funding innovation”.

“This does not mean they will replace annual budgeting cycles with a shiny, unproven alternative. Indeed, balancing fiscal control and appropriate spending with value creation and financial results is a non-negotiable requirement.”

Ultimately Deloitte says there are strong incentives for IT departments and finance teams working more closely together.

Nationwide, Barclays, Delta Airlines and Rolls-Royce all support its conclusion that the result of learning to work together is a sustained competitive edge. Therefore, Deloitte asserts:

“The time for IT-Finance collaboration on this issue is now.” 

The relationship between IT and Finance may start as an arranged marriage. But in time it seems they can learn to love each other and produce a lasting bond.

Further reading:

• Digital tools to shape your practice (members)
• Leading digital change and developing your career (members)
• E-learning – an introduction to data analytics  (members)

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.