Thanks to increasing automation, finance employees are given extra time and space to put customers back in the center and work on solutions with added value.
EY research shows that closure periods have shortened considerably over the past 20 years. For companies listed on the CAC 40 (the stock index of the 40 most important companies on the French stock exchange), we see an average decrease of no less than 22% over 20 years (-13.6 days). The same trend can be seen for companies listed on the SBF 120, which is the 120 most traded shares in Paris. Here, there is a 21% fall (-14.4 days) over 20 years.
There are several reasons for this drastic fall:
- Increased automation/standardization of transactional processes impacting closing activities, with a prominent role for Procure-to-Pay (P2P), Order-to-Cash (O2C) and Record-to-Report (R2R) among others.
- An increase in the number of closing moments.
- Anticipatory activities, such as preclosing in December and May.
- Better integration of process support software, such as ERP and EPM systems.
- A more efficient approach to closing activities, including better planning, coordination with subsidiaries and the application (within a group of corporate entities) of a single set of accounting rules.
The future role of the CFO in closure processes
The process of fast closing creates opportunities to rethink the current role of the CFO and make it future-proof. In the coming years, Chief Financial Officers will increasingly evolve into internal business partners who help define the financial strategy and independently trigger new business ideas and create added value. The CFO becomes the CVO, The Chief Value Officer.
In order to realize this shift in tasks and skills, the job description of a CFO/CVO will have to be thoroughly rewritten. Under the influence of increasing globalization, stricter legislation and regulations and the rapid emergence of new markets, the role of CFO/CVO will gradually evolve from a rather technical and stand-alone accounting function to a professional who facilitates innovative processes, assists the CEO in strategic decisions and detects digital solutions with an open mind.
The process of fast closing creates opportunities to rethink the current role of the CFO and make it future-proof. Chief Financial Officers will increasingly evolve into strategic business partners.
And how will the finance team evolve over the next few years?
The CFO's staff will also feel the impact of digital transformation and increased transparent and rapidly evolving markets. On the one hand, promising technologies – such as machine learning, blockchain, Roboting Process Automation (RPA) and Artificial Intelligence (AI) – will further optimize the closing process and significantly shorten the turnaround time. On the other hand, finance staff must also be prepared to retrain continuously and to embrace automation tools.
EY research shows the following (selection of) important trends in the finance team of the 21st century:
- The need for new skills and competences: less need for traditional routine tasks (taken over by new technologies) and extra need for analytical and scientific profiles (for the collection and analysis of financial data).
- An increasing need for agile and creative work: as a result of the previous trend, finance professionals are given extra time and space to process the collected data and to work on financial/fiscal solutions that offer their clients extra added value.
- Extra focus on customers: personalized customer data (reviewing past performance and looking ahead to possible commercial opportunities) will further optimize customer relationships.
- An increasing role for a thorough approach to cyber security: not only through information systems, but also through human behavior.
Fast closing must be a non-event
The migration from manual routine tasks in finance, accounting and controlling to more automated finance management is an unstoppable trend. If a company in 2020 needs two months to close a financial year, something is fundamentally wrong with their management processes. Fast closing should be a non-event, where a mix of automation tools and professional guidance can make a streamlined process of financial reporting. But such an evolution is impossible without high-performance change management within the company. This is the only way to make fast closing future-proof.
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Summary
Under pressure from internal and external factors (from impatient CEOs over globalizing economies to increasing political regulation), companies are confronted with increasingly strict (group) guidelines for the delivery of periodic reports. With fast closing, enormous amounts of financial data have to be processed in a limited timeframe, which requires the accounting team in a company to work even harder. How can new technologies and automated management processes contribute to shorter turnaround times and satisfied stakeholders? What skills and competencies do the CFO and their staff need to develop?