With the lifting of the remaining pandemic restrictions, businesses are moving on from short-term tactical planning to focussing on the key drivers of long-term value. They are also placing increased emphasis on dealing with external pressures such as rising expectations from customers and stakeholders in relation to environmental, social and governance (ESG) factors as well as dealing with inflation, price increases and supply chain challenges.
Businesses need to manage these drivers and pressures and understand how they impact performance and long-term value. That requires a finance function that goes far beyond traditional financial reporting in the service it provides to the business.
We expect to see a shift in the activities it performs. It will move away from reactive responses, transactional activities and backward-looking analysis and become more collaborative, forward-looking and insight driven. It will break free of traditional boundaries and spread its influence throughout the organisation.
Profit and loss statements, balance sheets, cash flow and simple variance analyses will no longer suffice. Organisations will require in-depth insights that allow them to make the connections between actual business activities and long-term value that help make better informed decisions. Failure to deliver those insights will see finance being supplanted by other functions in the organisation.
Build capability to strengthen the core
If finance is to meet these changing needs, significant investment in data collection and analytics capability will be required. But any additional spending will need to be justified based on the bottom line benefits it can bring to the business.
That new capability will be deployed to play a much bigger part to play in driving strategy, evaluating business options, and guiding the allocation of resources across the business.
In particular, finance will need to address the following areas: