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The changingshape of thefinance functionCreating a vision for the futureResearch emerging themes
Chartered Global ManagementAccountant (CGMA )CGMA is the most widely held management accounting designation in the world. It distinguishes more than150,000 accounting and finance professionals who have advanced proficiency in finance, operations, strategyand management. In the U.S., the vast majority are also CPAs. The CGMA designation is underpinned byextensive global research to maintain the highest relevance with employers and develop competencies most indemand. CGMAs qualify through rigorous education, exam and experience requirements. They must commit tolifelong education and adhere to a stringent code of ethical conduct. Businesses, governments and nonprofitsaround the world trust CGMAs to guide critical decisions that drive strong performance.cgma.orgAssociation of International CertifiedProfessional AccountantsThe Association of International Certified Professional Accountants (the Association) is the most influentialbody of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and TheChartered Institute of Management Accountants (CIMA) to power opportunity, trust and prosperity for people,businesses and economies worldwide. It represents 650,000 members and students in public and managementaccounting and advocates for the public interest and business sustainability on current and emerging issues.With broad reach, rigour and resources, the Association advances the reputation, employability and quality ofCPAs, CGMAs and accounting and finance professionals globally.aicpa-cima.com
ContentsCreating a vision for the future 1Theme 3: The changing shape of the finance function 2How the shape of the finance function is changing 2Why the shape of the finance function is changing 4How service areas within the finance function are fusing and evolving 6The future of finance: join us on our journey References 910
Creating a vision for the futureYou can’t see the future, but with the right insight you canprepare for it. We’ve created this briefing paper as part of ayear-long, worldwide project to understand the future formand direction of the finance function.Change is the new norm in many organisations –particularly within the finance function. Yet, because ofthis rapid evolution, there isn’t a composite picture of thefinance function of the future. It is this vision that we, atthe Association of International Certified ProfessionalAccountants, aim to create.With 650,000 members and students in 179 countries, weare uniquely well-positioned to work with global stakeholdersto investigate, analyse and document how the financefunction is changing.Using interviews, roundtables and surveys, thiscomprehensive global research project brings togetherdifferent organisational views – to deliver insight into theprocess of change and to synthesise a picture of the financefunction of the future.Our research aims to answer the following questions for you:XXHow will the future be different for your organisation?XXWhat are the drivers of change for your organisation?XXWhat are the implications for finance?XXHow should finance prepare for the changes?1Theme 3 – The changing shape of the finance functionTo do this, we conducted more than 300 interviews and50 roundtable discussions on the future of finance andidentified several common trends emerging across a rangeof topics. These trends provided our research team with aseries of insights into the finance function of the future andthis paper is the third of four that explore the key themesfrom our research. These themes are:1. The changing role and mandate of finance2. Changing technology and finance3. The changing shape of the finance function4. Changing competencies and mindsets
Theme 3:The changing shape of the finance functionThis briefing paper will:XXexplore how and why the shape is changingXXexplore how service areas within the financefunction are evolvingXXexplore the changing skills sets offinance professionals.How the shape of the financefunction is changingIn the digital age, our research shows that the financefunction’s shape has evolved into a hexagonal structure.Figure 1: The shape of the finance function inthe digital ageReading time: 30 minutes.“The expectations of the financerole have changed. Financeis now embedding itself acrossthe business.”When an interviewee from the Indian banking sectorshared this insight, it reflected the prevailing sentimentof respondents and demonstrated the radically changingnature of the finance function. Our research reveals that anexpanding mandate for finance, digital technologies andnew sources of data are combining to change the shape ofthe finance function.iAs expectations and skills evolve, that shape is migratingfrom a traditional hierarchical triangle (where broaderpopulations of workers report directly upwards to a seriesof ever-narrower management bands) to a hexagonalstructure (where expert teams collaborate as equals toachieve shared corporate objectives).The evolving shape has implications for financeprofessionals. It will impact:XXcareer paths and succession planning upwards throughthe structure, as the lower tier career ladders erodeLevel 1Leading thefinance teamLevel 2Partnering for value toinfluence and shape howthe organisation createsand preserves valueLevel 3Specialists generatingfurther insights in theirareas of specialismLevel 4Assembling andextracting data andproviding limited insightTraditionally, the shape was a hierarchical triangle with abroad base and fewer roles at senior levels. Over the pasttwo decades, the shape then evolved to a segregatedtriangle, which was driven by globalisation and advances ininformation and communications technology. This changeallowed routine processes to be migrated to shared servicecentres – the bottom section of the segregated trianglerepresents the finance function activity carried out withinshared service centres.XXthe skills needed to remain relevant. These will changeand go far beyond the traditional accountant’s skills setXXthe conventional mindset where finance works inisolation. This will shift instead to a strategically- andcommercially-aware mindset.We will continue to monitor the evolving shape of thefinance function as it informs the practical experiencerequirements for CGMA designation holders, lifelonglearning and continuous professional development needs.2
Figure 2: The evolution of the finance function shapeHierarchicalSegregatedDigital ageThe hexagonal shape of the digital age shows the impactof technological automation as it continues to erode thetraditional triangular base (Figure 2). This erosion hasimplications for succession planning; those basic financeactivities, which are now automated, had provided thetraditional training ground for finance professionals.In our interviews, we asked individuals to describe thenumber of hierarchical reporting levels within their financefunctions. This research allowed us to create a compositepicture of the reporting levels that sculpt the shape of thefinance function within the digital age. We found it consistsof four levels. From the top downwards these are:Many of the lower-level tasks involved in ‘assemblingand extracting data and providing limited insight’ and‘specialists generating further insights in their areasof specialism’ have been, and will continue to be,automated (Figure 3).XXLevel 1: Leading the finance teamFigure 3: The impact of technological change on theshape of the finance functionXXLevel 2: Partnering for value to influence and shape howthe organisation creates and preserves valueXXLevel 3: Specialists generating further insights in theirareas of specialismXXLevel 4: Assembling and extracting data and providinglimited insight.When overlaid with the Global Management AccountingPrinciples’ definition of management accounting, we canstart to understand the different responsibilities of theselevels.ii The principles define management accounting as‘the sourcing, analysis, communication and use of decisionrelevant financial and non-financial information to generateand preserve value for organisations’. In this context, theresponsibilities of each level are as follows:Impact oftechnologicalautomationImpact oftechnologicalautomationMost of these tasks are likely to be clerical in nature,rather than tasks performed by professional accountants.Professional-level tasks will still exist in the managementand continuous improvement of processes. Indeed, thisunderstanding and the use of new technologies will beincreasingly important in process improvement.Higher-value services, present within ‘specialists generatingfurther insights in their areas of specialism’ (includingfinancial planning and analysis) are now offered fromshared service centres or centres of excellence, causingthe central bulge in the hexagonal shape. Here, financeprofessionals will increasingly work in multidisciplinaryteams, assembled in skills combinations that support thebusiness. The flat top to the structure shows a move to acollaborative finance leadership approach.3Theme 3 – The changing shape of the finance functionXXLevel 1: To enable and shape the generation andpreservation of value for organisationsXXLevel 2: To communicate the insight and moralof the storyXXLevel 3: To shape the story through the analysisand use of decision-relevant financial andnon-financial informationXXLevel 4: To source the information for the story.
Why the shape of the financefunction is changing2. TechnologyOur interviews indicate there are three main reasons whythe shape of the finance function is changing. Thesereasons are: the changing mandate for finance, technology,and finance function capability.1. The changing mandate for financeThe role of the finance function continues to shift inemphasis towards management rather than accounting.This emerging mandate is based on twin beliefs: firstly, thatthe finance function has a unique end-to-end view of anorganisation; and secondly, that the Chief Financial Officer(CFO) has the business understanding to work alongsidethe Chief Executive Officer (CEO) as a co-pilot – explainingthe increasing focus on business partnering. Thisrecognises the important role of management accountantswho, as guardians of the business model, apply thediscipline of commercial finance to decision-making andvalue creation.The shape of the finance function, and those within it, areevolving to better enable ‘partnering for value to influenceand shape how the organisation creates and preservesvalue’. This role is increasingly central to the financefunction – and explains why the hexagon bulges outwardsat the Level 2 tier.Organisations are using technologies to improvethe efficiency of the finance function and build newcapabilities for it. An example of this is how organisationsare embracing technology to support the automation ofmanagement information processes, and provide reportingto the rest of the business on a self-service basis. In turn,this is contributing to the narrowing of ‘assembling andextracting data and providing limited insight’ (Level 4).However, it’s also heightening the need for skills and talentin two other levels: ‘specialists generating further insights intheir areas of specialism’ (Level 3) and ‘partnering for valueto influence and shape how the organisation creates andpreserves value’ (Level 2).a. New data sources and analysis methodsThe availability of a wide range of new data sources andthe means to conduct advanced analytics are providingopportunities to better inform decision-making. By contrast,in the past, these decisions had to be based on personaljudgement. Now, for example, predictive analytics improvesforecasting and it is likely that analytics will extend thefinancial planning and analysis (FP&A) area of the financefunction. This is pulling demand for talent into the higherechelons of Level 3 – ‘specialists generating furtherinsights in their areas of specialism’.Our interviews revealed examples where digital centresof excellence are providing new insights into customers’behaviour and experiences, derived from data. Theseinsights are enabling management teams to deal withimportant intangibles in a better, more informed way.b. Automation and cognitive computingA 2016 McKinsey report studied which functions could beautomated by advancing technology.iiiFigure 4: McKinsey’s report into the technical potential for automation in the re automatable activitiesLess automatable activitiesEstimates of extent to which different types of roles could be automated; Source: McKinsey4
McKinsey’s research examined groups of occupationalactivities and ranked them according to their susceptibilityto automation (Figure 4). Work activities at risk ofautomation include: data collection, data processing andpredictable physical work. Less automatable activitiesinclude: managing others, applying expertise, stakeholderinteractions and unpredictable physical work.What’s interesting about the McKinsey infographic is howit sits when overlaid across the digital age’s hexagonalshaped finance function (Figure 5), below.Figure 5: The potential for automation of the finance function in the digital ageManaging othersLeading thefinance teamPartnering for value toinfluence and shape howthe organisation createsand preserves valueStakeholder interactionsApplying expertiseSpecialists generatingfurther insights in theirareas of specialismData processingAssembling andextracting data andproviding limited insightData collectionIt confirms what our interviews are exploring – thatadvances in technology, and particularly in robotic processautomation, are providing opportunities to automate manyroutine, clerical activities. Cognitive computing, suchas artificial intelligence, machine learning and naturallanguage programming, are also providing opportunities toautomate advanced data analytics, report writing and evenconversations. Higher up the hexagon, new technologieswill augment what humans can do and support roles thatrequire personal interaction and the ability to manageothers – which are areas less likely to be automated.3. Finance function capabilityHistorically, the finance function has had a mandate tofocus on organisational efficiencies and reduce operationalcosts. In many organisations, this focus has heralded leanoperational processes, and now there is no more fat totrim. Technology is also at a point where machines can beleft to monitor process costing and highlight patterns ofefficiency. This shift has refocused the finance functiontowards revenue and value creation which, in turn, hasimpacted the function’s shape. Level 2 – ‘partnering forvalue to influence and shape how the organisation createsand preserves value’ – becomes the focal point for theseactivities, and is another reason for the bulge in the financefunction shape at this point. There are also implications forthe competencies required by finance professionals in Level2 and these are explored in our briefing paper, ‘Emergingtheme 4: Changing competencies and mindsets’.Together, these developments are radically altering thedelivery model for the finance function. As the deliverymodel evolves, its shape adapts into the emerginghexagonal structure present in our research.5Theme 3 – The changing shape of the finance function
How service areas within the finance functionare fusing and evolving“The future of finance is fusionrather than erosion.”This is the prediction of a banking sector interviewee.The changing mandate for the finance function and theimpact of new technology puts more emphasis on financeas a discipline across the business, rather than as anoverhead function. This fusion process, evident from ourresearch, is bringing together different internal areas of thefinance function, as well as fusing finance with the rest ofthe business.The following section reflects on the interview research, toexplore the changing role of finance as a discipline in thebusiness, based on the interviews we conducted. Here, weconsider how the digital age is impacting on the differentservice areas within finance, and compare this with thetraditional hierarchical or segregated structures (Figure 6).The left side of the table presents an overview of servicesprovided within the finance function, and the right sideindicates where they are migrating.Figure 6: Migration of hierarchical / segregated serviceareas in a digital ageManagementand mentinformationplanning andanalysisLeading thefinance teamSupportingdecisionmaking andperformancemanagementPartnering for value toinfluence and shape howthe organisation createsand preserves valueSpecialists generatingfurther insights in theirareas of specialismAccounting operationsHierarchical / segregatedAssembling andextracting data andproviding limited insightDigital ageManagement and transformationLeading the finance teamMany finance transformation projects have stalled. Mostaccountants are so busy working with legacy systems theydon’t have the capacity to take on a broader role. Somealso lack the analytical and commercial skills needed. Inaddition, management accountants’ potential to contributeisn’t always recognised.A new shared vision for finance’s role provides a mandatefor further change. Change will be constant, so an ability toadapt and manage change will foster the agility needed tosurvive and prosper.Change management and project management are alreadyimportant disciplines in finance.Changes to structure, systems and skills must be aligned,and progress in transformation must be measured andmanaged. Change is the new normal for businesses.Supporting decision making andperformance managementPartnering for value, to influence how the organisationcreates and preserves valueThe CFO usually works closely with the CEO to support himor her in running the organisation. Many businesses developand deploy finance professionals as business partners tocascade the CFO’s influence through the business.Business partnering services may be provided by:individuals deployed to work alongside business unitmanagers; a multi-disciplinary team in a centre ofexpertise; or a hybrid model, where some support isprovided locally, but an expert team is deployed to tackle aproblem or guide a major initiative.6
Management information, including FP&Aand data analyticsSpecialists generating further insights in theirareas of specialismAccountants tend to focus on financial analysis. Datausually ‘belongs’ to whoever owns the process thatgenerates that data. This means their analysis is not subjectto the same rigour that the finance professional applies.There is a need for finance to act as a broker of information,that can assemble and validate the analysis presented todecision-makers.The production of routine management information isalready being automated.Managers have dashboards on their desks so they canmonitor current performance.Self-service tools allow interrogation, so managers canidentify the root causes of performance. Problems oropportunities can be addressed promptly as they emerge.Advanced data visualisation and analytics can provideinsights to enable more accurate driver-based forecastingand predictive modelling.Finance professionals can increase their focus onproviding ad hoc expert support for bigger decisions orstrategic projects.They can question and investigate, to constantlyimprove the shared understanding of how thebusiness generates value.They can also scan the horizon, and develop and help toformulate strategies, so the business can be agile in how itcontinually adapts its business model.Subject matter expertiseSpecialists generating further insights in theirareas of specialismExpertise in accounting and financial matters has, for along time, provided accountants with security ofemployment and good career prospects.Concentrating subject matter expertise within teams canimprove efficiency. Teams may work in shared servicecentres (SSCs) or in centres of excellence closer to thebusiness. Experts from different disciplines (for example,logistics, data analytics or computing), can work togetheron the same team to better support the business.This expertise can be leveraged and developed whereteams work together. Teams allow specialisation andcollegiate working shares expertise. Lower value workcan be delegated and supervised, providing learningopportunities for tomorrow’s experts.New technologies, especially the use of cognitivecomputing, already offer the potential to enablegreater efficiency.In the near future, blockchain will bring greatertransparency and enable sharing of trusted information.7Theme 3 – The changing shape of the finance function
Accounting operationsAssembling and extracting data and providinglimited insightSSCs, whether in-house (captive) or operated by a serviceprovider (outsourced), have industrialised the managementof accounting processes.SSCs are expanding laterally to handle processes end toend, across professional disciplines.Rules-based processes are delegated to improveefficiency. The expertise needed most in SSCs is processmanagement and change management, especiallymanaging teams and migrating processes to SSCs.They are also expanding vertically to offer higher valueservices, for example to FP&A, management reporting orbusiness partnering.Robotic process automation is already here; embeddedcontrols and cognitive computing are coming soon.Blockchain is not far off.Labour arbitrage has supported the business case foroffshoring. Automation limits that benefit. The qualityof service or level of expertise, and the value theycan contribute has become more important than beinglow cost.Accounting and management information systemsIntegral rather than auxiliaryInformation systems are shown as a box to the side thatisn’t sufficiently integrated within the finance function.Although finance professionals still use terms such asledger, journal or chart of accounts, accounting is alreadydependent on technology. However, assembling informationfrom legacy systems and the widespread use of Excel keepsmany expensive professionals busy. There are also risks oferror due to human intervention.IT will be fully integrated.Cloud computing provides scalability.Blockchain could provide transparency.Accountants are still responsible for the integrity of theinformation produced.Greater expertise in data governance, data planning anddata architecture is needed.New risks must be managed. These include back-uppolicies and contingency plans to mitigate the riskof downtime. Addressing cybersecurity risks is agrowing concern.Understanding and managing what happens withininformation systems requires combined accounting andsystems expertise, whether individually or, more likely, inmulti-disciplinary teams.The skills needed to use new technologies, such aswhen automating a process, will become as importantas people management skills are today.In this evolved finance function of the future, we willsee accounting operations, subject matter expertise,management information production and FP&A (now withdata analytics) becoming more closely combined withdecision support and performance management. This is afusion of accounting expertise within the finance function,which will enable greater integration with the businessand reflect the clear focus on decision support andperformance management.The shape of the finance function will continue to evolve,with increasing emphasis on professional-level roles thatoffer these support and management skills. However, thelevel of specialist expertise that’s required will lead to theformation of multi-disciplinary teams, so that experts indata analytics, logistics and other increasingly importantareas will become members of the finance team. Financewill no longer be just for pure accountants.8
The future of finance: join us on our journeyFive things you can do in light of this briefingOur briefings on these emerging themes will enable us todiscuss a new delivery model for modern finance, withcertain key features. Ultimately, all organisations face thesame obstacles of building capacity, competence andcredibility within their future finance functions.1. Begin by identifying priorities for your finance functionthrough using the table in the section titled ‘howservice areas within the finance function are evolving’.The difference is that some organisations are innovators onthe journey to the future, while others are lagging behind.With this research, we want to help more organisations tolead from the front.The keys to transformation2. Next, we recommend investing time to identify skillsgaps in light of the evolving finance function shape,and developing plans to close them.3. From a personal standpoint, consider the directionin which you would like to develop your own career.You can then take action by reading up on disruptivetechnologies to understand how that may help or hinderyour future direction.XXmake use of the latest technologies to release the fullcapacity of the finance function4. To achieve your goals, start developing your owncontinuing professional education plan to take yourcareer in your chosen direction. It’s important to makesure this plan complements learning with experience andexposure in order to develop your skills and contacts.XXwiden the remit of finance to cover a broader range ofmanagement information, generating new insights andbusiness solutions5. To help us develop a knowledge-sharing community,please do get in touch to share your experiences,observations and opinions with me.XXprovide and empower finance professionals withnew competencies and growth mindsets to help yourorganisation create and preserve value.Peter Simons, BBS, MBA, FCMA, CGMAThat’s what this project is all about.future.finance@aicpa-cima.comBased on our interviews, it appears that an organisation’stop priorities to transform its finance function should be to:So, armed with this briefing, why not start a conversationon the future of finance in your organisation? Read one orall of our briefing papers on emerging themes and sharethem within your network.You can then ask yourself:XXHow do the emerging themes resonate in yourorganisation?XXWhere are you and your organisation on the journey torealising the finance function of the future?XXHow, in the light of these themes, will you reconsideryour strategies to meet the future finance function’sinnovative mandate?9Theme 3 – The changing shape of the finance function
Referencesi.The expanding finance mandate is explored in‘Emerging theme 1: The changing role and mandateof finance’. The impact of digital technologiesis explored in ‘Emerging theme 2: Changingtechnology and finance’.ii.CIMA.The Global Management Accounting Principles(December, 2015).iii.M Chui, J Manyika & M Miremadi.Where Machines could replace humans– and where they can’t (yet)(McKinsey Quarterly, July 2016).10
Report author:Peter Simons, BBS, MBA, FCMA, CGMAAssociate Technical Director of Research –Management AccountingHead of Future of Finance ResearchAssociation of International CertifiedProfessional al.comJune 2018 2018 Association of International Certified Professional Accountants. All rights reserved.CGMA and Chartered Global Management Accountant are trademarks of the Association of International Certified Professional Accountants and are registered in the United States andother countries. The Globe Design is a trademark owned by the Association of International Certified Professional Accountants.For information about obtaining permission to use this material other than for personal use, please email mary.walter@aicpa-cima.com. All other rights are hereby expressly reserved.The information provided in this publication is general and may not apply in a specific situation. Legal advice should always be sought before taking any legal action based on theinformation provided. Although the information provided is believed to be correct as of the publication date, be advised that this is a developing area. The Association, AICPA, and CIMAcannot accept responsibility for the consequences of its use for other purposes or other contexts.The information and any opinions expressed in this material do not represent official pronouncements of or on behalf of the AICPA, CIMA, or the Association of International CertifiedProfessional Accountants. This material is offered with the understanding that it does not constitute legal, accounting, or other professional services or advice. If legal advice or otherexpert assistance is required, the services of a competent professional should be sought.The information contained herein is provided to assist the reader in developing a general understanding of the topics discussed but no attempt has been made to cover the subjectsor issues exhaustively. While every attempt to verify the timeliness and accuracy of the information herein as of the date of issuance has been made, no guarantee is or can be givenregarding the applicability of the information found within to any given set of facts and circumstances.ISBN: 978-1-85971-863-6
CGMA is the most widely held management accounting designation in the world. It distinguishes more than 150,000 accounting and finance professionals who have advanced proficiency in finance, operations, strategy and management. In the U.S., the vast majority are also CPAs. The CGMA designation is underpinned by extensive global research to main.
