Digital Age Finance Function

After completing this topic, you should be able to recognize how the finance function is being transformed in the digital age.

The digitization of business will impact the finance function in many ways.
Increasing automation of lower-level tasks will change the structure of the finance function.
This transformation creates opportunities for finance staff to provide higher-level services.
New roles and responsibilities will change the competencies required of finance professionals to add value to the business.

Many lower-level tasks involving assembling and extracting data and providing limited insight are being automated.
Most of these tasks are clerical, rather than professional accounting tasks.
Despite automation, professional-level skills are required for:
- Management
- Continuous improvement of processes
Understanding and using new technologies is crucial for process improvement.

Increased automation of tasks will continue for specialists generating insights.
Higher-level services will be available from:
- Shared service centers
- Centers of excellence with technologies designed for interpretation.

Concept: Partnering for value is central to the role of the finance function.
The hexagon bulges outward to indicate this tier.
Business partnering services can be:
- Individuals working alongside business unit managers
- Provided from a center of expertise
- A hybrid model where local support is combined with expert assistance.
Technologies will facilitate engagement and augment what humans do.
Finance professionals will work in multidisciplinary teams:
- Provide insight through interaction with stakeholders.
- Generate and communicate insights to assist decision-making.
- Control operations and execute decisions.

Leadership of the finance team involves:
- Managing others
- Applying expert technical skills
- Formulating strategy, including financial strategy.
The least level of skills subject to automation.
Governance and oversight systems are necessary for leadership competencies.

Assembling and Extracting Data: Although technology can automate these functions, following set standards and policies is key for data collection.
Specialists Generating Further Insights: Specialists require systems to facilitate interpretation of financial and non-financial data for improved decision-making.
Partnering for Value: This requires systems that enhance engagement with internal and external stakeholders.
Leading the Finance Team: Requires effective management skills and strategic formulation capabilities supported by oversight systems.

The finance function is transitioning from traditional models to digital age models.
The Global Management Accounting Principles (GMAPs) by the Association of International Certified Professional Accountants reflect these perspectives:
- Definition of management accounting: Sourcing, analysis, communication, and use of decision-relevant financial and non-financial information to generate and preserve value for organizations.
Emphasis on the finance function as a critical business discipline rather than an overhead function.
The role of finance in implementing strategies and forming relationships within the organization is evolving.

Primary Role:
- Traditional: Focus on customary accounting and reporting activities.
- Digital: Development of finance professionals as business partners influencing across the business.
Data Management:
- Traditional: Time-consuming data entry and cleaning from legacy systems.
- Digital: Expertise in data governance and architecture ensures data integrity in analysis.
Financial Analysis:
- Traditional: Routine financial analysis focus.
- Digital: Analysis of big data enhances insights across financial and non-financial dimensions.
Business Involvement:
- Traditional: Limited to budget variance reporting and efficiency evaluations.
- Digital: Broader understanding of business performance and value creation opportunities.
Risk:
- Traditional: Focus on internal controls and compliance.
- Digital: Holistic view of enterprise risks to identify strategic opportunities or threats.
Subject Matter Expertise:
- Traditional: Functions often siloed within tax, treasury, M&A, and investor relations.
- Digital: Engagement in cross-functional business partnering to enhance value.
Technology:
- Traditional: Information systems viewed as external dependencies.
- Digital: Requires understanding of technology impacts and managing it cooperatively with finance.

The finance function operates in a dynamic environment reacting to market changes while ensuring both short- and long-term financial viability.
Modern finance teams utilize a responsive operating model embracing digital technologies.
Management accountants play an essential role in guiding decision-making and performance improvement.

Key Traits: Courage to speak up, influencing skills, persistence, business knowledge, ability to translate numbers into narratives.
Essential to build relationships and communicate effectively with stakeholders.

The finance function's responsibilities have expanded significantly and continue evolving.
Digitalization increasingly frees accountants to focus on strategic, high-level roles.
Although challenges exist (e.g., skill gaps, system investments), finance professionals must adapt to offer value in the new digital landscape.