Connectivity and automation transform the face of finance forever

 

• Finance professionals in top quartile companies cost 40% less than their median peers and spend 20% more time on analysis vs. data gathering
• The nature of people needed to work in and lead finance departments is changing: different skills are required
• Internal finance data is now being combined with open-source information for real time and predictive analytics

 

The annual PwC finance function benchmark report Breaking Away: How leading Finance functions are Redefining Excellence, shows how the best performing finance functions have ditched the traditional focus on book-keeping and information gathering. Instead, they’re producing real time analytics and management information used by other parts of the business to inform their activities.

 

Illustrative of this, is how finance professionals now spend 50% of their time on analysis versus data gathering, up from 36% just three years ago. In top quartile companies, they spend an average 60% of their time on analysis.

 

The changes mean there is a demand for a new type of numbers professional, able to navigate the new business landscape and interact (or ‘partner’) more meaningfully with other parts of the business. The need for soft skills is reflected in the priorities cited for more effective finance – some 44% of respondents cite collaboration as priority, while 53% say improvements in communication processes are most important.

 

Brian Furness, PwC Finance partner, said:

 

“Accountants have never really been at the top of peoples lists of roles most likely to be replaced by robots, but what’s happening with the advances in digital and technology is that the human role is changing quite radically as automated processes are being carried out by Artificial Intelligence (AI).”

 

“The best finance professionals today are producing actionable information, not circulating numbers that are likely to be out of date as soon as they’re released. In business today, insight is being driven by internal data is supported by data scraped from the internet or pulled from specialised external sources, and not always by the finance department.

 

“This democratisation of data has been a wakeup call for the finance discipline. It has also led to a demand for strategic thinking and leadership skills not traditionally associated with finance professionals.”*

 

Costs

 

As fewer people are needed to run finance, the cost of the average finance function as a percentage of revenue has fallen since 2011-12, by over 10%.  However, a combination of automation, shared services and more efficient use of capacity means that the cost of finance is a full 40% lower in the best performing organisations.

 

Economies of scale mean that the cost of finance as a percentage of revenue in companies with revenues over $10bn is less than half that of companies under $1bn. Operating in multiple countries creates complexity that is expensive for finance, the median cost of finance for a business operating in more than 10 countries is more than 2.5 times the cost of finance in a single country business for the average performers.  Top quartile finance functions are much better able to deal with complexity, with the cost penalty in 10+ countries 30% lower. 

 

There are significant differences between industries. Complexity and regulation mean that the finance function remains the most costly industry within the financial services industry (1.32% of revenues for the median).  At the other end of the scale, high-volume low margin businesses can run a lean finance function with the cost of the finance function within retail industry sitting at only 0.34% of revenues for the median.  Others tend to lie between these extremes, for example industrial manufacturers (1.18%), technology companies (1.11%), and utilities (0.83%)

 

The best performers harness technology and processes, for example delivering budgets in 80 days compared to a median of 95. PwC’s view is that taking three months to close the budget is unsustainable when decision makers are used to near-real time data and analytics.

 

Brian Furness, PwC Finance partner, who works to improve the performance of finance functions, said:

 

“Efficiency is not always about technology. We have recently seen capacity increases of 15-25% achieved within finance functions through process change and excellence in managing teams. The key is leaders willing to embrace wholesale changes in the way finance works and how it interacts with other parts of the business.”

 

 

 

Ends

 

Notes to editors

 

*We as PwC are changing the way we recruit as the skills needed in our business change. The UCAS tariff, for example has been scrapped as an entry criteria for our graduate scheme. It’s a move that could drive radical changes in the social mobility and diversity of the professional services' industry, and how companies assess potential more broadly. Perhaps finance functions should also be thinking more broadly about how they recruit and develop talent.

 

The report draws from more than 400 PwC benchmark engagements across industries, comprising 5,600 finance teams in over 100 countries and over 120,000 data elements.

 

 

About PwC

 

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com

 

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

 

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