Speed & Agility: The ultimate goals of a Mature Finance Function

Speed, agility and flexibility. Precision and efficiency. Real-time decision making. These are just some of the properties needed to deal with the modern business environment and its accompanying specifics. In times of economic uncertainty, these characteristics become must-haves. We have seen business needs change dramatically and finance, along with all other units, undergo a transformation regardless of their readiness.

The “PwC CFO Compass 2023 Survey” focuses on the way digital revolution is changing the processes within the finance functions and on how CFOs and finance managers respond to the increasingly demanding needs of the stakeholders.

CFOs from almost 130 companies operating in over 10 industries in the SEE market, with average revenues of EUR 60 million for FY22 and 450 average full-time employees on annual basis, took part in the survey. The results provide a summary of the financial professionals' views on critical business matters, strategic priorities and factors they currently consider vital.

A long way to go: Mature Finance Function

The mature finance function focuses on grouping work into task types, for example – reporting, management, and planning, based on business partnerships with other areas of the organisation, rather than structuring finance departments into traditional areas like accounting, controlling, or taxation.

Only 9% of the surveyed organisations on the SEE market can describe their finance function as mature

The findings from the survey show that in SEE only 9% of the companies can be considered to have a mature finance function. However, the developed maturity index shows that even those ones have catching up to do in order to make up for the gap in the individual categories covered by the survey. It turns out that the list of tasks waiting to be implemented by the finance departments is still long.

Analysing the survey from the perspective of individual areas, Planning & Budgeting, Business partnership and Management reporting are comparatively developed, as in each segment there are above 30% of the companies that fall in the scope of the top performers. However, they fall behind regarding some of the other components.

IT development, automation, as well as employees’ digital skills seem to be the components that are more neglected by companies. Only 17% of them define their IT infrastructure and the level of automatisation as developed, because of the different tools that have already been implemented.

Where to start from with financial transformation? Processes

A significant number of CFOs are driving the transformation process by making specific decisions based on trends in particular domains

The survey results indicate a new trend where a significant number of CFOs are driving the transformation process by making specific decisions based on trends in particular domains. This approach is preferred over viewing the process as a whole solely from the standpoint of business value, which may limit the understanding of the changes and provoke resistance to the transformation process.

A well-defined roadmap centered on people, technology, and processes and the relationship between them, as well as on possible outcomes that could affect the overall performance of the company is essential for success. In order to maximise efficiency while upholding compliance, such a roadmap should also include the finance function's culture and willingness for change.

52%

of the CFOs confirmed that the process of adapting management reporting to new business needs was successful.

• More than two thirds of CFOs track elements of income statements (fixed and variable), financial results and KPIs in their monthly reporting compared to previous year and budgets (less so vs forecasts).

• At the same time, weaknesses in the tools that traditionally supported these processes have been exposed. Lack of flexibility, manual input, and data inconsistencies made it impossible to create dynamic scenarios or migrate to so-called scenarios.

• The so-called real-time reporting is a big challenge and still requires continuous improvement. This is shown by the fact that net working capital and cash flows are covered by less than a half of the organisations that took part in the survey.

• Proactive cash flow management is a sign of a mature finance function, and those companies have a challenging road ahead to reach this.

• Every fifth CFO finds it difficult to reconcile statutory data and managerial data for the purpose of the preparation of monthly management reportings.

• 41% still rely on manual adjustment of the data structure.

• Nearly a half of the CFOs find it difficult to perform the month-end closing procedure.

• More than 75% of CFOs manage the preparation of monthly management reports and reports per Business Unit / Cost Centre / Line of revenue for 5 business days or less.

There is a positive trend in terms of performing remotely repetitive processes

According to the survey, more than than 80% of the companies can perform remotely most financial processes, which shows increased flexibility and efficiency in coordination and decision making. An area of improvement would be management reportings – only about a third of the CFOs have access to monthly management reports in a dynamic form that allow momentary access to visualised information and multilevel analysis.

1/3

of the CFOs have access to monthly management reports in a dynamic form

Where to start from with financial transformation? Technology

The use of technologies of the future is still at a low level

Тoday’s primary tool for bringing about change in business and society is technology. However, there is a growing gap between organisations that are utilising modern tools to innovate and those that are falling behind in the game of transformation.

The inability to expand robotic process automation and intelligent process automation is a widespread problem globally, often due to concerns about cost and data security. Handling of company transactions limits the ability of finance to create added value in other areas.

13%

of the organisations have implemented process automation and RPA.

PwC CFO Compass Survey 2023

69%

of the organisations don't use artificial intelligence or machine learning yet.

PwC CFO Compass Survey 2023

15%

of the CFOs use big data and predictive analytics.

PwC CFO Compass Survey 2023

45%

of the CFOs plan to implement or change the systems supporting finance functions in the near future

PwC CFO Compass Survey 2023

Where to start from with financial transformation? People

The nature of employment is changing dramatically. On the one hand, there has been noticeable tendency towards centralisation, outsourcing and automation of routine and simple tasks for a number of years. However, the business world is growing more intricate, with a wide range of connections and interdependencies. The ability to innovate and manage stakeholder expectations is still crucial, and requires the correct soft skills.

The digital skills of finance department employees must be strengthened

Redesigning competences is necessary since employee roles and views are changing. Merely 29% of the participants reported that staff members working in the finance sector are acquainted with and utilise modern technologies for process automation to the fullest extent possible. It stands to reason that many businesses still have the chance to create value by enhancing their digital capabilities.

71%

of the respondents indicated that employees in the finance area don't know and use new technologies for process automation at an advanced degree.

According to the survey 69% of CFOs plan to fill the competence gap with development programs or training for the current employees, and 38% – by recruiting people with the required competences.

Also, only half of the participants have training development programs for financial teams. Well-designed digital competence development programs which cover both training and goals, but also various types of mechanisms, should be implemented. Automation processes should also be encouraged by the management – a quarter of the participants don’t encourage employees to automate processes on their own, whereas one in four participants offer rewards for process automation.

CFOs feel responsible for real digital transformation

The "CFO Compass" Initiative

The "CFO Compass" is an initiative that brings together a knowledge base, professionals and a wide range of support dedicated to CFOs.

We work with CFOs of large and medium-sized enterprises across all industries, helping them digitally transform their organisations to optimise back-office processes and improve cost efficiency while maintaining compliance and a skilful approach to risk management.

In Capital Markets and Accounting Advisory, we provide services related to review of financial statements and new standards adoption, which will help you improve the quality of your organisation’s financial reporting, as well as finance function improvement, enhancing efficiency for overall business success and growth.