UK: Finance Departments Must Adapt To Keep Abreast Of Back-Office Revolution, Warns

Last Updated: 2 June 2000

Beancounting Days Over For Finance Professionals

The concept of e-Finance is closer to reality than could have been anticipated two years ago claims a new report, eFinance@work, by KPMG Consulting. In 1998, the firm predicted that due to changing business and operational models driven by internet technologies, 'accountants could go the way of coalminers'* if they did not adapt to the new environment within 10 years. However, developments in eBusiness have been so rapid that these predictions have already been realised and companies need to make immediate changes to their finance departments to avoid the role of finance becoming sidelined.

Scott Parker, consultant at KPMG Consulting, commented: "The role of the finance function within companies is changing dramatically. From now on, finance departments will drive, rather than measure, financial performance. While the traditional responsibilities of finance departments - forecasting, budgeting and financial control - will remain, many of the processes associated with these have been automated, freeing finance to become a strategic partner to the business."

The report highlights the finance department's role as an integrator and provider of information. This will involve liaising with external parties, such as suppliers and partners, and pulling together information from marketing, logistics and other departments, in order to challenge decisions and business directions. This transition will require wholesale change within finance departments, both culturally and operationally. Upskilling staff will be vital and there will be major change for the Finance Director himself, who will move away from the traditional finance role to become more of a strategic consultant.

The report explores the four key themes that will drive the new role of the finance department:

Eliminate many of the traditional roles of the finance function.

Manual tasks - such as processing expense forms - are being automated and replaced with web-enabled systems. This could reduce processing costs by 20%, although some companies achieve much more.

During the 1990s, a popular way for large organisations to reduce costs and improve efficiencies was to locate all operational tasks in a shared service centre. But as companies automate their processes and link directly with customers and suppliers, there will no longer be a need for large accounting factories in a single location. Before long, the shared service centres will essentially become control rooms, monitoring performance, managing processes and tracking exceptions to the rule.

In addition, organisations are finding that Application Service Providers (ASPs) offer a solution. Companies can outsource IT to an ASP - servicing a number of businesses simultaneously - at on off-site location. It is expected that ASPs will be a popular option for many organisations: projected worldwide revenues for ASPs are forecast to grow from US$3 billion in 1999 to US$23 billion in 2003.**

Embed financial controls and risk management in technology.

As increased access to information delivers greater decision-making power across an organisation, the potential risks for the organisation also increase. However, new technology allows consistent procedures, tools and templates to be easily implemented. Cisco, for example, has adopted a web-based expenses system that enables the company to capture individual corporate credit card transactions online and employees to input other expenses on a daily basis, while flagging up consistent overspending on expenses, or the use of an unauthorised airline or hotel.

Empower decision makers.

Chief executives have always wanted finance directors to deliver the Holy Grail of finance: making the finance function a strategic business partner. The internet facilitates this role by , allowing real-time, customised management information to be delivered through a web browser to employees on an anytime, anywhere basis. The performance management portal effectively provides a single and instant version of the truth, allowing the whole organisation to manage performance against clear strategic priorities. Motorola, for example, uses a system which not only enables all its employees to have daily access to marketing and manufacturing information, but also incorporates paging technology to ensure that employees who are not near a PC can access the information they need, or be alerted to new developments, via a pager, with a two-minute response time.

Explore new opportunities.

The specialist skills typically found in finance - tax, treasury, investor relations and corporate finance - are being profoundly affected by the internet. This is having an impact, both on the way these skills are delivered - common tax and treasury questions can now be answered over an intranet or internet - and the skills that are required, for example, in co-ordinating a cross-border transaction. Finance will become much more project-based and finance professionals must develop and re-vamp the skills to meet this challenge.

Chris Gant, partner responsible for eFinance at KPMG Consulting, commented: "The back-office revolution is already happening. However, while leading organisations, such as Cisco, Virgin, Whitbread and Motorola are implementing the necessary changes already, many firms still have substantial ground to make up. Customers and suppliers are ultimately forcing all companies to meet the eBusiness challenge and there is no time to delay. The traditional finance department will not survive, finance must either adapt to the pace of change or risk becoming sidelined within an organisation.

For further information, or assistance, please speak to your usual KPMG tax contact.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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