Looking ahead to the new year, economic experts forecast a healthy global economy in 2018. According to Goldman Sachs economists, “for the first time since 2010, the world economy is outperforming most predictions”—a trend they say will not only continue but amplify in 2018. The IPO market is predicted to rebound, with IPO value to improve by more than 50 percent over 2017 to nearly $300 billion, according to Baker McKenzie. And, entire industries stand to be reshaped by vertical mergers and acquisitions, such as recent announcements by Amazon (Whole Foods), CVS (Aetna), and AT&T (Time Warner).
While the economic outlook is good news, organizations will also face an uncertain political environment and will need to adapt to some significant changes, including the impacts of recently passed tax reform in the U.S. What does all of this mean for CFOs and corporate finance organizations? In order to adapt to change and capitalize on opportunities as they happen, businesses will become even more reliant on their finance teams for relevant data and strategic insights.
“Finance teams are evolving from being centered on transactional responsibilities to being tasked with providing the business with analytics and strategic insight.” —Betsy Bland, vice president of financial management products at Workday
We asked Workday customers, executives, and partners for their take on the biggest issues and trends impacting finance leaders this year. Here’s what we heard:
The role of finance and how work is done will continue to evolve in 2018. “Finance teams are evolving from being centered on transactional responsibilities to being tasked with providing the business with analytics and strategic insight, helping their organization look to and move into the future,” says Betsy Bland, vice president of financial management products at Workday.
Making this shift will be top of mind for many finance leaders. Frank DiLiso, vice president of finance at TMX Group, a financial exchange services company, highlighted one issue leaders will have to address. “With increasing pressure to keep finance budgets flat year by year, finance will have to figure out how to balance the efforts required under stewardship and financial operations with providing insights and being a business partner to help their companies grow profitably.”
Many experts believe that digital technologies such as cloud computing, automation, and machine learning are key to helping finance organizations meet increasing business demands. “By harnessing digital technologies and enhancing existing analytics capabilities, finance—a traditional purveyor of analysis—could become the go-to source across the enterprise for strategic advice,” according to the Deloitte report “Tech Trends 2018: The symphonic enterprise.”
Yet all of this takes strong leadership. “Increasingly, forward-thinking CFOs and CIOs are charting finance’s course toward a digital future built around interconnected and automated systems, unified data sets, and real-time analysis and reporting,” according to the report.
Shifting to cloud computing from legacy on-premise software will be a crucial part of the creating the digital future. “A recent Gartner survey of senior finance executives found that by 2020, 36 percent of enterprises will use the cloud to support more than half of their transactional systems of record.”*
In addition to expanded responsibilities around data and insights, the speed at which finance organizations must deliver information will be critical. “Finance will need to provide managers and employees cognitive insights and dashboards so they can make swift decisions based on real-time data,” says Richard McColl, global Workday practice leader at IBM.
“Finance needs to know what data is important, how to interpret that data, and then provide guidance on what it means for the business.” —Thomas Schroder, global product strategy lead for financials at Alight Solutions
Finance will also shift more into the role of storyteller, able to interpret data and communicate what it means back to other business stakeholders. “Finance is being asked to provide the right people with the right data to make decisions,” says Thomas Schroder, global product strategy lead for financials at Alight Solutions, a provider of benefits administration and cloud-based HR solutions. “They need to know what data is important, how to interpret that data, and then provide guidance on what it means for the business.”
Access to better and more meaningful data will be important in helping to drive better decision making. “New technologies are now enabling finance to access data on things such as supply and inventory, organizational performance and efficiency, propensity to leave, and employee sentiment,” says McColl.
In 2018, finance will increasingly take advantage of digital technologies such as automation and cognitive tools, including machine learning, to handle administrative and manual tasks, freeing finance professionals up to focus more on analysis and business partnership. “Within finance, the role of the basic data entry ‘order taker’ accounting clerk role is being augmented by machine learning,” says Schroder. He adds that each finance organization has to assess the right timing and value for its business. “Finance will need to consider when they should use robotic process automation and what size and volume they start getting value as an organization.”
McColl also emphasizes the impact of digital technologies in 2018, especially when it comes to supporting change. “In 2018, it will be important to reimagine how people work with digital tools such as artificial intelligence, cognitive, robotics, and the Internet of Things, and to take advantage of those technologies to build capability and a culture that can respond quickly to changes in the marketplace.”
“The best-prepared companies will be those with the most nimble, ready-for-change teams and finance systems.” — Trish Coughlin, corporate controller at Workday
He provided examples of how cognitive technologies and greater insights can help the business better monitor performance and make adjustments. “The power of cognitive and artificial intelligence is that it can read and absorb vast amounts of data very quickly and tell you what it means. It can monitor trends, spikes, and anomalies in real time and then prompt you on the right course of action,” says McColl. “For example, finance can use data to help managers make optimum use of salary and expenses to target increases to the right people.”
This year, finance teams will continue to face changing corporate finance regulations. “In 2017, corporate finance teams buckled down on preparing for the adoption of the new revenue recognition standard, ASC 606. In 2018, they’ll be moving from adoption of ASC 606, to preparing for the new lease accounting standard, ASC 842,” says Trish Coughlin, corporate controller at Workday.
Schroeder emphasizes that regulatory change and compliance will be major areas of focus across every industry and country. “Companies will continue to deal with changing regulations. Localizing regulatory changes across different regions is an ongoing issue, especially in LATAM, APAC, and EMEA.”
Compliance with the European Union’s General Data Protection Regulation (GDPR) will also be front and center for CFOs, especially considering the essential role of governance in the program and the severe penalties for noncompliance. According to Forrester’s “Predictions 2018 A Year of Reckoning,” 80 percent of firms affected by GDPR will not comply with the regulation by May 2018. For some, noncompliance will be a strategic decision if they judge that potential fines are actually less than the cost of compliance.
Coughlin stressed the importance of having the right technology systems in place to support ongoing regulatory change. “The best-prepared companies will be those with the most nimble, ready-for-change teams and finance systems.”
The coming year brings many potential opportunities, yet some challenges, too. Finance leaders who can effectively take on an advisory role, while leveraging technologies that help them quickly deliver meaningful data and adapt to ongoing change, will be best suited for a successful 2018.