Episode 7 - The Future of Finance

    by Emma Pownall
    Marketing Director


In this show, I look at the future of finance in modern business with Mark Lee, the UK's leading accountancy and finance function futurist, and Nick Swarbrick, CFO at Datel.


I started by asking Mark what he thought the biggest challenges faced by finance professionals today might be.

Mark: Probably the biggest challenge finance people face today is the pace of change and development of technology. There's been a lot of talk about AI, artificial intelligence, robotic process automation, machine learning, also Big Data, Data Analytics, huge changes that are impacting what finance people have to do. And a lot of people have been saying for years, this is going to mean that there's less work for finance people, particularly at the junior level. The fact is that we've had these warnings for years. I'm a firm believer that within 5-10 years life will be very different in finance teams, but nothing is changing overnight. And probably the biggest challenge is to recognise that you need to upskill and be able to do things in a different way. Because the requirements of people in finance teams will be changing as a result of people becoming more familiar and more comfortable using new technology.

I wanted to know what this looks like in a finance team.

Nick: So I think really just to build on what Mark was saying, I think that uncertainty and that pace of change is critical. I heard a lovely phrase the other day, where with the increasing pace of change, that we're now in the slowest pace of change today we will ever see in our lifetime.

Mark: Yeah I’ve heard that one too.

Nick: And I think the other challenge for us all is data. And it's not the lack of data, it's the glut of data. Once again I heard a lovely little summary about our data glut, now giving us even bigger haystacks to start looking in.

How do finance people combat these challenges?

Mark: Making more use of the technology that's available to create more valuable data and information for business partners, colleagues elsewhere in the organisation, but not doing it from scratch because it's what you think they might want. It’s spending time to find out what will be of use and value to your colleagues in the organisation. Spending time with them, that's something that computers will never be able to do is to sit down with colleagues and find out what do they want to understand their needs, and to ensure that the way in which you find the needles in those bigger, bigger haystacks are going to be of use and value to colleagues to help them make better business decisions. Because ultimately, that's what they want you to be able to do. And that's what finance people should be providing.

Nick: I probably see it at 2 different levels. First of all is, what does it mean for the finance function? And then what does it mean for the skill set of a CFO? So for the finance function, it's all about getting a lot more agile to deal with that uncertainty around us. It’s getting to grips with that data being much more data centric, and knowing how to interpret it is that higher value-add stuff that Mark was talking about. And ultimately, he's a function being a lot more tech savvy. If you now move on to the changing role of the CFO and the changing skill sets, I think you can probably break it down into four areas. Historically, technical skills have been absolutely critical. I think in this day and age they're just taken as given, there’s a lot more emphasis now on business skills, and we can talk about those and the softer skills. And I think going forward, we'll see an increasing focus on technology skills.

Mark: Can I build on Nick's comments there in terms of skills, and I personally have this frustration when we talk about soft skills versus technical skills. Because the implication when we say soft skills is they're really easy, and that we learn them just through experience. We learn everything through experience, but what we used to call soft skills are not soft and fluffy. They're difficult and hard. And we have to devote as much time and attention to developing what I prefer to refer to as key business skills, as we do our technical skills. And as Nick said, we take it for granted that finance people have had the training, and they've had the technical experience and understanding to appreciate and understand what they have to do. But they don't necessarily have effective communication skills. And that includes being able to listen effectively, to write and communicate effectively, to communicate one to one and to present effectively as well. That's not a soft, easy skill, it's a hard those are hard skills to develop. And that's just one example of the range of key business skills that are becoming more and more important as we go forwards, as technology is able to deal with some of the more basic and simple, dare I say it, simpler stuff that finance people previously did themselves, but the technology is going to be doing to a much larger extent in the future.

It sounds like finance people need to have a wider business knowledge in order to communicate well enough with the different areas of the business. I asked Nick if he thinks this is the case.

Nick: Absolutely. I think there's 2 sort of critical areas of the business skills side before we touch on the softer or maybe not softer skills. First of all, is that commerciality that the CFO has to have. And to me, that's all about really driving business performance. It's about growth, it's about profitability, it's about cash flow. The other aspect is managing risk. And so that's being a lot more risk aware and not risk averse. And for me, I always pull that down to what I call the three R's. So it's looking at the risk, looking at the reward and looking at the resources you have in place. So that’s sort of key commercial aspects. In terms of that more strategic stuff, I think it's all about being forward looking. And it's also about being able to see that bigger picture. So really understanding the detail, but not getting bogged down in it. And I think that agility that ability to react to the marketplace is becoming ever more critical.

So, how do finance professionals prepare for this change and get on board with this way of thinking?

Nick: I think the skills that they really need to hone in and work on, first of all, is leadership. And I see a fundamental difference between leadership versus management. A manager will set a plan, a leader has a vision, a manager will set targets, a leader will win commitment. And it's really about trying to become a motivating leader. And actually, I see that journey from historically finance managers evolving to become finance leaders. But taking our point before about commerciality, it's now wider business leaders.

Mark: Nick’s absolutely right. Those are crucial skills that finance people will look to develop. The important thing is not just having a willingness to build and develop the necessary key business skills. It's having the support of the employer, to at the very least allow time to enhance your skills, in an ideal world to fund the acquisition of those additional skills as well. This includes when it comes to being an effective leader versus simply managing judgement and decision making, building trust, creative thinking, problem solving, time management, critical thinking, collaboration and relationship building. There's a raft of skills there that you can learn over many, many years of just sitting and watching good people and learning from the people alongside you. I'm not sure the time is available for people to sit and wait and do that anymore. Because the changes we are going to see are going to impact what's required within let's say, 5-10 years. If you recently trained and qualified and you're at a relatively early stage in your career, or you want to encourage those at that level in your organisation. Then you need to ensure that you're not reliant upon them just sitting there and being good from a technical perspective, you have to encourage them and make the time to understand and appreciate why they need to develop their skills beyond the technical stuff they did at Uni or college and for exams, because that is just not enough.

I wanted to know what practical steps an FD could take if they want to build this development into their day to day lives. Is it about getting involved in projects? Is it about working with people wider in the organisation? What will expose them to these experiences that are going to help develop those skills?

Nick: I think there's a number of areas and I think that the first thing probably to draw out is these are things you learn on the job, not in a training room. So I think it's all about being in the right environment and having a coaching and supportive environment and learning from other people around you. Obviously, another critical skill is being self-aware, being able to be challenging and challenged. And I think the other aspect to talk about is the CFO not just focusing on themselves but building that skill set across the whole team. So, the junior people in the department are going to be the CFOs and the FDs of tomorrow. So, you've got to have that whole culture throughout the departments.

Mark: Inevitably, I'm going to suggest a good thing to do is to bring in an external catalyst to build an awareness and an understanding. I often point out when I'm talking to senior finance people, that there's inevitably three types of people in their finance team. There's those who are keen to do things a new way, we might call them digital natives. It's just not an age thing. It's an attitude and a state of mind. The second type of those who will automatically follow their leader. The next point about leaders versus managers is crucial here. And then thirdly, there are those who will resist change - those with a fixed mindset rather than a growth mindset. Possibly because they say we've always done it that way. You can only spend so much time trying to convince them that if they don't change, they don't have a future. And they will be the ones who have less of a future than the digital natives and those who are willing to follow their leader and to take advantage of the opportunities which have to be presented to them to enhance their skills. And coming back to the leadership point, it's a matter of identifying what are the key skills that your team are going to require in the future that the organisation will require for finance in the future? Where are the people now on that spectrum, if you like from having no ability whatsoever to the top ability range that we might hope for? And how can we close the gap?

Nick: I mean, you asked about some of the practical steps. A couple of things I've found through my career is one, I've taken some learnings of the sports field and from sport in general, a key thing that I've come across in rugby coaching is a mantra of ask, don't tell, empower, don't delegate. And in terms of business partnering, it's driving a culture of high support high challenge. By doing that and telling my team what I'm doing, it develops me and hopefully they can understand and develop themselves.

I think that's fantastic advice for any leader. So, how do the rest of the board get the most out of this modern finance function?

Mark: It's a question of being that external catalysts to help them appreciate that there are more opportunities available than they might have expected. It depends on the CFO, how long they've been in post, and their ability to communicate effectively the changes that are coming, and what this will mean. Most CFOs want more staff in their team, they want more ability to provide greater value, but they need the rest of the board to be on board with that, as regards the value the return on investment they're going to get from that additional investment, whether that's in people or in technology. And thinking about some of the things that Datel do with clients, it's crucial the CFO is able to communicate effectively the benefits that will be delivered as a result of further investment, and sometimes an external catalyst can help boost that demand if you like and get the board on board.

Nick: And my experience of board without being disrespectful to my board colleagues, is that the simpler you can make the message to the board, the better. So I think it's the duty of a CFO to analyse the complexity but present simplicity.

Mark: One large organisation in Edinburgh engaged me recently to speak ahead of their strategic planning day as an external catalyst, to ensure that they would think about things beyond those that were in their heads or that the finance team were presenting to them. And to recognise it wasn't just them and their finance team that needed to think about these issues. And that I was told afterwards, the strategic planning went far more effectively because they'd had this external catalyst to help ensure that they thought around the issues and beyond their own organisation.

Nick: We also talked before about embracing change and getting your team to embrace change. One great example of that was with my previous organisation where we had to completely redesign the finance function. I took the bold or perhaps somewhat foolish step to get the team to design their own jobs. And they actually ended up being more radical than if I'd done it.

Mark: Building on that example, one of the mistakes I've seen, not just in finance teams, but generally, is when somebody leaves, there's an automatic tendency to replace them and to try and replace them with somebody who has exactly the same skill set and able to do exactly the same job. These days, it's even more important than ever to sit back, take the opportunity and go, do we need to replace this person? What skills do we actually need? Can we take the opportunity to revise or tweak the job and to make more use of technology rather than less or keeping things as they were? And I think the people that finance teams are looking to recruit going forwards, perhaps are different to those they've had in the past. They had to have more be more aspirational in terms of their broader skills, and evidence a wider range of business skills, not just the technical stuff they've done in the past, that the computers may be doing to a large extent in the future.

I was interested in the changing roles within a business because we often find that changing FD can be the catalyst for a look at the technology and systems that a business is operating with. I asked Mark how he thinks technology is affecting the nature of the finance function.

Mark: Well, I think particularly when there's a new CFO or FD in place, the chances are they're going to want to review how things have been done and prove their worth and value. That won't always mean dissing their predecessor who may have done a fine job. But we're seeing increasingly that new technology is fracturing jobs into their constituent parts. And CFOs, new in post, are likely to be more aware perhaps because they've had to think about these things in other roles. The extent to which this new technology can be introduced, which may reduce the need for some of the staff in the department at the junior level. Talking to a CFO the other day, with 10 people in his purchase ledger department, if one of those resigns, or leaves, he knows he's not going to be able to automatically replace them. Indeed, he probably doesn't need to replace them.

And how else do we think this is affecting the finance function? It feels like it's not so much a reduction in headcount that's needed, but potentially a change in skill set of some of the functions within the team.

Nick: Absolutely and probably in common with many CFOs I'm sitting here at the moment thinking what does it all mean to me? Mark talked before about artificial intelligence, machine learning and other such things. We talk about and we hear about robots replacing people. And you know, CFOs are sitting there going well, how much is hype and how much is reality? To be honest, it's probably a bit of both. There is hype, there is reality. I think technology is hugely important. But as you say Emma it's more about balancing the people and the technology together, not technology at this stage, replacing people.

I asked Nick and Mark what they think technology can do well versus less well, in this situation.

Nick: At this stage, early stage, I'm thinking the things it does well is probably automating repetitive tasks. And it's also very good at analysing trends in big volumes of data. So going back to our point before it's sorting through that haystack, and trying to find that needle for us. The things perhaps it does less well at the moment is really ad hoc things, things that you're not doing on a repetitive basis. And also it's around some of the interpretation of the data that comes out. So for example, something I saw recently was a demonstration of an AI tool around credit control. And what that could do was tailor an approach for each and every customer. So rather than having a standard credit control escalation process, you would know that customer X always paid on the 15th of the month, whether you chase them or not. So just let them pay on the 15th of the month. You know that customer Y would only respond once they’ve been threatened legally so don't wait six weeks to send them a legal letter, do it after a week. But another example from the other side, I seen a demonstration with Alexa once again in the credit control environments. So I said Alexa who owes me money, and I got a beautiful credit control report. However, Alexa couldn't tell me who I should be worried about in terms of debt collection, my credit controller could.

Mark: There's a lot to be said for distinguishing hype and reality and a lot of what we're talking about today in 2020 that's real has been hyped for the last 2, 5, 10 years. We're seeing things becoming much more commonplace now. And some of the technology that Nick is talking about has been around for years, but is only now becoming more accepted, particularly by the senior finance community that understandably wants to wait and see whether it's sustainable, or whether the organisations that are developing the software are going to be around for more than a year or 2. There are a number of things that technology is never going to be able to do, at least not within the next 10-20 years. From an artificial intelligence perspective, the machines won't be able to do collaborative problem solving, constructive questioning. They're not going to be able to evidence emotional intelligence and build relationships in order to support business partners. They're not going to be able to exercise critical thinking skills, exercise judgement, or most importantly, provide handholding care and support. Human qualities that people in finance will still have roles and opportunities, if they're able to exhibit and practice these skills. Again, not necessarily skills that people who've moved into finance in the last 10 or 20 years expected they would have to be able to demonstrate, but that they will need to do if they want to hold back the tide of the robotic process automation, machine learning and artificial intelligence that is developing faster than ever before.

This brings us back to those soft skills that we were talking about earlier and the importance of that. We've talked a lot about soft skills, but I needed to know more about the tech skills that CFOs need to have.

Nick: I think in simple terms, the CFO in terms of technology needs to know enough. And they need to understand the technology to the extent of being able to explain it to the business, but they also need to be able to explain the business side to the technology people. So it works both ways. And in making any decisions, I think the CFO has always got to be focused on business benefit, and not be seduced by the smart technology or the clever way of doing things which might not necessarily add value. I've seen plenty of examples where comparatively simple technology actually delivers the most benefit.

Mark: And I’ve certainly encountered many vendors who have got fantastic ideas that will benefit business. And they want to know how can they better engage CFOs, finance leaders, in order for them to at least test if not buy and use the new technology solution they've got. Too often they come at it from a perspective of a solution to either a problem that doesn't exist or a problem that isn't big enough to risk changing processes and procedures in order to take on and use this new technology, which is one of the reasons why, as we said earlier, sometimes the new technology is only accepted and adopted by CFOs after they've seen it operating effectively elsewhere.

It’s definitely a big part of the decision-making process when we're talking to CFOs about new business systems. And one thing that we see time and time again is a business will say they’re unique and need a bespoke solution. And actually, the processes aren't that unique. It's about having a system that can adapt and be customised or tweaked to be able to be interpreted in the right way within the business. But actually, it's based on solid processes that are tried and tested and are best of breed.

Mark: And that's one of the reasons why I think it's important for CFOs to recognise whether it's Datel or using Sage or any other ERP software that you don't want to be reinventing the wheel, trying to get it right for yourself because however specific your needs are, the bulk of what you need is pretty similar. The underlying requirements are pretty similar across organisations. The tailoring and tweaking absolutely needs to be achieved. And sometimes it can be an excuse for refining your processes as well to make them that much more effective, remembering all the time that with finance data, we're trying to ensure that the organisation is better placed to make better business decisions.

Nick: The other critical area a CFO has got to be involved with is getting their team to embrace technology. It's perfectly natural for the team to be threatened by that technology in the first instance. But it's about getting them to understand the benefits and that their job will change, absolutely, but it'll change for the better. Mark’s talk about all those technology solutions, I think it's important to remember that from the CFO side, implementing the technology is merely the start of the journey, not the end of it. And it's all about going back to business benefit, leveraging that technology to drive the growth, to drive the profitability, to drive the cash flow.

I wondered what's around the corner for finance professionals, and what we can expect to see in the next five years.

Mark: Over the next few years, we're going to see this rapid development of new technologies, rapid acceptance of new technology, enabling finance people to present greater insights and find more of those needles in the haystacks that Nick was referencing earlier. We're going to see more people who move into finance, recognising that it's not just a question of being analytical and having an affinity with numbers, that finance is about communication. It's about business decision making. It's about facilitating that. And that's a different awareness and understanding and appreciation than perhaps has been required or recognised in the past.

Nick: In terms of the pure technology solutions, I also think we'll see a lot more of mobile and web enabled applications, more cloud based and hosting. And probably more of the subscription model that we see in our daily lives.

Mark: We're going to see more data scientists, more data analytics, professionals within the finance teams, roles changing. And there'll be less necessity for some of the more junior roles that have existed, doing the repetitive work that the software is able to take over and do going forwards. Whether those Junior people stay in the organisation and their roles evolve, or whether they leave and go elsewhere will be a joint decision to be made by them in terms of their future and their aspirations, and also whoever is leading the finance team and the extent to which they are able to reskill and retrain in order to continue to be of value going forwards.

Finally, I asked Nick and Mark what the one thing is that they think an FD could take away from this discussion.

Nick: Well can I have 3 things please. Putting together the point we said before about people and technology working together. Point 1, surround yourself with great people. Point 2, be excited by the technology but not seduced by it. And point 3, talking about the dynamic environment we're in, build that continuous improvement mindset, you've got to be agile.

Mark: Yeah, I've also got 3 things to finish with if I may. The first one is do your homework, familiarise yourself with new technology, new solutions, new ways to present data and integrate data and insights - don't reinvent the wheel. Secondly, recognise that your role is about providing greater insights and look for opportunities to do that. Stop running analysis and providing reports that never get read. Talk to your business partners and stakeholders. Check to find what will be the right data sources to create analyses and reports that will help them to make better decisions faster than they do now. And the third one is a little bit off the wall, and that's grow your network using LinkedIn. Make sure your profile on LinkedIn helps you to be attractive to other people to join your organisation. But also if you're at the junior level, makes it easier for you to find a new role, if you do find that your current position isn't going to be right for the future.

My guests were Mark Lee, the UK’s leading accountancy and finance futurist, and Nick Swarbrick, Datel’s CFO. I hope that gives you a little insight into the near future for finance professionals, and a roadmap into the priorities to ride the wave of innovation.

In our next episode, we meet Marnie Millard, CEO of Nichols, a FTSE 250 business and one of the UK’s unsung manufacturing heroes. Marnie spent her whole career in soft drinks, and as well as being one of FTSE’s few female leaders, she's cemented the fortunes of the business. To hear Marnie’s story, join us next time, on Business Futures.

This podcast was produced by ModComms, a full-service marketing agency offering innovative approaches to client challenges.


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My guests:

Mark Lee, FCA

Mark Lee is a Fellow of the ICAEW, the CIOT and the Professional Speaking Association. For over ten years, he has been routinely ranked as one of the most influential online accountants and was once identified by Accountancy magazine as the most networked accountant in the UK. After spending 25 years in practice and working as a partner at Clark Whitehill (now Crowe UK) and BDO in London, Mark left private practice in 2006 and is now a self-proclaimed 'debunker' – challenging misconceptions and hype about marketing, social media and the speed of change. Mark's aim is to focus accountants' attention on what they need to do differently to succeed in the immediate future in their firms, departments and careers.

When he’s not speaking at conferences and away days, Mark researches and writes about how accountants can future proof their firms, practices and careers. His voluntary roles include sitting on the ICAEW Members' and Commercial Board and being Treasurer of The Magic Circle! You can check out his website and connect with him on LinkedIn.

Nick Swarbrick, Finance Director at Datel

Nick is a highly experienced, commercially focused CFO/FD. He now acts as a wider business leader here at Datel, and knows first-hand how technology can enable success within a business. Nick is passionate about building high-performing teams and strives to be a motivated and motivating leader, with a strong business partnering ethos. Comfortable tackling issues at the functional, operational, and strategic levels, Nick has a proven track record of success in terms of delivering business benefits. He is a regular contributor at industry events and has a wealth of knowledge on financial best practice and business insight.

Business Futures host:

Emma Pownall, Marketing Director at Datel

My team and I provide our customers with a range of events, guides and tools that bridge the gap between business leaders and technology.  From large conferences connecting customers with each other and the software world, to sharing customer stories that explain what is possible with the right business solutions, I'm focused on sharing how people and technology can support business success.