Speeding Towards Transformation: 2021 Trends In Finance And Accounting
We are approaching the end of 2020, a year unlike any other in the history of finance and accounting. The Covid-19 pandemic and its economic, social and political impacts have accelerated profound changes in business, work and life. CFOs and other finance professionals have spent much of the year trying to address the challenges, but in 2021 they will be poised for executing longer-term strategies that will position their organizations for growth and profitability, or as McKinsey says, “crisis managers with a long term view.”
There are already optimistic signs that finance and accounting leaders and their teams are better able to navigate the current climate and are prepared for future scenarios, like more lockdowns or additional restrictions. For example food and beverage finance leaders quickly adapted to Covid by beefing up investment in mobile apps and curbside pickup. They see changes in consumers’ purchasing behaviors (49% of consumers downloaded two or more apps during Covid for food and beverage purchases) as a permanent trend.
CFOs in other industries have also pivoted to technology to solve Covid-related challenges. Organizations with heavy emphasis on resilient supply chains for profitability are considering or have already implemented a digital supply chain management system, according to McKinsey Consulting. These systems facilitate enhanced insights into the supply chain and with the help of advanced analytics can provide supplier risk assessments, providing the finance team with a way to predict disruptions before they happen.
Looking ahead to 2021, I attempt to predict the technology being implemented to solve Covid’s immediate challenges will be embraced by organizations, and their customers, for the enhanced efficiencies and cost-savings they bring. Finance and accounting teams have an opportunity to be leaders in these digital transformations.
Here are my top six mega-trend predictions for 2021 in finance and accounting.
1. Automation will no longer be debated. Routine, rules-based tasks will be automated. This was true before the pandemic, with over 50% of finance and accounting professionals indicating automation would impact how their company performed its work in the next one to two years in a Deloitte/IMA survey released in August 2020. During the pandemic, when the remote financial close became a reality for most finance departments, those who had some automated processes in place fared better than those that did not. Finance leaders are making greater investments in cloud computing and software as a result, whether the remote financial close is here to stay or becomes a hybrid approach.
2. Remote working will become the norm for finance teams. According to a June 2020 PwC survey, “54% of CFOs plan to make remote work a permanent option.” Facilitating successful remote working arrangements is a two-part process. First, CFOs must commit to providing the right technology tools to their staff. Second, they must champion teamwork and collaboration among individual teams and cross-functionally, throughout the organization. Lack of in-person contact can make employee engagement and productivity suffer. It is important for CFOs to build and maintain corporate culture with the help of both HR and IT. Employee town halls, special virtual events and open communication with employees at all levels of the organization are key. CFOs must have a virtual open-door policy with employees and all stakeholders of the organization.
3. Environment, Social and Governance (ESG) reporting will become more important. An already-accelerating trend pre-Covid, ESG will gain new focus, fulfilling consumer mandates for more corporate responsibility, but also serving as an important organizational risk mitigation tool. Back in May, I wrote an article for Forbes in which I discussed how “intangible assets” like environmental or social risk and/or impact were rapidly becoming more important for finance professionals when measuring and reporting company performance. Today, finance teams and senior management are better able to connect improved organizational performance with implementation of sustainability measures. For instance, organizations can realize decreased costs when they minimize their physical office footprints, but this also helps lessen environmental impacts. ESG will no longer be perceived as a cost, but rather a benefit for organizations. A report published by IMA (Institute of Management Accountants), the professional organization of which I am CEO, entitled “Finance Function Partnering For the Integration of Sustainability in Business,” offered a blueprint for how the finance function can successfully work cross-functionally to integrate financial and non-financial reporting.
4. Enterprise Risk Management (ERM) becomes a finance accountability. If there’s one thing the Covid-19 pandemic has taught is, it’s that a crisis can emerge suddenly and overtake all one’s plans and expectations for the future. In May I wrote an article for Forbes on how companies need to take a more proactive approach to Enterprise Risk Management (ERM), and why the finance function is essential to this initiative. The finance team has unique insight into a company’s financials and supply chains, which were great sources of risk for global organizations during the pandemic, and they also have a framework for addressing ERM: the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Enterprise Risk Management Framework. The COSO framework allows finance teams to preempt crisis management by focusing on managing risks and preventing or minimizing issues before they occur, emphasizing Governance and Culture, Strategy and Objective Setting, Performance, Review and Revision, and Information, Communications and Reporting. In 2021, companies will be high-focused on mitigating risks - be the environmental, reputational, or other - and the role of finance in prevention will become more crucial. In fact, using the COSO ERM framework properly, management accountants can better anticipate and prepare for disruptions and natural disasters with plans and procedures in place for business continuity and remote work.
5. Diversity, Equity and Inclusion (DE&I) will be a competitive differentiator, in addition to being the right thing to do from a core values perspective. In 2019 The Wall Street Journal ranked companies in the S&P 500 by levels of diversity and inclusion. They found the top 20 companies (or those with the highest scores for DE&I) had better operating results on average than the lowest-scoring firms. Companies that value DE&I enjoy other benefits as well, enhanced corporate reputation, more innovation, and ease in attracting top-tier talent. The business case for DE&I has never been more compelling than now. DE&I initiatives can create a stronger corporate culture and more engagement from employees, at a time when employers need them to put forth their best efforts, think of solutions to on-going problems, and work as a team.
6. Upskilling is the call-to-action. IMA recently conducted a global survey of finance and accounting professionals, posing questions related to Covid impacts on staffing, revenue management, upskilling and reskilling. A key finding of the survey was the concern by finance and accounting professionals about whether their current professional skills will still be relevant in the post-Covid-19 era—12% of survey respondents believe their skills won’t be relevant, and another 10% are unsure. In this context, it is clear why professional associations like IMA are emphasizing the importance of continuous learning and offering courses in data analytics, blockchain and other technologies, as a way of helping professionals gain the skills they need to compete in the new post-Covid world of work.
2021 will see the emergence of the post-Covid economy, where Mergers & Acquisitions will be back on the rise, and finance leaders will have the strongest business case yet for investment in technologies like intelligent automation, RPA, data analytics and blockchain. There will be more opportunities for them to prove that they can add value to an organization beyond reporting and disclosure. Today’s finance function, which is pivoting from value stewardship to value creation, requires finance professionals to constantly upskill and acquire competencies related to communication, decision making and leadership. 2021 will be the finance professional’s time to shine in this regard.