What are the CFO’s priorities for transforming the finance department?

Faced with global challenges, CFOs are rethinking their approach to outsourcing and cosourcing to build a future-proof finance function.

• The finance sector is facing a range of challenges, and as a result, is undergoing a fundamental transformation.
• What are the main themes and pressures troubling CFOs? To find out and assess its impact, EY examined the findings of four recent studies.
• How can you transform your finance function to add value to your wider business operations, address resource issues, and support business growth?

From ever-changing regulations and the impact of the global pandemic, to the wider impact of changing workplaces and geopolitical volatility, businesses around the world are facing an extremely tough situation posed by challenges that require drastic changes. is in dire need of change.

Rising inflation and interest rates, as well as significant exchange rate fluctuations, are adding to the uncertainty of the future. And it’s the finance department that’s feeling the impact more than anywhere else.

To assess the impact of these challenges, EY recently conducted four studies.(2022 EY Tax and Finance Operate (TFO) Survey, “DNA of the CFO” Survey, EY CFO Imperative Report, 2021 Global Corporate Reporting Survey) We have identified the key themes and pressures that are currently prioritizing senior executives (SFEs).

This article presents the findings of the survey and examines evolving technologies and competition for talent, as well as the solutions companies are adopting, such as using in-house shared service centers and reviewing outsourcing/co-sourcing models. I’m here.

These surveys, and our conversations with EY leaders around the world, reveal that CFOs face multiple challenges and headaches.

Finance and the Great Reset after the Pandemic

In the eyes of Vaida Lapinskiene, EY Asia-Pacific Accounting Compliance & Reporting Leader, COVID-19 has changed the face of finance once and for all. “All the old models that we had before COVID-19 have to be revisited,” she says. “The role of the CFO is now shifting to that of the Chief Value Officer (CVO). How can the finance function transform itself and bring value to the wider business operation?

Resources How can you address issues and support business growth?Do reports from the finance department provide the insights you need to make faster and better decisions for the future? We cannot rely on conventional methods, including how to procure resources for the finance department, how to select and introduce technology, and how to work with third parties.”

To make a difference, Kathy Denardo, EY Americas Accounting Compliance and Reporting Leader, believes every CFO needs to focus their finance function on building the future of their company, not reporting on past data. I’m here. “This means that finance professionals should prioritize future-proof activities such as scenario-based forecasting and internal and external data mining to understand value drivers.

Addressing basic data requirements. Plan for new regulatory requirements, environmental, social and governance (ESG) challenges, and base erosion and profit shifting (BEPS), including how to manage costs, while also managing costs. And it is still essential to drive improvement in profit margins.”

In fact, the word cost comes up again and again in EY research on the finance sector. According to EY TFO surveyed CFOs and SFEs, 85% of companies have changed their finance function operating model, putting cost savings at the heart of it. In addition, 88% of companies plan to reduce their finance budgets over the next 24 months, with an average reduction of 4.8%.

If the finance department fails to demonstrate leadership in cutting costs, other departments will not follow suit

On the other hand, it is a matter of course that the finance department is actually responsible for cost reduction, and we must lead the way in systems and methods that are more cost-effective. “If the finance department fails to demonstrate leadership in cutting costs, other departments will not follow,” points out Liam Keys, Partner, Finance Operations at The European Tax Council with Ernst & Young LLC. “The CFO said, ‘If the finance department costs $100 today, how can we make it $95 tomorrow and $90 a year from now?’ ‘ and ‘How can we better manage the resulting financial and intellectual capital to add more value?’

An idea popped into Sergio Garrido Villalba, EY Global Accounting Compliance and Reporting Leader. “There are many ways to reduce costs, such as rethinking processes and optimizing the way work is done. But as the company grows, expect finance to do more with the same resources. Either way, this is a very big challenge.”

On the other hand, the tools to control costs are limited and many finance departments have been doing so for years. So where are CFOs and SFEs looking to improve efficiency?

Expanded use of in-house shared service center

According to EY’s TFO survey, 58% of CFOs and SFEs cited greater centralization through the use of in-house shared service centers as a priority for their finance function’s operating model. At first glance, this result may come as a surprise to some, as many companies have outsourced certain functions, including high-volume, low-value tasks, to external shared service centers for years.

However, Philippe Verhoeven, EY EMEIA Accounting, Compliance & Reporting Leader and Partner at Ernst & Young LLC in Belgium, believes the pandemic has caused many CFOs to rethink how best to make the most of shared service centers. increase.

“With employees working remotely regardless of country or region, companies no longer need everyone to work in the same physical space, and employees in different countries and regions can play the same role, effectively We realized that we could move into what we would call a virtual shared service center.”

This also avoids some of the language and personnel challenges that arise when setting up service centers in low-cost countries. “In India, for example, it is very difficult to find people who can teach in languages ​​like Norwegian, Polish and Turkish, so we have to transfer native speakers to service centers,” says Garrido. . “From a talent perspective, this has not always been an attractive option. Remote work can help overcome this challenge.”

However, these current changes may become a whole different problem in the future as more high-volume, low-value work gets automated. “Companies are now looking at what a global business services organization should look like,” points out Lapinskiene.

“Should it be a traditional center of scale, a highly efficient organization that handles high-volume transaction processing, or should it be a center of excellence, managing a set of processes and how those processes operate? Should it be an organization dedicated to continuous improvement in how it integrates into the business and how it provides insight into the business?”

Rethink how you work with external providers

Rethinking the use of these shared service centers is just one way for CFOs and finance leaders to consider how best to use external service providers. In fact, outsourcing and cosourcing are rapidly evolving beyond simple cost savings to take a smarter, more comprehensive approach.

EY TFO survey finds 62% of CFOs and SFEs plan to increase cosourcing of some finance and tax activities in the next 24 months, and 77% will cosource some activities I answered that it is very likely. A particularly important word in the two examples above is “some”. Finance leaders are looking to optimize their operations in the most effective way.