Generation next: world-class organisations are increasingly demanding that their finance functions move away from number-crunching and start creating real value. Margaret May explains how the profession must transform itself in order to rise to the challenge.
| Author | May, Margaret |
| Position | Finance: the future |
Since "big-box computers" first mechanised financial processing in the 1970s, the course of evolution has taken us through devolved finance using local servers and spreadsheets in the 1980s to global enterprise resource planning (ERP) and shared service centres (SSCs) in the 1990s. By the turn of the millennium the development of web technology had aided the full integration of business processes, featuring electronic links to suppliers, partners and customers. Web-enabled SSCs managed all non-core processes, with ERP linking to supply chain management systems and customer relationship management systems.
Today the function is moving towards complete "lights-out" processing. The eventual outcome will be "virtual finance", with the replacement of transaction processing by web-based systems maintenance and audit.
In addition to the considerable impact of technological developments, all businesses have experienced huge changes stemming from a wide range of other challenges over the past 15 years. These have included:
* An increase in shareholder power. Businesses have been forced to focus more attention on delivering shareholder value. It is no longer sufficient to calculate the traditional profit and loss and balance sheet statements; it is now equally important to address the drivers of economic value creation through shareholder value calculations, which reveal economic profit or loss. Part of this calculation in a 21st-century organisation is the need to include the intrinsic value of intangible assets that give rise to corporate reputation (see figure 1, right) and must be protected by an integrated enterprise risk management system.
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* Heightened environmental, ethical and social awareness. Since the turn of the millennium companies have been required to have an embedded internal control system that monitors important risks, including environmental, ethical and social threats.
* Legislation requiring the public services to deliver value. One example is the Best Value initiative in local government, which in 2000 put an end to the regime of compulsory competitive tendering.
* Cultural transformations. These have included the move from the "top-down" organisation, with its command-and-control management style, to a more empowered, innovative, "bottom-up" culture. All departments have had to accept the idea of providing a service to their internal customers--and all too often finance has lagged behind. A key part of the...
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