The pace at which technology is driving change in today’s accounting and finance functions is accelerating at a rapid clip, resulting in boosted efficiencies, better collaboration with the business, enhanced compliance, and more.
Such was the overall theme from this year’s accounting and finance benchmark report, developed jointly by Robert Half and the Financial Executives Research Foundation (FERF), the non-profit research affiliate of Financial Executives International. Based on survey responses from more than 1,700 financial leaders at public and private companies in the United States and Canada, the report also features insights gathered directly from interviews with financial executives.
“We have been tracking the automation trend closely as part of our benchmarking research for past several years and, year in and year out, one thing emerges pretty clearly: Accounting and financing organizations throughout North America are only expanding their embrace of automation and, even more so, cloud computing,” Dave Pelland, research consultant at FERF, said during a webinar discussing the findings.
The intent of the report, Pelland said, is to help accounting and financial leaders assess how their accounting and finance functions operate relative to their peers and provide insight on how to adjust management strategies to align with leading practices.
Key themes and trends discussed in this year’s report include:
- How accounting and finance functions are keeping pace with the evolving compliance landscape;
- How technology trends are impacting accounting and finance functions, including driving the need for new skills; and
- How accounting and financial leaders are managing everyday operations in response to heightened business expectations and a skills shortage.
Adoption of cloud-based solutions among accounting and finance leaders in North America continues to rise. In this year’s survey, 75 percent of U.S. financial executives and 73 percent of Canadian financial executives said they either are currently using cloud-based solutions or plan to do so in the future.
The desire to boost efficiencies is a primary reason why accounting and finance leaders are moving to automation and the cloud. According to the report, accounting and finance leaders are using automation for routine tasks—such as data collection, management report generation, and document storage. “That gives accounting and finance teams more time to devote to analysis, collaboration with other business units, and help with decision support,” said Paul McDonald, executive director at Robert Half.
“We have been tracking the automation trend closely as part of our benchmarking research for past several years and, year in and year out, one thing emerges pretty clearly: Accounting and financing organizations throughout North America are only expanding their embrace of automation and, even more so, cloud computing.”
Dave Pelland, Research Consultant, FERF
Automating business processes, however, creates its own set of challenges. “A lot of organizations have processes with workarounds,” Pelland said. “Those workarounds are probably a little bit trickier to automate and, so as financial leaders are thinking about automation, in some cases, they may need to clean up those processes before they can automate them.”
Many respondents said they do not have plans, however, to automate processes that require strategic judgment, such as financial decision making and project management. For example, 26 percent of companies with less than $500 million in revenue and 35 percent with more than $500 million in revenue said they don’t have plans to, or won’t, automate financial decision making.
Another trend changing the operations of many accounting and finance functions today are “digital transformation” efforts, also referred to as “digitization,” which the report broadly defines as the application of technology “to create new business models and processes; drive innovation and revenue; and, in some cases, disrupt entire markets and industries.” As such, digital transformation is an umbrella term that can include process automation, cloud-based solutions, data analytics tools, internet of things (IoT) devices, AI, and machine-learning technologies, the report states.
Winnie Leung, chief financial officer at Canadian financial technology firm Moneris, said during the webinar that one benefit of digitization is that it helps companies make risk-based decisions faster. Some solutions on the market enable firms like Moneris to reduce credit risk, for example, by taking information that the company may have on a client and layering in public data to help decide whether to advance credit to a certain customer, or whether it poses a risk to the firm.
Another company that’s in the early stages of automation as it moves toward digital transformation is tire manufacturer Titan International. Jim Froisland, chief financial officer and chief information officer at Titan and one of the financial executives interviewed in the report, offered insight on starting the digital transformation journey: “You need to pick the right technology, of course, but before you do that, you need to define the business case and get the right resources behind it,” Froisland said. “Define your business needs. Then, get the right skill sets. And then, get the right technology.”
As companies pursue digital transformation efforts, demand for different skills among accounting and finance leaders is growing. According to the report, 17 percent of respondents at U.S. companies and 22 percent of Canadian companies have plans to expand their accounting and finance teams in response to digital transformation efforts.
As such, respondents listed several technical and non-technical skills that are becoming more important. Top technical skills that are in demand include, for example, experience with ERP systems and experience in data analytics.
- Accounting and finance organizations are automating processes primarily for these functions: invoicing, data collection, report generation, document storage and compliance. Many firms also expect to automate processes such as financial planning and forecasting—for example, predictive reporting—over the next three years or at some other point in the future.
- Adoption of cloud-based solutions among accounting and finance leaders in North America continues to rise. Three-quarters (75 percent) of U.S. respondents said they are either using cloud-based solutions or plan to do so in the future, compared to 72 percent in our 2017 survey and 62 percent in 2016. Seventy-three percent of Canadian financial executives said they are using or plan to use cloud-based solutions—up six points from last year’s survey and 26 points from our 2016 survey.
- Seventeen percent of organizations in the United States and 22 percent in Canada said they plan to expand their accounting and finance teams due to digital transformation initiatives. About half of the financial executives in North America surveyed said they expect to maintain their current staffing levels.
- Accounting and finance managers in the United States work an average of 46 hours per week, down from 47 hours in our previous survey. Canadian accounting and finance managers are devoting 43 hours per week to their jobs, on average, down from 45 hours last year.
- More than half the firms in the United States and Canada we surveyed rely on manual processes for accounts reconciliation, but those percentages are decreasing. For example, a growing number of firms in North America report they are using internally developed tools or systems.
- The finance function is primarily responsible for overall effectiveness of internal control over financial reporting (ICFR) in most U.S. and Canadian organizations.
- Only about one-third of financial executives in both the United States and Canada say they expect to see their compliance costs rise this year; many expect costs to remain steady. However, most organizations in North America anticipate their compliance burden will increase over the next three years.
Soft skills, like communication and creativity, are also high in demand—often even more so than technical skills. One reason for this, the report states, is that “accounting and finance professionals need a broader range of communication skills to work effectively with others across the organization because digital transformation efforts often require, as well as enable, extensive cross-departmental collaboration.”
Few respondents cited “knowledge of AI and robotic process automation” as a necessary skill. This is likely to soon change, however, as use of these technologies grows, McDonald said.
Companies that do decide to expand their teams likely will face a skills shortage. For example, 49 percent of companies with more than $5 billion in revenue said they are either somewhat or severely understaffed. Meanwhile, the U.S. unemployment rate for accountants and auditors is just 2 percent.
Many companies are overcoming the skills gap by using interim staff, the report found. This year, 33 percent of U.S. respondents said they are using interim professionals, up from 28 percent in 2017. In Canada, 41 percent of companies said they are using interim professionals, up from 32 percent in 2017.
“We know from our interviews with finance executives that new mandates are adding to the compliance burden for many accounting and finance functions,” McDonald said. Thus, financial executives are increasingly turning to interim professionals to not only support new initiatives, like digital transformation efforts, but also to meet evolving regulatory demands.
“For example,” the report states, “as accounting and finance functions have worked to implement revenue recognition and lease accounting standards, many have brought interim resources into their departments for extra support, either to lend expertise in those areas or to take on everyday tasks while full-time staff members focus on standards adoption.”
As the regulatory landscape continues to evolve and place more demanding compliance burdens onto accounting and finance leaders, those leaders “can add value by staying on top of what’s happening in the industry of accounting and finance,” Joan Cox, CFO of educational non-profit Head Start of Greater Dallas, said during the webinar. Prudent accounting and financial executives today can stay on top of the latest trends in accounting and finance by participating in peer-to-peer forums, for example, to exchange knowledge and ideas, hear what challenges others are encountering in their companies, and how they are approaching those challenges, she said.
Financial executives have a key role to play in adding value to the business beyond just making sure that the company keeps accurate books and records. Leung challenges all financial executives to keep this one important question in mind: “How do we help the business grow and succeed, and where does the finance team play a role in that?”
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As technology evolves, so do accounting and finance leaders