Traditional finance departments will disappear with a big bang, claims KPMG Management Consulting

Citation

(1998), "Traditional finance departments will disappear with a big bang, claims KPMG Management Consulting", European Business Review, Vol. 98 No. 6. https://doi.org/10.1108/ebr.1998.05498fab.003

Traditional finance departments will disappear with a big bang, claims KPMG Management Consulting

Traditional finance departments will disappear with a big bang, claims KPMG Management Consulting

The traditional role of the finance departments within companies will change radically over the next ten years in what will amount to a "big bang" for accountants, KPMG Management Consulting has claimed in a new report. The report leads with a warning from Hugh Collum, executive vice president and chief financial officer of SmithKline Beecham, who claims: "Accountants could go the way of coalminers... if they do not realise the fundamental changes they need to make."

The report, "Finance of the future ­ a guide for business users", claims that finance is moving away from being an internally focused, manually intensive and stand alone operation, to being customer-focused, with a commercial understanding of the business and with processes and systems in place to support the business partner concept.

Several key drivers for change are outlined in the report. One is the rapid development of IT, which has removed many of the tasks traditionally associated with the finance function. Manual ledgers disappeared years ago and manual transaction processing will go the same way with the advent of electronic commerce. Another driver is the changing needs of businesses. The need for financial knowledge is no longer restricted to the finance function and there is much greater awareness of the financial implications of decisions throughout the organisation. Similarly, business knowledge is increasingly valued more than technical expertise. Additionally, much of the traditional finance function activity is moving out of the business as part of major outsourcing deals and attempts to focus on core skills and operations.

"All this should cause finance directors ,to wonder what their jobs will involve in the future," said Scott Parker, executive consultant at KPMG Management Consulting, speaking at the launch of the guide. "If finance directors do not redefine their role, they may fade in importance and end up merely checking other people's sums and their companies' compliance with legal and tax procedures. However, there is an alternative and the KPMG Management Consulting report is the first attempt to comprehensively define that alternative."

The report focuses on three accountabilities that it claims are unique to the finance discipline:

(1) to deliver value to the shareholders in accordance with their expectations;

(2) to challenge business managers to generate value and monitor their success in doing so;

(3) to manage financial risk and maintain financial control.

"These areas of accountability are not likely to change in the future," said Barbara Morris-Welsh, partner in charge of Financial Management at KPMG Management Consulting. "What will change, is who holds the responsibility for the activities which underpin them. In future, the responsibility will go to other parts of the business."

The report identifies five ways in which finance should change:

(1) Financial awareness within the business should be raised so that the financial implications of strategic and operational decisions are understood before the decisions are taken. Finance professionals could move into line positions to train and develop line managers to become more financially aware.

(2) A finance discipline should be established to allow people using finance skills to share leading-edge techniques, experiences and issues, to develop the challenging mentality that they should possess.

(3) Organisations should build centres of excellence for specialist skills such as finance, HR and IT. The finance centre, for example, may include tax, planning and treasury. The centres could work together in one cross-discipline "advisory team" to provide advice on strategic issues; and specific projects. Many small companies have already done this by outsourcing those services.

(4) Operational activities, such as transaction processing, which do not create strategic advantage, could be re-located in shared service centres or outsourced.

(5) The role of chief operating officer, COO, should be developed further to incorporate responsibility for managing the advisory teams and the functional disciplines.

"Finance professionals need to look forward as they serve the business", said Barbara Morris-Welsh, partner in charge of Financial Management at KPMG Management Consulting. "Successful organisations are those that do the unthinkable. It was unthinkable for ICI to cut itself in two. It was unthinkable for Hanson to turn its back on its conglomerate philosophy. Business change and development requires a supportive and flexible finance function if it is to succeed."

For further information please contact Barbara Morris-Welsh, KPMG Management Consulting. Tel: 0171 311 3677; E-mail: barbara.morris-welsh@kpmg.co.uk or Brittany Walker, KPMG Management Consulting. Tel: 0171 311 3686; E-mail: brittany.walker@kpmg.co.uk