Businesses are facing disruption on an unprecedented scale. A recent PwC Leadership Exchange survey showed that almost three-quarters (73 percent) of business leaders in Ireland believe that their organisations are significantly affected by changes in business models. In order to protect short-term profits while fostering long-term growth, there’s a heightened need for business leaders to leverage the expertise of finance and tax departments. Their transformation to adapt to the new normal, an environment demanding new skills, workflows and attitudes, is imperative.
Ruth McNamee, finance transformation director at PwC Ireland, emphasises that businesses must be swift in their response and quick in adapting to changes. Recent global research from PwC indicates that in the coming year, 43 percent of financial leaders aim to transform the finance function into a business partner. “Non-financial factors also matter; reporting on sustainability (CSRD), gender balance, new regulatory norms (Pillar Two), and balancing short-term pressures with long-term growth objectives, among other things,” says McNamee.
McNamee insists that organisations need to continually reassess their markets, pricing, cost structures as well as invest in the right skill sets to maintain a competitive edge. “Businesses must routinely re-imagine their offerings, instilling a culture of continuous improvement to stay relevant. The transformation of finance and tax operations, to support broader business initiatives, is what constitutes finance transformation. It’s a purposeful strategic shift supported by people, processes and technology, aimed at creating a finance operation aligned to future needs.”
Looking to the future of the finance function, McNamee visualises an agile, experience-centric setup centred on insights. “Being proactive rather than reactive, appreciating the power of data and leveraging highly automated procedures for transactional recording are all part of the future. It envisions a ‘get it right the first time’ approach, so that data and analytics can swiftly provide real-time insights.”
Significant transformations are on the horizon for the finance function of the future, as per McNamee. A hybrid workforce comprising humans and digital counterparts will catalyse these changes. Future financial professionals will be drawn from a broad array of fields rather than solely traditional accounting backgrounds. Contrary to the emphasis largely being on technical abilities, attributes such as curiosity, leadership, communication skills and the power to influence will take precedence.
As evident within PwC, there is a trend of companies recruiting data scientists and other professionals without an accounting background to capitalise on technologies like GenAI and mainstream machine learning. With 51% of financial leaders planning to hire in specific segments to drive growth, it is a nod to the findings from the PwC Global Pulse survey.
Illustratively, McNamee mentions that the use of innovative technology-led solutions has helped a client reduce the month-end closing process from three days to a single day, and increase forecast accuracy by an impressive 80%.
Meanwhile, PwC Ireland’s Johnny Wickham, partner for tax technology and transformation, highlights the intensifying pressure on tax and finance functions due to a multitude of factors. These involve dealing with OECD tax reforms, the introduction of a global minimum tax rate under Pillar Two, and the rising need for more accountability and transparency around businesses’ tax affairs. With a new set of electronic reporting obligations lying ahead, they are operating in an increasingly digital world.
According to Wickham, there’s an apparent spike in real-time or near-real-time reporting and the EU’s forthcoming Value Added Tax in the Digital Age (VIDA) proposals will further add to digital reporting requirements for organisations. Wickham also notes a change in the areas that Chief Financial Officers (CFOs) are concentrating on. Whilst their attention continues to be on long-term prospects, likely due to disruptions to the supply chain and other similar factors, there’s a concurrent escalating emphasis on short-term considerations.
Overcoming immediate challenges are indeed substantial for them. Wickham emphasises the vital nature of skill development in a fiercely competitive talent market; securing staff with suitable technical knowledge, tech skills, business insight and requisite professional training poses a true test. In the past decade, technology has dramatically refashioned enterprises and this trend is set to persist in the future. For instance, according to PwC’s 2024 CEO survey in Ireland, 63 per cent of Irish business chiefs anticipate generative AI to greatly alter their company’s value generation process within a span of three years.
Wickham advises that a harmonious blend between immediate necessities and a future directional perspective is required. With the PwC 2024 Global Leadership (CFO) Pulse Survey citing that a whopping 89 per cent of CFOs worldwide believe finding a balance between operational efficiency and growth investment is a daunting task, the future seems uncertain. Moreover, slightly less than one third (28 per cent) of Irish CEOs do not see their business surviving for another ten years without substantial revamping. Thus, finance and tax functions must take the driver’s seat in enforcing the necessary changes to stay afloat.
Strategy should be the starting point of finance and tax transformation, McNamee suggests. Defining your ‘north star’ or your end goal for transformation is pivotal. The PwC Future of Finance Framework outlines the means of achieving the transformation in finance, which spans over individuals, processes, and overall performance, endorsed by technology. Aligning these elements is fundamentally crucial; a transformation journey that considers its people will achieve more success.
Additionally, Wickham advises simplifying the process; understanding your existing finance and tax scenario, determining your desired position, and designing a pathway to reach it. These are mounting pressures to surpass. Increasing rates of change not only from regulators but also from domains such as sustainability are intense. Concurrently, the revolutionary nature of GenAI is set to revise the future workforce composition and the skillset essential for finance and tax functions. Above all, there is a competitiveness tug from all fronts. As revealed by our PwC 2024 Global Leadership (CFO) Pulse Survey, it appears that in the forthcoming 12 months, cost reduction as a fraction of the cumulative revenue is a priority for 59 per cent of CFOs.
McNamee concludes that investment should be geared towards abilities rather than projects. A clearly defined strategic plan is essential, along with a robust justification for alterations. Subsequent to this, prioritise achieving swift successes to not only secure universal support within the company for the shift, but also to finance upcoming endeavours.