The evolution of the finance function over the last decade has been exciting to watch. Long gone are the days when this was seen largely as a transactional or administrative department. Today, finance teams, led by CFOs and heads of finance, sit at the heart of businesses, rightfully recognised as essential partners to growth.
Recent years have put finance teams to the test, but also served to underscore the importance of this evolution. A challenging and uncertain operating environment, with no shortage of unexpected challenges, has created an opportunity for finance leaders to assess the limits of their redefined role. Plus, it has highlighted the benefits that expanded influence can bring.
How do we know this? American Express, recently conducted research amongst 250 senior financial decision-makers, including CFOs, heads of finance and finance directors, in UK companies whose annual turnover ranged from £5 million to more than £500 million.
The results highlight the key changes CFOs have made over recent years, while underlining their focuses for 2023, as they seek to drive growth in their businesses amidst an unpredictable backdrop.
Confidence in their performance
What is immediately clear from our research is that finance leaders and CFOs remain confident in their function and are optimistic about the performance of their business as a result.
In our survey, 94% rated the overall quality and performance of their finance team as good, with 88% confident in the ability of their team to respond to unexpected events. Additionally, 60% expect their business’s financial performance to be better in 2023 compared to 2022.
While this positive self-assessment may not be altogether surprising, this does not mean that finance leaders are not alert to the challenges and pressures they are under. They understand that there is still room to improve the overall efficiency of the function, with this singled out as the most effective strategy to improve performance and safeguard its future success.
A strong focus on business collaboration
Today’s finance function is not just there to manage the numbers, it is a genuine strategic partner. The relationship between the finance team and the wider business remains a high priority, with respondents telling us their finance function needs to service a greater number of internal stakeholders today than in the past.
As a result, they place an increased emphasis on the skills needed to drive and grow these internal relationships, with collaboration (34%), change management (32%) and people or ‘soft skills’ (31%) all rated as of increasing importance to finance teams over the next 2-5 years.
The positive news is that the vast majority (92%) of respondents say that the relationship of the finance team with the wider business is currently good. But with four-fifths (81%) stating a more flexible and agile finance function will be more important in the year ahead, it’s clear that this focus on collaboration will help finance leaders stay one step ahead and on top of the challenges being faced by the business.
Data and digital skills in demand
Another way finance leaders are readying themselves for the future is by shifting the composition of the skills within their teams. When asked what skills will become more important over the next 2-5 years, over half (56%) said data analytics and tech skills. Only just over a third (35%) cited traditional finance, accounting, or treasury skills.
This shows just how vital access to robust data, actionable insights, and detailed business intelligence – whether from within the organisation or partners – is to today’s finance functions.
This is especially true in the current climate, when finance leaders tell us they expect to reforecast and re-budget more often. Leaning on partners with data and insights drawn from the wider industry can help finance leaders contextualise and benchmark their decision making.
Leading the charge on ESG
Far from just an operational issue, our research finds that CFOs and their teams are also helping lead the charge on environmental, social and governance (ESG) across their organisation.
Nine in 10 (89%) say that ESG is important when considering business spend and investment decisions, showing how firmly these topics are now embedded within the function. This is also reflected in the number of finance leaders who say they have implemented KPIs or metrics to track their progress in key ESG areas.
And our research reveals that finance leaders are already tracking ESG activity and impact in areas such as community engagement and outreach activity, diversity, equity and inclusion (DEI), giving and philanthropy and climate risk.
Actions to drive competitiveness
These findings show some of the ways the function is evolving. However, there are several actions finance leaders are taking now, in response to the current challenges at play.
While reducing costs is at the top of the list to help improve the competitiveness, there are other steps they are taking to drive performance. These include strengthening supplier relationships, as finance leaders know that strong supplier relationships are vital and will continue to be so in the months ahead.
Improving the B2B payment experience is key to this. When asked what steps they are taking to improve their businesses’ relationship with suppliers, around a third (34%) are improving the ease of payment processes and around a quarter are either improving payment terms (26%), paying more promptly / speeding up payments (25%) or improving the range of available payment options (24%) – all of which will help keep suppliers on side.
Tackling out of policy T&E spend and better managing FX volatility are also high on the list, to help smooth out unexpected hits to the bottom line and improve compliance. Focusing on these three short-term wins will not only help keep costs and processes under control but ensure there is more time and resource to focus on more strategic activity in the period ahead.
Finance leaders and their teams continue to evolve to keep pace with the demands of the times. From working more closely with the wider business to sharpening their focus on environmental and social goals, finance teams continue to play a key role in their businesses. While uncertainty remains on the horizon, it’s clear the UK’s flexible finance teams are in a strong position to help drive growth.
The themes discussed in this article will be explored in more detail in a forthcoming American Express whitepaper, unpacking further insights on the priorities of finance leaders for the period ahead.