Businesses need to transform their finance functions in order to compete and add strategic value

Businesses are experiencing unprecedented levels of disruption. For example, PwC’s recent Leadership Exchange survey revealed that almost three-quarters (73 per cent) of Irish business leaders are of the view that their organisation is being impacted by business model disruption to a ‘large’ or ‘very large’ extent. Business leaders need the support of finance and tax teams to respond in a way that protects short-term margins while driving long-term growth. This has reinforced the need to transform finance and tax functions to enable them to adapt to the new world where new skills, behaviours and ways of working are required to support the business.

“Businesses need to respond rapidly and adapt fast,” says Ruth McNamee, finance transformation director with PwC Ireland. “The most recent PwC Global Leadership (CFO) Pulse survey found that 43 per cent of finance leaders are prioritising establishing finance as a partner for the business in the next 12 months. It’s also about looking at non-financial items, such as how do you report on sustainability (CSRD), diversity and gender balance, new regulatory requirements (Pillar Two), demographic shifts in the market and short-term pressures versus long-term growth objectives.”

“To remain competitive, organisations need to constantly look at their markets, pricing and costs, while ensuring they have the right people with the right skills,” adds McNamee. “To remain relevant, businesses must constantly reinvent their propositions by embedding the continuous improvement mindset. Finance and tax functions must embrace transformation to support those wider business efforts and that is what we refer to as finance transformation. It is a strategic, intentional shift underpinned by people, processes and technology. The ultimate goal is to move towards a finance function of the future.”

Finance function of the future

McNamee explains that the finance function of the future is agile with a focus on insights and experience. “It is proactive rather than reactive. It recognises the value of data and uses highly automated processes to record transactions with a right first-time mentality that allows data and analytics to deliver insights in real time.”

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There will be other quite significant changes. “With a digitally enabled finance function of the future you will have a mix of humans and machine-based roles,” McNamee continues. “It will be a digital workforce. The finance professionals of the future will come from a variety of backgrounds, not just traditional accounting. There will be a shift in emphasis from those technical skills to softer skills with characteristics like curiosity, leadership and communication skills as well as capacity to influence. Just like at PwC, we are seeing clients hiring data scientists and other non-accounting professionals to help leverage the promise of technologies such as GenAI and more traditional machine learning. This reflects the PwC Global Pulse survey, which found that 51 per cent of finance leaders intend to hire in specific areas to drive growth. This is leading to a step change and shift in the finance function.”

For example, we recently supported a client to achieve month-end close in one day when it had previously taken three,” McNamee says. “In another case, we helped a client to increase forecast accuracy by 80 per cent by using a new technology-focused solution.”

Johnny Wickham, tax technology and transformation partner with PwC Ireland, points to some additional forces which are driving the need to transform. “The pressure on tax and finance functions to do more with less is now greater than ever. They are dealing with OECD tax reforms and the introduction of a global minimum effective tax rate under Pillar Two as well as the need for greater transparency and accountability around the tax affairs of businesses. They are operating in an increasingly digital world facing new electronic reporting obligations.

“Tax returns used to be periodic events, but we are now seeing a significant increase in real-time or near-real-time reporting across the globe. The EU VAT in the Digital Age [VIDA] proposals will also introduce further digital reporting requirements for organisations.”

There has also been a shift in focus. “While chief financial officers [CFOs] continue to focus on the longer-term perspective, there is now a growing emphasis on shorter-term thinking as a result of external disruptions to the supply chain and so on,” Wickham says.

“They have significant near-term challenges to overcome. The pace of change, not just in regulation but in areas like sustainability, is accelerating. At the same time, GenAI promises to redefine the nature of the workforce and skills requirements for finance and tax functions. And on top of all that, they are facing pressure in terms of competitiveness. In our 2024 PwC Global Leadership (CFO) Pulse survey, 59 per cent of CFOs are prioritising reducing cost as a percentage of total revenue over the next 12 months.”

Skills development vital

“Skills development is vital,” says Wickham. “It’s a competitive talent market. Recruiting staff with the right mix of technical knowledge, technology skills, business acumen and providing the appropriate training is a real challenge. Technology has completely transformed organisations over the past 10 years and will continue to do so in future. For example, PwC’s 2024 Irish CEO survey revealed that 63 per cent of Irish business leaders expect generative AI to significantly change the way their company creates value in the next three years.”

“There is a need to balance shorter-term needs with the long-term strategic view,” Wickham notes. “In our 2024 PwC Global Leadership (CFO) Pulse survey, 89 per cent of global CFOs say striking the right balance between operational efficiency and investing for growth is a key challenge and nearly three out of 10 (28 per cent) Irish CEOs do not believe that their business will be viable in a decade without reinvention. Finance and tax functions need to play a lead role in driving the change necessary to remain viable.”

Defining your north star

Finance and tax transformation should begin with strategy, according to McNamee. “You need to define your ‘north star’, your overall goal for the transformation. The PwC Future of Finance Framework details the levers of finance transformational change across people, process and performance all supported by technology. These aspects must be aligned, and it is critically important to bring your people along with you on the journey.”

There is also a need to simplify the process, according to Wickham. “You need to understand your current tax and finance landscape, where you want to get to and put a plan in place to get there.”

“You need to invest in capabilities rather than initiatives,” McNamee concludes. “You need to define a roadmap and build a solid business case for change. After that, focus on quick wins to get buy-in across the business for the transformation as well as to fund future efforts.”

Learn how PwC can transform your finance function to drive strategic value here