December 11, 2018
By: Larry White, Executive Director, Resource Consumption Accounting Institute
Professional accountants working in business and the public sector constitute the overwhelming majority of the profession working within and beyond finance teams. The future attractiveness of the profession is very much dependent on the value these accountants create to secure interesting and expanding job opportunities and career pathways inside organizations.
A golden opportunity to create new value is presented by the automation and digitalization of finance and accounting. The rapid reduction of manual processes particularly at the transaction and reporting levels is allowing a more significant focus on contributing directly to business decisions. Grasping this opportunity is essential if accountancy is going to remain an exciting and value-added profession in the business world and in the public sector.
Consequently, the IFAC PAIB Committee is aggressively pursuing an agenda to redefine and elevate the role of accountants in business. The most recent meeting of the PAIB Committee clearly shows many “Signs” on the road to changing their image. The report of our September 2018 meeting, Perspectives on the Finance Function Journey, is now available providing a summary of the key areas being discussed by the committee, including
A Vision and Roadmap for the Finance Function – This is a major project looking at the accountant and finance’s role in a digital age. The prerequisites for delivering such a vision include:
–Being customer-led and responsive to customer needs throughout the organization.
–Commercial, business, or organizational awareness and understanding well beyond just the financials.
– Technology and digitally enabled.
– Values and culture to explore strategic and future oriented ways to create and present value for decision making and reporting.
– Structure to be a business partner throughout the organization.
– Talent and skills to support new roles, innovation in decision support, and improved communication.
– Professionalism–ethics and integrity – and the high standard of professional values must evolve for a changing future.
A clear vision and roadmap for the development of finance functions will also provide a guide to those areas that a board of directors and management can use in assessing, evaluating, and enhancing the value creating role of their finance function.
Data Analytics – The committee explored the state of implementation of data analytics to deliver insights from financial and non-financial data to improve decision making critical to an organization’s success. Use of improved data analytics allows accountants to help organizations uncover valuable insights to improve strategic and operational decisions for revenue growth and cost reduction, as well as, in financial reporting processes to better manage risk (see Data Analytics, an information resource for IFAC members, for more information).
Data Modeling Beyond Financial Accounting and Reporting – The committee is concerned that finance functions over rely on data and processes designed to support financial reporting systems. The consequence is outdated financial-centric performance and costing models that do not deliver the actionable information that their operational colleagues require. Improving data analytics, the analysis of non-financial capitals, and how they contribute to value creation call for accountants to develop new, more relevant models of organizational value and performance both inside the organization and for external reporting.
Effective Audit Committees and their Relationship with CFOs and the Finance Function – Effective audit committees are a critical part of delivering trust and confidence in reporting and risk management. The committee has been considering audit committee practices across countries, and it is clear that their remits and practices vary considerably. Differing views existed on the role of the audit committee in supporting the finance function. Many felt the finance function needed to push for it be reviewed and clearly understood by the entire board because the finance function needs to become much more broadly focused than external financial reporting to be successful in a digital economy. However, the committee had some good reports of situations where the audit committee had taken a lead advocacy role for developing the finance function. A close relationship between an audit committee and finance function will continue to be important. The committee will continue to explore and share experiences on audit committee and board best practices for supporting the finance function.
Trust and Professionalism
– Exploring the issue of trust and professionalism, the committee considered the root causes of declining trust in the profession with a view to address the question: “How might we maintain and enhance trust in professional accountants in business and the public sector?”. Trust is based on accountants displaying ethical and professional behavior, as well as, contributing greater value to the organization and society. Each of these areas – behavior, the perceived ability to deliver value to the organization, and the contribution to society – will be examined further. The recognition that the latter two are historically less well addressed is significant in changing the perception of PAIBs.
Effective Communication and Storytelling – Accountants need to up their game in communications which will require a new broader, strategic view of their roles and new skills. They need to be focused on addressing long term value creation for multiple stakeholder groups, providing information on multiple capitals for decision making, and reporting to support the creation and development of responsible organizations. This will involve communication beyond numbers. It will require a focus on storytelling and authenticity to engage and influence important stakeholders.
In other news, – The International Ethics Standards Board for Accountants (IESBA) provided an update of its activities including resources to support the implementation of NOCLAR, and its new project on Promoting the Role and Mindset Expected of Professional Accountants. The latter project has arisen in the light that the IESBA will not be seeking to expand the concept of “professional skepticism” to accountants working outside audit where the term is applied with a specific meaning and definition. The committee felt this position was appropriate given the focus on accountants working as a business partners and active members of a value creating team. However, accountants in business will continue to be expected to exercise professional judgement in all they do which, of course, includes professional challenge when appropriate.
All these areas are the “Signs on the Road” that will lead to the new, expanded, and more robust image and skill set of professional accountants in business. The PAIB Committee is focused on helping IFAC members around the world recognize and prepare for these changes. Let us know what you think!