The finance function now has a mandate to go beyond its core accounting role. This change doesn’t discard core accounting — it’s still an essential foundation of the finance function. However, enabled by technology, finance is now capable of assessing a broader range of strategic information and becoming more influential in an organisation’s decision-making.
The finance function has a unique end-to-end view of an organisation, and the chief financial officer (CFO) has the business understanding to work alongside the chief executive officer (CEO) as a copilot and strategic partner.12
The mandate to think strategically
The research for the report Re-inventing finance for a digital world identified the characteristics of high-performing organisations. The research revealed that when finance functions lead the way in defining and reporting strategic key performance indicators (KPIs), 38% of respondents were more likely to describe themselves as being in ‘high-performing companies in highly competitive industries’.13 Strategy teams within these organisations were also likely to report into the finance function, and their diagnostic processes were more likely to be ‘somewhat automated’.14
The research also revealed that the 44% of finance functions that led scenario analysis for strategic initiatives were more comfortable using nonfinancial data to support decision-making and developing customer value propositions.15
In uncertain times, these high-performing organisations, with finance functions that employ strategic thinking, are more adaptable and better able to rethink their business models to meet new challenges.
Management accounting: Linking strategy and the business model
The Global Management Accounting Principles state that Fundamentally Management Accounting is about organisational and performance management. Our approach to organisational management is focused upon:
Strategy creation
Strategy delivery
Value creation16
All three of these require strategic thinking. A strategic thinking mindset is therefore a crucial element in the goal of value creation through ‘the identification of the possible strategies capable of maximising an entity’s net present value.’17
By connecting strategy with the business model, management accounting helps organisations to simulate different strategic scenarios to understand how those scenarios might affect the generation and preservation of value.
The finance function’s role in facilitating strategic collaboration
Finance functions and finance professionals have a duty to provide and facilitate strategic thinking spaces. Think of them as ‘strategic incubators’ where you can set up safe spaces for creating and testing strategic options before implementing and embedding them across an organisation.
This requires interdisciplinary collaboration not only within an organisation but also externally with multiple stakeholders, to come together and understand the impact pathways of possible future strategic directions. An impact pathway describes how, as a result of a specific business activity, a particular impact driver results in changes to strategic direction and how these changes in strategy affect different stakeholders (the pathway elements are inputs, activities, outputs, outcomes, and impacts).19
In the PwC pulse survey Executive Views on Business in 2022, PwC found that CFOs are prioritising collaboration across the business. At the top of the priority list for 50% of CFOs is ‘establishing finance as a business partner across the enterprise.’
With demands also becoming more volatile, strategic CFOs are redoubling their efforts to position finance as a nimble business partner that can work in lockstep with other business functions, to tackle challenging issues.20
