Finance 2025: Looking ahead with the benefit of hindsight

Introduction

Predictions don’t always age well. Only the most misguided among them, in fact—such as the late 1970s prophecy that there would be no reason to have computers in homes—seem to stay fresh in the collective memory, serving as reminders of how difficult it is to anticipate the impact of emerging innovations or abstract risks.

With that in mind, revisiting our eight predictions for finance in 2025¹ risked raising some valid questions about the value of trying to anticipate what’s ahead. Still, while only about three years had passed since we published those predictions in 2018, the unforeseen global COVID-19 pandemic fundamentally reshaped workplaces, accelerated digital technologies, and tested finance leaders in areas such as crisis management, enterprise agility, and change management. It also presented CFOs with a new set of decisions—some of which were core to the survival of the business.

So, we can at least claim we got that assumption right. Underlying many of the original predictions, you see, was an awareness that the role of finance—and how it would add value to the business—would shift dramatically by 2025. As automation absorbed a growing number of operational tasks, the function’s increasingly business-savvy professionals would proactively provide analysis for decision-making, collaborating with partners across the enterprise in high-value activities like scenario planning and advanced forecasting. “Finance,” the report said, “will have a bigger say in how decisions get made throughout the enterprise.”²

But how about the predictions themselves? Truthfully, some remain surprisingly on pace, while others are relevant, if lagging to various degrees. Still, the process of revisiting and revising them offers rewards.

And in this edition of CFO Insights, we’ll share what we have learned about the future by rooting ourselves more firmly in the present and asking: Which challenges and concerns should CFOs consider prioritizing? How can companies better use data to construct a more accurate vision of the future? And what might be the best way to prepare now for 2025?

What’s changed in 3.5 years?

For context, it is helpful to remind ourselves that the pandemic didn’t quite come out of nowhere. It was a catastrophe foretold³ —a risk to both supply and demand whose impact may have been underestimated.

But the subsequent economic downturn, which included a fleeting recession⁴, was unlike most others that preceded it. This downturn wasn’t primarily triggered by systemic inefficiencies (think subprime mortgages and the Great Recession⁵) and was met by massive government stimulus.⁶ And even before the economy rebounded, business leaders were investing in innovation and stress-testing the viability of the remote workforce. The result: the crisis registered as a blip in technology investment, especially in industries that were less affected by the pandemic.⁷

At the same time, companies raised staggering sums of money, buttressed by low-interest rates and a wide-open window for IPOs. At the close of the first quarter of 2021, non-financials in the S&P 500 held more than $2 trillion in cash reserves⁸. And as companies looked to scale, those with robust balance sheets sought out mergers, acquisitions, and other restructuring activities. Global M&A activity, in fact, reached a record of $2.4 trillion in the first five months of 2021.⁹

These dynamics of the reborn economy challenged CFOs on many fronts, including demands for more comprehensive, frequent, and near-real-time outlooks on performance—in the form of cash-flow forecasts, for example, or precise valuation. Those forces also affected our assumptions and outlook, as well as changed the options available to finance leaders eager to seize emerging opportunities and mitigate risks.

Where the future went

Many, if not all, of the 2018 predictions assumed that a broad set of then-emerging technologies would continue to progress on their existing trajectories, combining to accelerate the automation of the finance function. But some tools have proven faster than others in driving value for finance. Business priorities also constantly shift, big ideas gain (or lose) momentum, competitors act in surprising ways, industries undergo shape-shifting—all undercurrents that can sweep predictions away, either partly or fully.

That said, what follows are our predictions 2.0 and where each of them stands now:

1. The finance factory: Transactions would be touchless by 2025, we predicted, owing to innovation in automation and blockchain’s deployment. Freed up from traditional processes, finance would focus on designing and maintaining systems that automate business practices and governance models.

• What’s changed: A generally slower-than-expected rate of investment in data architecture, sometimes combined with the absence of standardized processes, means that finance is only now shifting from automating discrete activities to focusing on more complex processes. Without proven use cases, blockchain’s momentum in finance has stalled.
• What’s next: Few finance functions will likely have a truly touchless back office by 2025, but ERP systems and other tools can enable CFOs to apply automation to high-value activities, such as planning and forecasting.

2. The role of finance: The way we foresaw it, finance would focus more on service, analytics, and business insights, developing new capabilities that would enable the function to supply the CEO with an integrated view of business performance for “just-in-time” decision-making.

• What’s changed: Faced with the pandemic and its associated challenges, the function’s success has depended on strengthening its agility and adaptability. Some functions have already fulfilled the need to prepare multiple scenarios, as opposed to a single strategy.
• What’s next: As real-time information moves closer to reality, and business analysis grows increasingly automated, finance will likely bolster its efficiency by offloading some responsibilities to captive locations, centers of excellence, and outsourcing vendors—all of which may be held to a higher standard. Lower costs can enable the function to invest in work that is building enterprise value.

3. Financial cycles: Finance goes real-time, producing actuals and forecasts on-demand, thereby making traditional finance cycles less relevant. There is no close, and forecasting happens in real time.

• What’s changed: The close, as we know it, isn’t disappearing anytime soon. Companies have tried to speed it up, but key information is still often only available on a monthly basis.
• What’s next: The demand for off-cycle reporting will likely accelerate as industries converge, new business models are created, and the post-pandemic economy takes shape. Technology, such as cloud-based ERPs with in-memory computing, can also help what will be anything but a slam-dunk effort.

4. Self-service: Come 2025, self-service will become the norm for activities ranging from budget queries to report production. Spreadsheets will be replaced by visually rich information that is intuitively accessible.

• What’s changed: Many companies provide access to static reports by phone, but typically callers can’t ask a question or tailor their request.
• What’s next: Finance generally remains uneasy about the use of self-service data, with concerns about discrepancies between self-service tools and systems of record. Finance leaders need to spend more time working with the business to strengthen data governance and standardize reporting, incorporate push technology that will know what users need before they ask, and make use of visualization tools for simplification purposes. Chatbots are unlikely to become prevalent in finance by 2025.

5. Operating models: Robots and algorithms will join an expanded finance workforce that already includes gig workers, freelancers, and others; new service delivery models will emerge. Such models will be driven by the need to expand the function’s core capabilities.

• What’s changed: The pandemic underscored the benefits of being able to support remote workers by proving effective collaboration tools and clearly defined work responsibilities. Challenges also emerged, such as the criticality of keeping data secure in an environment where the workforce is distributed.
• What’s next: With many CFOs having difficulty hiring employees via traditional channels, finance will likely use technology to access global talent pools and specialized resources. Some may adopt a “center-office” mindset, absorbing responsibilities such as offering capabilities on demand and coordinating external partners.

6. Enterprise resource planning: Even as some ERP vendors were building advanced technologies into their products, we predicted that new players would enter that space by offering specialized applications and microservices that sit atop—and integrate with—platforms.

• What’s changed: Some ERP providers have upped their game, adding new features, including cognitive functionality, and buying competitors at a rapid clip.
• What’s next: Big vendors will likely continue embedding more advanced capabilities, bringing more data into ERPs, while dispatching any threats to their business model. Cloud-based financial ERPs may migrate from back-office cost centers to drivers of finance automation and digital transformation.

7. Data: Given that few companies had begun the hard work of aligning and integrating data (see “Mastering data for better insights—and competitive advantage,” CFO Insights, January 2021), we expected that plenty of finance teams would still be struggling with questions of data integrity and completeness in the years to come. Automation and cognitive tools would help, but a grueling and tedious task would still be awaiting finance.

• What’s changed: Not enough, in some cases. Standardized, high-quality data requires process and organization changes, as well as a leadership mandate.
  
• What’s next: To realize its digital transformation goals, finance may need an enterprise data strategy with a strong leader. Without the appropriate skills, workaround solutions will only grow that much more complex.

8. Workforce and workplace: Finance talent models will put a premium on data scientists, business analysts, and storytellers, who, combined with tools such as predictive modeling, will enrich the function’s ability to provide strategic advice.

• What’s changed: With new business and revenue models emerging and the pace of change accelerating, the war for talent has intensified. Companies may be hiring more data scientists, but not necessarily in finance. Often, they are highly valued elsewhere in the organization, where they are needed to build very complex models, using disparate data sets.
• What’s next: Finance may need to sharpen its value proposition and expand its sources of talent to draw the people it needs most: those with business acumen, a service mindset, digitally savvy—and possessing knowledge drawn from operations, engineering, and other functional areas.
  

Managing the unknown

The predictions, in their past or present form, are closely interconnected. Automation can support new operating models and may be enabled by ERP upgrades. Gains in self-service and faster reporting cycles can transform finance’s role. And everything hinges on good data and a skilled workforce.

The future for CFOs will require managing across functions, building the right combination of capabilities, and establishing a strong data foundation—simultaneously (see sidebar, “Calling the future into question”). How can you be certain that your vision of the future is entirely accurate? You can’t, of course, as we know all too well. The best you can do to prepare is consider what’s likely to happen, then compare that to your finance vision and strategy.

In some areas, the gap between what you foresee and what actually transpires may be wider than you’d like, but still directionally useful. No need to “carry the world upon your shoulders,” as the Beatles song puts it. And who can forget that a record executive rejected them early on with the dismissive prediction that “guitar music is on its way out”?

Endnotes

^{1 “Finance 2025: Digital transformation in finance: Our eight predictions about digital technology for CFOs,” Deloitte Development LLC, 2018.}

^{2  Ibid.}

^{3 “Bill Gates has been warning of a global health threat for years. Here are 12 people who seemingly predicted the coronavirus pandemic,” Business Insider, December 15, 2020.}

^{4 “Global M&A surges to record high for third straight month,” Reuters, June 4, 2021.}

^{5 “Subprime mortgage crisis, 2007-2010,” Federal Reserve History.} 

^{6 “Fiscal stimulus, vaccinations lift U.S. economy above pre-pandemic level,” Reuters, July 29, 2021.}

^{7 ” Maximizing the impact of technology investments in the new normal,” CIO Insider, Deloitte Insights, Deloitte Development LLC, February 2021.}

^{8 “Officially, the pandemic recession lasted only two months,” New York Times, July 19, 2021.}

^{9 “S&P 500 firms beef up their cash piles to deal With ‘new normal,’” Bloomberg, June 16, 2021.}