Fasten your seatbelts and fire up those hyperdrives. Ladies and gentlemen, finance is about to hit warp speed. Where to? Destination 2020. That’s right. 2020 is upon us. And if you’re still dizzy after all of 2019’s political turmoil and swings in the financial markets, economy (and everything else), get ready for more. Moving at warp speed is the new normal for finance. And despite the continued buzz about machine learning, predictive analytics and robots, 2020 is NOT at all a science-fiction story.
So, let the countdown begin. And as you complete your pre-flight checklist, read on to learn what Finance teams can expect in 2020 and how to prepare for the journey ahead.
Trend 1: Uncertainty Is A Certainty
If you think 2019’s cloud of uncertainty is over, guess again. Many of the same familiar forces are in store for 2020. And like 2019, they’ll cast a fog over all aspects of the economy, global markets and business planning cycles that finance will need to navigate through.
Trend 2: Politics and Macroeconomic Forces Cast a Fog
Brexit still looms (how many years has it been now?) over the UK, Europe and the rest of the world. And though the UK general election (see Figure 1) results point to Britain leaving (we’ve seen this movie before) the European Union (EU), the downstream economic impact from the Brexit saga is anybody’s guess.
Organizations must also prepare for the ebbs and flows of the global trade wars. On one hand, The US-China trade war has a phase 1 deal complete. And the US, Canada and Mexico deal is making progress too. But at the same time, new tariffs between the US and Europe are destined to impact consumer demand in ways not yet fully understood.
Finally, as if trade wars and Brexit aren’t enough to cloud planning cycles, US presidential politics certainly will. There’s little doubt that the impeachment process and the 2020 presidential election will dominate the headlines and create volatility in financial markets.
Trend 3: The Indifferent Economy
Does it surprise you that 56% percent of US companies are taking steps to prepare for a recession and that they expect that recession to coincide with the 2020 presidential election? Clearly, the political landscape is adding to fears of an impending recession. But what do the underlying numbers say when you look past all the political noise?
While not the 3% economic growth President Trump promised, the numbers are not terrible. Nor are the numbers great either, they’re just kind of “meh” as the majority of economists believe the economy will grow around 2% in 2020.
Here are three factors that are driving the most recent economic forecasts:
Do these factors suggest there’s no chance of a recession in 2020? No, they don’t. But what the factors above do imply is that there are signs the economy is on stable ground (absent of any unforeseen events).
Trend 4: New Regulations on the Horizon
Finance chiefs must keep a pulse on the regulatory front too. And while there are requirements coming that will impact specific industries such as banking and insurance, the impact of the new Lease Accounting guidelines under IFRS 16 and ASC 842 is much broader. For example, early estimates of the new standard, which essentially calls for companies to report lease liabilities directly on the balance sheet, put the total impact at over a half a trillion dollars for public companies.
While the new guidelines effected public companies beginning in 2019; private companies got a reprieve and must now implement the new standard for fiscal years beginning Dec. 15, 2020 (a 12-month delay from the initial deadline).
For those gearing up, there’s a good opportunity here to learn from public companies who’ve already adopted the new standards:
Trend 5: New Technologies Become Mainstream
But there’s also good news for finance teams. Some new technologies such as robotic process automation (RPA), machine learning (ML) and predictive analytics will move beyond the hype and become mainstream. And like the exponentially increasing adoption of cloud-based solutions by finance, the adoption of these advanced technologies is a matter of when – not if.
In fact, Gartner expects almost 75% of controllers to adopt RPA in 2020, up from just 19% in 2019. For back-office and transaction focused teams, RPA’s ability to automate and standardize processes is compelling and will free up resources to focus on more value-added activities
The use of predictive analytics and ML is growing as well (see Figure 2), with almost 50% of organizations either currently using or evaluating data science software, according to the Dresner Advisory 2019 Wisdom of Crowds survey. What’s the main use case? Finance and operational leaders are looking to supplement their planning processes with statistically significant, unbiased forecasts to compare against business forecasts that may be biased by the fog of politics and uncertainty. There’s no downside of leveraging advanced analytics to help drive dialogue with business leaders – to find new ways to ask why.
How to Prepare For 2020: Think Big but Start Small
So, amidst the uncertain political environment, macroeconomic landscape and economy, many finance leaders are asking the same question – what does this all mean for my business in 2020 and how should I prepare?
For mid-sized to large organizations, one way to start is by setting a clear vision for your finance team. EY reports that 68% of finance chiefs say that purpose is critical in driving the agility to innovate in times of disruption so start by defining a mission (e.g., your why) for your finance team across 3 core themes – people, process and technology.
By thinking big, you’ll quickly identify gaps (that will be barriers to achieving your mission) that can set the stage for specific initiatives to focus on for 2020.
Here are a few important initiatives to consider for 2020:
Time to Modernize Finance Systems?
If your organization is relying on spreadsheets and email, or fragmented legacy corporate performance management (CPM) products to support critical finance processes – 2020 could be a great time to modernize. Over time many of these solutions have become a nightmare to maintain or upgrade. A modern CPM platform that unifies planning, financial close, reporting and analytics may actually be less disruptive than upgrading and is essential for jumpstarting finance transformation and supporting many of the initiative mentioned above.
Why is this important? Without taking advantage of the efficiencies and advancements of a modern platform to streamline back-office processes and drive agility for CFOs, how else would finance teams have the time to focus on lease accounting, creating business value and expanding the role of finance? Odds are they wouldn’t.
Blast Off in 2020
And finally, before you blast off into 2020, don’t forget to celebrate your accomplishments from 2019 with your team. Finance teams put in more hours than almost any other functional area, let them know it’s appreciated. And remember, no matter how big or how small your finance transformation, it’s okay to think big and start small. Because you just never know – taking just one small step may represent a giant leap forward for your finance team in 2020.
That’s what unleashing finance is all about!