THE NEW CFO OF THE FUTURE

FINANCE FUNCTIONS IN THE TWENTY-FIRST CENTURY

Contents
1 About this paper
2 Executive summary
3 What’s new?
4 The business environment
4.1 The overall context
4.2 Change
4.3 Impact on finance functions
5 Roles of finance professionals
5.1 The leading model for finance
5.2 Business leadership and partnering
5.3 Transaction processing
5.4 Traditional accountants’
responsibilities
1 ABOUT THIS PAPER
In late 1998 the Institute of Chartered Accountants in Australia
(ICAA) and KPMG Consulting jointly published “CFO of the
1 Future”, a thought leadership paper whose purpose was to predict
2 the work of finance professionals in the future and therefore the
skills and training they would require.
4
The paper influenced the strategic direction of the ICAA, and its
5 findings were factored into the new “CA Program” launched in
2001, replacing the old “Professional Year” training for Chartered
5
Accountants.
5 Since 1998 much has changed in the business world in Australia
6 and internationally, so it is worthwhile revisiting the original
project. Similar to the objective of the 1998 paper, the objective of
7 the current update is to ascertain how the roles and responsibilities
7 of finance professionals are changing and to predict how these will
change in the future so as to provide further input to training
7 needs, both for the ICAA and for accountants individually.
11 KPMG Consulting was pleased to research and prepare this paper
on behalf of the ICAA. We would like to acknowledge the people
listed in the Appendix who freely gave their time to be interviewed
13 or to complete a survey.

5.5 Structure 14

6 Skills 15

6.1 Soft skills 15

6.2 Hard skills 16 Written by: Malcolm Simister, Senior Manager, KPMG Consulting, Inc.
7 Enabling technology 18 Researched by: Malcolm Simister and Scott Southall, Managing
Director, KPMG Consulting, Inc.
8 Watch points 20
Additional assistance from: Nigel Adams, Alok Chakravarti, Nick
9 Implications for the ICAA 21 Jarman, Janine Marchesi, Heidi McLean and Katrina Wilson
Special thanks to Emily Hamilton for reviewing drafts of the paper.

Appendices

A Contributors 22

B Glossary 23

THE NEW CFO OF THE FUTURE 1

2 EXECUTIVE SUMMARY
IMPACT OF THE BUSINESS ENVIRONMENT ON
FINANCE PROFESSIONALS
One of today’s paradoxes is that the only constant appears to be
change, a perception perhaps deriving from change’s pace, depth
and breadth.
Managing a business when globalisation is producing enormous
opportunities and risks, when new concepts and techniques are
making accepted ways of doing business obsolete, and when
technology is advancing in leaps and bounds is extraordinarily
difficult.
Based on research carried out for this paper, businesses are
increasingly turning to their finance professionals to help them
manage through the changes they confront, but not specifically in
their traditional finance roles. Leading finance professionals are
taking on new roles that add greater value to their businesses.
These people do not work in a finance ‘silo’ but work with other
professionals in, for example, strategy, marketing, operations and
logistics, providing business leadership to and partnership with
other business professionals.
Providing leadership involves finance professionals helping, for
example, to determine business strategy, communicating internally
and externally, and regularly reviewing their company’s portfolio
of businesses.
Business partnership has two broad aspects. The first is direct
involvement in business management through providing such
things as sophisticated analysis and the management of business
risk and major projects.
The second aspect is performance management, including the
provision of strategic and operational performance reporting and
analysis, provision of a framework for continuous business
planning and forecasting, calculating value-based measures of
shareholder value, and the provision of cost and profitability
information based on sophisticated activity-based techniques.
Some of these activities may not seem new, apparently being those
in which leading finance professionals have been involved for
many years. However, their sophistication and direct commercial
impact has increased. For example, accountants have always
‘crunched the numbers’ for business plans, but have rarely been so
intimately involved in determining not just the plans but also the
strategy upon which they are based.
Similarly, many accountants have previously been involved in
portfolio management, but not often to the extent of pro-actively
determining which businesses to divest and which to acquire.
While there is some overlap between finance and other
professional business roles, some key differences are that CEOs set
strategy and business managers implement strategy, while CFOs
ensure that the strategy is implemented and provide the financial
resources to do so. Senior finance professionals therefore have
a pivotal role in leading organisations far beyond that of chief
accountants.
2 THE NEW CFO OF THE FUTURE
ACCOUNTANTS’ CHALLENGE
The challenge is that while these new roles are coming the way of
finance professionals, they are not necessarily being offered to
accountants. Accountants must quickly broaden and deepen their
skills if they are to retain their place as leading business
professionals, or face relative decline in their traditional roles of
transaction processing, and statutory and technical accounting.
Adding to their imperative to re-skill is the fact that transaction
processing, and statutory and technical accounting are becoming
more automated and are often regarded as being relatively less
important.
LEADING TRANSACTION PROCESSING AND
REPORTING TECHNIQUES
While businesses are needing more from their finance
professionals, at the same time they are demanding cost
reductions. A technique being implemented in some companies
that not only enables cost reduction but that also frees up finance
professionals for other work is Virtual Close, the latest buzzword
for faster reporting.
Receiving information faster enables managers to make better
decisions based on rigorous information, relying less on ‘gut feel’.
That in itself is very useful, but to deliver information faster
requires that transaction and reporting processes are ‘right first
time’. If it takes only one or two days rather than one or two
weeks to produce the monthly management reports, for example,
then a large amount of finance professionals’ time is freed up for
other work. In this way, leading companies are deriving greater
value-add from their finance professionals without increasing costs.
Many organisations process their transactions in shared services
centres, a well-accepted concept nowadays. However, in the near
future, centralised, physical shared services centres may not be the
lowest cost option and transaction processing may not even be
regarded as a finance function responsibility at all. Straight
through processing, whereby supplies are ordered and receipted
electronically, and then paid for automatically according to pre-set
terms and conditions, may mean that procurement staff, who have
the relationship with suppliers, prefer to deal with any accounts
payable issues.
In statutory and technical accounting there is also change. The
move towards the adoption of international accounting standards
does not hide the deficiencies in traditional accounting. The
emergence of more value-based measures is indicative of these
deficiencies, but even these do not provide a full picture of a
company’s performance. Non-financial information is as important
in assessing a company’s performance from an external perspective
as it is internally and may be increasingly demanded in the future.
SKILLS
It is no surprise that accountants need to upgrade their skills to
enable them to take on additional responsibilities and cope with
the new business environment. At more senior levels, soft (people)
skills are of more relative importance than the hard (technical)
skills at which accountants are traditionally better. At senior levels,
hard skills are a given; well developed leadership, communication,
influencing, negotiating and change management skills are also
required.
However, accountants must also enhance their hard skills to be
able to carry out more sophisticated analysis, have a better
understanding of business generally and be able to use On-Line
Analytical Processing (OLAP) and modelling tools with as much
competence as most use spreadsheets today. The ability to devise
robust non-financial and value-based measures will also be
important.
INFORMATION TECHNOLOGY
Much of the additional value-adding capability comes from
information technology. Enterprise Resource Planning (ERP)
systems are now common in leading companies although,
typically, many have not been implemented so as to deliver as
much business value as they could. In the next few years there is
likely to be much investment in data warehouses and OLAP and
modelling tools as companies recognise that information is a very
important, perhaps ultimately the only, competitive advantage.
The Internet and intranets are of increasing importance as
enablers of electronic commerce and deliverers of information.
Business-to-business (B2B) e-commerce is growing rapidly and
new techniques, such as public exchanges (electronic wholesaling)
and reverse auctions are being trialled. Time as well as the efficacy
of the technology will determine their success.
WATCH POINTS
There are also other watch points for finance professionals to
monitor. The natural environment is becoming of great concern
to the public, resulting in, for example, Socially Responsible
Investment (SRI) funds growing rapidly in Australia, albeit from a
very small base. These funds and the community’s desire to hold
companies accountable for all aspects of their activities may
promote more Triple Bottom Line reporting. Some companies
already report not just on their financial but also on their
environmental and social/ethical performance, and this surely
represents an area of opportunity for accountants. Potential
environmental taxes may also impact accountants’ work.
Not surprisingly, there are also technological watch points,
including the Extensible Business Reporting Language (XBRL),
that allows more robust and simpler collection of data from many
sources, and mobile commerce (m-commerce/ WAP).
Institute of Chartered Accountants (ICAA)
Just as there are challenges for accountants, so there are significant
implications for the Institute of Chartered Accountants, if it is to
remain relevant to the needs of its members. As the business
environment and the roles of accountants change, so the need for
high quality, lifelong training increases, set in a clear, comprehensive
framework. The training should cater for the needs of the new
finance professionals, and therefore be wider in scope than has
previously been the case.
In addition, many accountants are no longer in accounting roles.
Assuming that the ICAA wishes to cater for these members’ needs
implies that it could also cater for other business professionals’
training requirements. Other business professionals may welcome
the opportunity to become members of a recognised leading body,
adding diversity to the “finance” profession.
Another important service that the ICAA could provide is mentoring.
The business world requires that people manage their own careers
and adapt quickly to new circumstances. In such an environment,
having a mentor can be invaluable.
“Finance’s role is to assist the business create shareholder
value” – Matthew Slatter, Chief Finance Officer, AXA Asia
Pacific
“I used to think that Virtual Close was not important but
am now a very strong supporter. It delivers ‘right first time,
straight away’ and allows people to get on and do other
things” – Peter Day, Executive General Manager Finance,
Amcor Limited
“Soft skills are critical to the long-term success of the
organisation, including vision, communication, energy and
discipline” – David Moffatt, Chief Financial Officer, Telstra
“Triple Bottom Line issues are very important and
awareness is growing. The linkages to shareholder value
need to be understood; finance can assist in this” –
Matthew Slatter, Chief Finance Officer, AXA Asia Pacific
“Ethical and environmental reporting is growing in
importance; it is part of reputational risk management” –
Philip Chronican, Chief Financial Officer, Westpac Banking
Corporation Limited
“The ICAA needs to determine the training people need
throughout their careers and then develop partnerships
with other organisations to deliver it” – Peter Day,
Executive General Manager Finance, Amcor Limited
THE NEW CFO OF THE FUTURE 3
3 WHAT’S NEW? There is also now more recognition of the need for speed in
So how do this paper’s findings compare with those of the 1998 providing information for decision-making. Three years ago some
paper? Until 11th September 2001 the fundamentals driving organisations practiced faster reporting; today many recognise that
business development were the same as those of 1998, namely not only is information more useful the faster it is received, but
globalisation, new concepts and technology. that if the routine reports are produced faster, finance
professionals’ time can be used for more value-adding activities.
However, a critical foundation of the globalisation of business is a
generally secure and stable international environment. The Although there was a hint of what was to come in 1998, it is now
terrorist attacks on the USA and subsequent events may force a much clearer that there may not be a separate finance function in
critical re-examination of the practicalities of globalisation, but at most organisations in the future. Finance professionals may be an
the time of writing not all the implications may yet be appreciated. integral part of each business area, including strategy, marketing,
Some techniques regarded as best practice in finance may need to operations and procurement.
be re-thought. So in the last three years some significant changes have occurred to
The further business uncertainty may well increase the the development of the finance function; the next three years will
contribution organisations need from their finance professionals. doubtless deliver further significant changes.
Their roles as business leaders and partners are likely to become
more demanding and it is evident that the number of finance “CFOs are no longer only focused on the numbers. They
are becoming more and more involved in all aspects of the
professionals in these positions is rapidly increasing. Managing
business” – Norman Gillespie, Chief Financial Officer,
business risk may now have a stronger imperative for many Cable & Wireless Optus Limited
organisations and decisions may be impacted by international
“No managing director receives results too soon” – Peter
politics more than has previously been the case. Meehan, Chief Finance Officer, Australia Post
In the area of performance measurement, many more “We need to free up peoples’ time to free up their
organisations have implemented shareholder value measures since mindset” – Peter Marriott, Chief Financial Officer,
1998 and are beginning to recognise their difficulties and Australia and New Zealand Banking Group Limited
limitations. Consequently, there may now be greater appreciation “Analysis will be statistically based in future – accountants
of the need to consider non-financial measures in decision-making. should be good at it” - David Moffatt, Chief Financial
Officer, Telstra
Opinion as to the best model for transaction processing seems to
“A big issue facing CFOs is recruiting, retaining and
waver every few years between centralisation and decentralisation.
developing high calibre people” – Philip Chronican, Chief
Both models have their advantages and disadvantages with a Financial Officer, Westpac Banking Corporation Limited
centralised shared services model being preferred in 1998.
However, technological developments may now be favouring the
decentralised model from an economic as well as from a risk
management perspective. While straight through processing can
be applied in a centralised shared services environment, it can also
be effectively applied in a decentralised environment. With electronic
ordering of supplies, electronic receipting and subsequent electronic
payment according to pre-determined terms, there appears little
need to have a central, physical facility.
Another significant difference from the findings in 1998 is that
transaction processing may not be a finance function responsibility
in the future. Straight through processing almost eliminates the
need to manage the process; rather, the exceptions must be dealt
with and there may be powerful reasons why the relevant business
function, rather than the finance function, should do this. For
example, the marketing function may prefer to handle any accounts
receivable issues itself, as it has the relationship with the customer.
A similar argument holds for accounts payable, while payroll
processing is already often a human resources responsibility.

4 THE NEW CFO OF THE FUTURE

4 THE BUSINESS ENVIRONMENT
4.1 THE OVERALL CONTEXT
Before considering the New CFO of the Future and the revolution
that finance functions and professionals are going through, it is
important to recognise that this revolution is being driven by
changes in the business and general environment.
Increasingly, this environment is more demanding in nature. It
can not only be very difficult to implement a response to a
situation, but deciding what that response should be in the first
place can be more difficult still.
Responses are also heavily influenced by an organisation’s own
values. For example, some consider that the ‘business of business
is business’ while others contend that business has responsibilities
to a wider group of stakeholders than just shareholders.
Deciding organisations’ responses to scientific developments can
also be difficult (e.g. whether or not to produce genetically
modified food), while technological developments are arriving so
fast that it is difficult to know whether to respond now, later or not
at all (e.g. Business-to-consumer (B2C) e-commerce).
In addition, the international political environment is currently
very uncertain and that could have enormous short and long-term
direct and indirect implications for business. Some of the
fundamental assumptions on which companies have been
operating could change so that considerations other than “better,
faster, cheaper” may take priority.
The underlying theme of all this uncertainty is change.
“Accountants need to understand the way the business
world is moving, the emerging business models and
concepts” – John Norman, Chief Financial Officer Asia
Pacific, BP Australia
"Finance needs a more strategic view" – Peter Marriott,
Chief Financial Officer, Australia and New Zealand
Banking Group Limited
4.2 CHANGE
As with the paradox that the only thing certain in life is death, so
change now appears to be the only constant. The pace, extent and
depth of change makes the current context very different to that of
previous eras.
Business decision-making in such a dynamic environment can be
very difficult and has the potential to cause enormous business
volatility. One reason for some of the recent spectacular business
failures in Australia was incorrect, insufficient or poorly managed
responses to "change" by those companies.
Many of the responses required are expensive in terms of both
investment and risk. For example, investing in new technology in
a time of comparatively rapid technological development makes
deciding when and whether to invest very difficult. If an
organisation’s timing is wrong it might be unable to recover the
cost of the investment before the next generation of technology
makes the first redundant.
Human factors affect responses too. Just because the latest and
best technology brings some benefits does not mean that people
will use it in sufficient numbers for it to be commercially viable.
People do not adapt to change at the same rate, whether it be
improved technology or a new concept. As at June 2000, only
approximately 80% of Australian businesses used personal
computers, 60% used the Internet and only 20% had a Web site
(source: Business Use of Information Technology, ABS 8129). As
at November 2000 only approximately 35% of Australians accessed
the Internet from home (source: Use of Internet by Householders,
ABS 8147) and WAP technology seems to be being accepted more
slowly than its proponents hoped.
There are three core aspects to change in business:
1. Globalisation
Globalisation is increasing business opportunities and challenges,
and therefore complexity, in many ways. As trade barriers come
down, organisations have access to more markets, but a company
also faces more competition. Production can be located in lower
cost locations, but the business risk may be higher. Access to
capital may be easier, but perhaps only in the world’s major
financial centres. Globalisation cannot be ignored and companies
must learn to adapt to it.
2. New techniques and concepts
The last few years of the twentieth century saw an explosion of
new business techniques and concepts. Today, many of these
techniques and concepts are accepted but their implementation is
far from universal. Sometimes, practical experience of them fails
to deliver the benefits promised. In addition, newly emerging
techniques and concepts threaten to make some of the existing
ones redundant. However, driven by the competitive imperative of
"better, faster, cheaper", organisations need to continually monitor
new techniques and concepts to determine which are appropriate
for them.
3. Technology
The impact of new technologies on business is enormous and they
manifest themselves in many ways – different production methods,
faster delivery channels, enhanced products, better ways to
manage, streamlined administration and completely new products
and services, to name but a few.
However, having the best technology does not always lead to
commercial success. For example, 100 years ago Britain’s Great
Western Railway had a network technology (‘broad’ gauge track)
that was technically superior to that of its competitors and peers
(the narrower ‘standard’ gauge), yet it was forced by Act of
Parliament to adopt the inferior technology for reasons of
compatibility. More recently, an apparently superior video
technology lost out commercially to another variant of the technology.
Therefore, while important, having the best technology is not
always the decisive factor in commercial success as wider
considerations also come into play.
THE NEW CFO OF THE FUTURE 5
4.3 IMPACT ON FINANCE FUNCTIONS
The extent of change illustrates why doing business is harder these
days and why finance professionals have a new, valuable role to
play. Organisations need all the help they can get to make the
correct decisions, manage the business, and adapt strategy and
plans to changing circumstances.
Leading finance professionals contribute invaluable finance –
specific skills, knowledge and experience that other business
people usually cannot. They have a broad commercial
understanding that brings together all parts of the business. For
example, marketers naturally focus on customers, while operations
people are interested in efficiency and productivity, and although
CEOs may understand both, it is the CFOs who understand the
full financial impacts of functional decisions. Finance
professionals understand the whole value chain.
Yet, while these new, exciting responsibilities are being thrust onto
finance professionals, they are not necessarily being offered to
accountants. Not all people in finance functions are accountants,
some organisations preferring people with other qualifications
such as an MBA for the ‘high-end’ work. It may depend on individual
personality and ability, but generally accountants must adapt if
they are to regain their position as the leading business finance
professionals. They must broaden and deepen their skills, quickly.

“Accounting training is an advantage for general business

managers because then they really understand the bottom
line” – Peter Meehan, Chief Finance Officer, Australia Post
“Business people such as marketers and engineers
understand the financial impact of their part of the
business but need finance professionals to pull together
the whole picture – they have a wider perspective and are
independent” – John Norman, Chief Financial Officer Asia
Pacific, BP Australia
“Finance brings a different perspective – rational and
objective” – Peter Nankervis, Chief Financial Officer, Asia
Pacific, Cadbury Schweppes
“The objectives of finance centre around the creation and
maintenance of shareholder wealth. This encapsulates all
other roles, such as managing risk, providing advice,
analysing performance and compliance” – Philip
Chronican, Chief Financial Officer, Westpac Banking
Corporation Limited

6 THE NEW CFO OF THE FUTURE

 5 ROLES OF FINANCE PROFESSIONALS
5.1 THE LEADING MODEL FOR FINANCE
Stages in the transformation of finance functions
Leader
"Creating Shareholder Value"
Business Partner
"Team Member"
Advocate
"Service Orientation"
Value Added
Commentator
"Reactive Analysis"
Guardian "Technically
Competent"
Scorekeeper
"Transaction
Based"
Time
For many years, the clear trend has been for finance
functions to increase the value they add to their
organisations, becoming more proactive and broadening
the scope of their influence. At the same time, the
cost of the function has reduced.
There appears to be a general consensus among the finance
professionals and others who contributed to this paper about the
shape of leading finance functions in the future. In particular,
there is agreement that finance professionals have a vital value-
adding role to play in navigating and managing businesses through
the challenges of the commercial world.
However, emerging technology may soon challenge the consensus
about transaction processing. It seems that transaction processing
goes through cycles of centralisation and decentralisation, the
current thinking being that centralised shared services centres is
the optimum model. Yet, current technological and political
developments may be swinging the pendulum back in favour of
decentralised processing.
Whichever precise model is chosen, however, it is still likely that
finance functions will have three broad roles:
■ Business leadership and partnering – the new ‘high end’
■ Transaction processing – at least for the time being
■ Technical and compliance – accountants’ traditional work
The Roles of Finance
Business
leadership
& partnering
Technical
Transaction &
processing Compliance
The three fundamental roles of finance overlap and
i n f l u e n c e o n e a n o t h e r, a n e w t e c h n i q u e o r m e t h o d o l o g y
o f t e n h a v i n g a f l o w o n i m p a c t e . g . Vi r t u a l C l o s e ( f a s t e r
reporting) has a direct flow on influence to business
leadership and partnering and to technical and compliance.
It is the first of these three, business leadership and partnering,
which requires accountants to fully broaden and deepen their
skills. Their incentive is the opportunity to participate in finance
work that many regard as the most interesting, that adds most
value to organisations and is the fastest growth area.
With transaction processing requiring less professional accounting
input, if accountants fail to step up to the new partnering and
leadership role their only responsibility may become the statutory
accounts and other compliance work. The implication is that
drastically fewer accountants will be required.
“The role of the CFO is to help convert dreams into
commercial reality” – Trevor O’Hoy, Senior Vice President
& Chief Financial Officer, Foster’s Group Limited
“There are not enough CFOs with attitude; too many are
still chief accountants” – Peter Jenkins, Chief Financial
Officer, Mayne Nickless Limited
“Business units respond well to Finance being part of
them; they welcome the discipline and analytical support;
they want a partner who understands the financial
ramifications; they want someone prepared to say ‘No’” –
David Moffatt, Chief Financial Officer, Telstra
5.2 BUSINESS LEADERSHIP AND PARTNERING
It is important to understand the difference between the roles of
CEOs, business managers, and new CFOs and other finance
professionals.
Essentially, CEOs set strategy and business managers implement
strategy, while CFOs ensure that the strategy is implemented and
provide the financial resources to do so. CFOs therefore have a
pivotal role between CEOs and the business managers.
Ensuring that strategy is implemented involves a combination of
performance monitoring and management, achieved via
THE NEW CFO OF THE FUTURE 7
mechanisms such as management reporting, business planning
and forecasting. It also requires that finance professionals
contribute to business decision-making from their unique
financial perspective.
“To use an historical analogy, CEOs are the kings, business
unit heads the barons and CFOs the chancellors. CFOs’
role is to maintain the power balance between the king and
the barons” – Matthew Slatter, Chief Finance Officer, AXA
Asia Pacific
“The CFO should work closely with the CEO as they both
drive the company’s vision” – Grant Logan, Chief Financial
Officer, Goodman Fielder Limited
“CFOs must shape as well as commercialise others
dreams” – David Moffatt, Chief Financial Officer, Telstra
Business leadership
Examples of activities in which pre-eminent finance professionals
are leading their businesses include:
■ Determining business strategy. In times of rapid and great
change, it is important that a wide variety of perspectives is
involved in determining business strategy and that of finance
professionals is one of the most critical. In many ways, finance
professionals provide the ‘glue’ for the whole strategy because
they understand the ramifications of action in one area on
other areas. Finance professionals are therefore in a good
position to recognise the inconsistencies, what is practical and
what is not, what ‘sounds right’ and what does not. They also
‘crunch the numbers’ for the strategy.
■ Communication. Businesses need to communicate to a greater
extent and with a wider range of people than ever before, both
internal and external. For example, financial markets and
finance providers demand to be kept up-to-date at all times,
employees need to know about their employer’s actions and the
general public like to hold companies accountable. This
situation is reflected by an increasing amount of CFOs and
other finance professionals’ time being taken up with
communicating to a wide range of people, either in written
documents or face to face. Accountants’ ability to deliver
information clearly and concisely to others is very useful.
■ Portfolio management. Market pressures do not allow
businesses to deliver poor returns on capital employed for
long, so it is essential that companies manage their portfolio
of businesses and act on those that are under-performing.
Finance professionals are well placed to identify under-
performing assets and also have the skills to initiate corrective
action, whether that be retain-and-improve or divest. Finance
professionals also play key roles in business mergers and
acquisitions.
8 THE NEW CFO OF THE FUTURE
"CFOs have to look for ways to improve business
performance" – Ross Pinney, Executive General Manager,
Specialist and Emerging Businesses, National Australia
Bank Limited
"Business looks to the logical, thinking mind of finance
professionals" – Derek Murray, General Manager Planning
& Administration, Food Liquor & Logistics Group, Coles
Myer Limited
"A major challenge for CFOs is helping to formulate and
communicate strategy, internally and externally – the
market is more discerning of a company’s strategy"
– Steven McKerihan, Chief Financial Officer, St George
Bank Limited
Business partnering
Business partnering essentially consists of assisting in business
management, and providing information and a framework in
which key decisions can be made – performance management.
Business management
Examples of the assistance finance professionals provide to
business managers include:
■ Analysis. Accountants are well used to analysing financial
statements and ‘actual-budget’ variances. In the competitive
business world, sophisticated analytical techniques are a key
competitive advantage and may be employed to, for example,
unearth emerging consumer trends, determine how best to
organise product distribution and to understand complex
relationships with other organisations. Skill in Decision
Science (incorporating such techniques as regression analysis,
optimisation, decision trees, probability theory and queuing
theory) is becoming a core requirement.
■ Risk management. Risk management is of growing importance
to businesses as they attempt to deliver more certainty in their
results and in some cases to ensure the survival of the business
itself. All risks ultimately have a financial impact and finance
professionals’ core skills allow them to identify strategic,
operational, reputational and other business risks, and assist in
their management. This is in addition to the more traditional
financial risks that finance professionals generally manage.
■ Major project management. While recognising that project
management is a specialist skill, accountants’ process and
management skills can also be used to manage non-finance
related projects.

"There are three areas for finance people – business
partnering, specialists (e.g. tax and treasury) and
transaction processing. In 5 years time more than half our
finance people will be in business partnering roles" – Peter
Nankervis, Chief Financial Officer Asia Pacific, Cadbury
Schweppes
"Finance is partnering with the business at all levels"
– Peter Marriott, Chief Financial Officer, Australia and New
Zealand Banking Group Limited
"Finance needs to use sophisticated analysis techniques
– analysts and investment bankers certainly do" – Peter
Day, Executive General Manager Finance , Amcor Limited
"The analytical role of Finance is extremely important"
– Bill Wavish, Director – Finance, Woolworths Limited
Performance management
The most common performance management techniques used by
leading organisations are generally well known these days, even if
their application is far from universal. The Balanced Scorecard,
continuous planning and forecasting, value based management,
activity based management, and management reporting and
analysis are briefly described below.
"The finance function should focus on measuring and
improving value" – Grant Logan, Chief Financial Officer,
Goodman Fielder Limited
Balanced Scorecard
The Balanced Scorecard performance management framework
Strategy Strategy
formulation refinement
Strategy 'stress testing' and learning
T h e B a l a n c e d S c o r e c a r d i s m u c h m o r e t h a n a r e p o r t w i t h f i n a n c i a l , c u s t o m e r, i n t e r n a l p r o c e s s e s a n d i n n o v a t i o n a n d
learning measures. That report is one output from the whole framework and is but one element in the suite of
information available to management.
The importance of a Balanced Scorecard performance management
framework, conceived by Kaplan and Norton in the early 1990s,
is that it provides the structure to manage an organisation to its
strategy.
The Balanced Scorecard is not just a report, but in many cases it is
not until key performance indicators to populate the report are
developed that the strategy is really understood. In such cases the
Balanced Scorecard helps to determine strategy.
However, designing and implementing a Balanced Scorecard is not
easy. Many measures can be devised to monitor customer
perception, internal processes, and innovation and growth while
the range of financial measures is large. Determining the few key
performance indicators that communicate the organisation’s
progress towards its strategic objectives, and so enable managers to
quickly assimilate the information, is difficult. Also difficult is
devising measures that are not open to manipulation and that are
comparable over time. Compared with financial measurement,
non-financial measurement is still in its infancy.
Despite these difficulties, many organisations, particularly in the
USA and Europe, have successfully adopted the Balanced
Scorecard. Many others have introduced non-financial measures
into their management reports that are not strategically based and
that are therefore not, despite first appearances, true Balanced
Scorecard measures.
"The Balanced Scorecard is very important; it cuts through
the noise generated by Finance and focuses the mind"
– Peter Nankervis, Chief Financial Officer Asia Pacific,
Cadbury Schweppes
Strategic
initiatives Board reports &
Strategic performance Strategic performance
Measures and targets management reporting
Resource allocation management information
and rolling forecasts
THE NEW CFO OF THE FUTURE 9
 Continuous planning and forecasting
Continuous planning and forecasting loop
Results
(monthly)
Plan
Action Review Review
(as required) (quarterly) (monthly)
Forecast
(monthly/
quarterly)
The continuous planning and forecasting loop is part
of the Balanced Scorecard performance management
framework, but can also be implemented independently
of the strategic approach that the framework provides.
Continuous planning and forecasting are replacing traditional
annual planning and budgeting as key elements in managing and
controlling an organisation. Traditional annual planning and
budgeting are frequently laborious, time consuming exercises
resulting in data of dubious value filed on managers’ shelves,
rather than being of any particular use in managing a business in a
rapidly changing environment. They are also too rigid for the
modern business environment.
Hence, leading organisations employ a more frequent, continuous,
business-planning loop and effectively replace budgeting with
continuous forecasting and target setting. The loop ensures that a
controlled mechanism is in place to review and refine strategy as
circumstances demand, and because business plans are considered
regularly the chance of them merely being documents gathering
dust is greatly reduced.
While care needs to be taken to avoid ‘jumping at shadows’ and
changing business plans too often, overall the advantages of
continuous planning, supported by continuous forecasting,
outweigh the potential disadvantages.
The result is a far more nimble and more forward-looking
organisation better able to adapt to changing circumstances and
market conditions. The enormous disruption of the annual
planning and budgeting cycle is also replaced with a less onerous
and regular forecasting and plan-review cycle, with benefits in
terms of the effort required.
10 THE NEW CFO OF THE FUTURE
Forecasting in many organisations is of poor quality because
inadequate infrastructure support is in place. A good model in
which key variables can be changed is the basis of accurate
forecasting. However, no matter how good the model, it is
important to recognise that forecasts are just that and by their
nature are unlikely to be completely accurate. The organisation’s
culture needs to be supportive of some inaccuracies in the
forecasting process.
This is especially necessary as best practice forecasting focuses on a
range of key performance indicators rather than just financial
outcomes. The focus is at a higher level, recognising the inherent
uncertainties and also requiring far less effort, but allowing
sensible business decisions to be made.
Value based management
Financial measures are usually important in decision-making, so it
is important that the most appropriate ones are used. Partly
because of the shortcomings and difficulties associated with
traditional accounting measures, various other financial measures
have been developed, usually for organisations’ internal use.
Some companies have adopted Economic Value Added (EVA™),
Economic Profit or Shareholder Value Added, for example, as key
financial measures. Whichever technique is used, the underlying
principle is to measure and grow incremental free cash flow,
recognising the cost of capital invested in the business.
Proponents claim such measures indicate financial performance
more effectively than traditional accounting measures, evidenced
by their results closely tracking share price. This is perhaps hardly
surprising as it appears that most analysts, whose influence on
share prices is large, use similar techniques in their own analysis.
This does not necessarily make them ‘right’, especially as analysts
do not always arrive at the correct conclusions from their analysis,
but value based management techniques do seem to have some
advantages over traditional accounting measures.
However, a limitation that can reduce such techniques’ usefulness
is that it can be difficult to apply them except at the total
organisation level. Calculating the cost of capital for the whole
organisation is easier and more certain than doing the same for
individual business units within it.
“There is a trend towards using EVA as the business units
need to understand their financing costs. But EVA is still
only a supplementary measure” – Norman Gillespie, Chief
Financial Officer, Cable & Wireless Optus Limited
“EVA will not replace but will be additional to traditional
accounting measures” – Steven McKerihan, Chief Financial
Officer, St George Bank Limited
Activity based management
In a highly competitive world, knowing the cost of organisational
activities and why they are carried out, being able to assess whether
they need to be carried out at all and whether they could be carried
out for less cost, is crucial to business success or even survival.
Activity based techniques, initially an improved tool for product
costing over traditional standard costing, are now being used for
much more including, for example:
■ Strategic cost management, embracing activity based costing,
target costing, competitive cost benchmarking and value chain
analysis;
■ Customer value management, enabling an organisation to
establish the relationship between those things that customers
most value and the cost of producing them;
■ Customer profitability analysis, enabling an organisation to
assess the profitability of individual or groups of customers;
and
■ Channel management, enabling an organisation to assess the
profitability of different sales and delivery channels.
Information technology is now available to enable the above types
of analysis at reasonable cost.
“There is a need for more and better management
accountants as a deep understanding of costs is vital – the
cost of processes, the relationship between fixed and
variable costs. Managers must know what levers to pull”
- Peter Jenkins, Chief Financial Officer, Mayne Nickless
Limited
“Activity Based Costing is very important; businesses need
the greater level of sophistication it provides” - Peter
Nankervis, Chief Financial Officer Asia Pacific, Cadbury
Schweppes
“Customer profitability and accurate product costing is a
competitive advantage” – Stuart Rowley, Vice President
Finance, Ford Motor Company of Australia Limited
Management reporting and analysis
Management reporting is increasing in sophistication and
usefulness. Rather than just a monthly exercise, management
reporting in leading organisations is about ensuring that all
decision makers have access to whatever information they need
when, where and how they need it. A holistic management
reporting framework ensures consistency, completeness and access
to information.
Information is a key word, for it is not just data that decision
makers need but, rather, information in the form of a range of
analysis, trends and relationships between different pieces of data.
Leading organisations are also ensuring that decision makers can
access other information to satisfy ad hoc needs. The competitive
environment demands that the more decisions that are made
based on empirical information, rather than ‘gut feel’, the ‘grapevine’
or ‘putting two and two together’, the better.
Technology supports this need through products such as data
warehouses and On-Line Analytical Processing tools. Finance’s
role is to ensure that information is available in the data warehouse
when people need it.
5.3 TRANSACTION PROCESSING
Most organisations regard transaction processing as an essential
administrative function to be carried out as efficiently and cost-
effectively as possible.
Shared services is a concept now commonly used to deliver lower
cost and better service, but electronic transactions are reducing
costs and changing business models still further.
Additionally, the need for speed in information delivery is extending
the need for ‘right first time’ to ‘right first time, right now!’
There are four concepts impacting transaction processing, namely
Virtual Close, shared services, outsourcing and straight through
processing.
1. Virtual Close
The idea of faster reporting is not new and Virtual Close has now
superseded Hard Close and Soft Close as the best technique to
enable it. The business advantages of faster reporting (enabled by
continuously or ‘virtually’ closing the books) are obvious in an
environment where information is vital and the velocity of
business demands that decisions be made faster.
Coincidentally, as organisations demand more from their finance
functions in terms of business leadership and partnering, cost
pressures demand that they do so without increasing cost. It is
therefore imperative that the highly skilled finance professionals
who are able to contribute more are freed up from their regular
routines of management and statutory reporting and tax
compliance. The faster that the books are closed and reports
produced, the more time that finance professionals have for other
value adding activities.
Achieving a Virtual Close requires that the whole information
‘food chain’ be accelerated with, for example, transactions being
processed on the day they occur, clearing and inter-company
accounts being reconciled, and problems cleared daily and journal
entries being posted promptly.
Virtual Close is therefore a key enabler of value adding finance
functions as well as delivering information to the business faster.
“There is a need to free up accountants’ time” – Peter
Meehan, Chief Finance Officer, Australia Post
“Businesses need information quickly and accurately – the
ideal is straight away” – Derek Murray, General Manager
Planning & Administration, Food, Liquor & Logistics
Group, Coles Myer Limited
THE NEW CFO OF THE FUTURE 11

“Fast reporting is very important. Yesterday if possible”
– Peter Jenkins, Chief Financial Officer, Mayne Nickless
Limited
“We need to free up peoples’ time to interpret data and
want to take out the manual work required to get it”
– Stuart Rowley, Vice President Finance, Ford Motor
Company of Australia Limited
“Speed in reporting is vital in a global business” – Ross
Pinney, Executive General Manager, Specialist and
Emerging Businesses, National Australia Bank Limited
“Speed of reporting is important; so is quality of data”
– David Moffat, Chief Financial Officer, Telstra
“It is important to prioritise information needs. Generally,
the more frequently it is needed, the faster it is required”
– Philip Chronican, Chief Financial Officer, Westpac
Banking Corporation Limited
2. Shared services – physical and virtual
Three years ago, shared services was a concept new to Australia;
nowadays it is common practice. Some organisations have
established shared service centres for all their Australian operations;
others have assessed their operations on a global basis and transferred
transaction processing to shared service centres in lower cost
locations in Asia or elsewhere.
When implemented correctly, shared services delivers reduced cost
and improved service to the businesses it serves through
standardising processes and engendering a service culture in the
centre. It effectively turns neglected back office functions into
businesses whose business is transaction processing.
Finance processes that are typically suitable for being carried out
in shared services centres are those that are repetitive and
transaction based, including accounts payable, accounts receivable,
general ledger, payroll, fixed assets and cash. Such processes are
fundamentally the same whatever the industry and location, so
that processes can be standardised throughout an organisation.
There is no clear consensus regarding some other processes, such
as management reporting. Some argue that standard reports and
variance analysis can be produced in a shared services
environment; others contend that such processes should be carried
out in business units to ensure their staff are ‘on top’ of the issues.
Decisions as to where to locate shared services centres can be
complex. Cost is only one consideration, and that is often
influenced by government incentives such as rent and tax holidays.
Other considerations include the quality of communications and
other infrastructure, accessibility, political stability and availability
of the required skills. Some countries that were considered to be
attractive locations may now be re-evaluated in light of the current
international uncertainty.
Developments in information and communications technology
now make the establishment of ‘accounting factories’ unnecessary
to implementing shared services. Processes standardised in
different locations using common software to deliver the benefits
of physical shared services, perhaps without some of the initial
disruption, allow ‘virtual’ shared services to be implemented. Why
12 THE NEW CFO OF THE FUTURE
go to the trouble of sending actual or imaged invoices to a shared
services centre far away when they can be input locally and processed
by common software managed centrally?
This can be especially useful, for example, in businesses where
finance is not responsible for the transaction process and where a
decentralised business model is required.
3. Outsourcing
The concept of outsourcing is nothing new and many business
functions and processes are now outsourced. Common examples
include information technology, recruitment, property management
and services, data entry, tax compliance and payroll processing.
The latter is the most common finance process that is outsourced,
but some companies have outsourced all of their transaction
processing, book-keeping and accounting.
Indeed, there appears to be a growing feeling that there are now a
sufficient number of reputable organisations offering outsourcing
services in transaction processing to enable organisations to
confidently consider the option.
There are many considerations when deciding whether or not to
outsource, however the first to look at are the objectives. Different
organisations have different objectives when outsourcing: to free
up management resources (e.g. for processes that do not require
core competencies), to access scarce or expensive skills (e.g.
information technology), to access technology (e.g. avoiding the
need to upgrade an organisation’s own facilities) and cost
containment (cost reduction may not be obtained but cost
increases may be avoided).
Once the objectives are understood, some of the many other
considerations concern the provider (e.g. cultural fit, geographic
coverage), the market as a whole (e.g. how mature it is, the number
of alternative providers), the boundary of the organisation (e.g.
whether to outsource all or part of a process or function) and the
readiness of the organisation to outsource (e.g. does the organisation
have the skills to manage the relationship and deal with the change
required).
If the objectives are clear, outsourcing can confer many
advantages, but implementation is not easy.
“Ten years ago transaction processing outsourcing was
talked about, five years ago some were trying it, now it is
a credible alternative” – Peter Day, Executive General
Manager Finance, Amcor Limited
4. Straight through processing
Straight through processing, whereby transactions are processed
electronically with little manual intervention, promises to significantly
reduce the effort required to process transactions. It could eliminate
finance professionals from transaction processing, except in the
initial design of the system and workflow, and in exceptions
monitoring and processing.
Many companies have embarked on an e-procurement strategy.
The extent of their e-procurement functionality varies widely,
from simple point solutions, to the use of e-market places or
public exchanges and reverse auctions. Until recently, emphasis
was placed on the commercial transaction, not on the financial
settlement. However, companies are now seeking to close the loop
and make the complete process fully automatic. Functionality
now exists to not only order goods or services over the Internet
and to receipt them electronically, but to also pay electronically
and send an electronic remittance to the supplier.
This requires that terms of trade and rules of business be
established in advance. Therefore, in addition to initial systems
and workflow design, finance professionals may also be involved in
establishing the relationships and negotiating prices with business
partners (including suppliers, service providers and customers).
Finance professionals’ new role in transaction processing is
therefore more that of “control” rather than of “processing” and
adds more value to the business.
Elimination of paper from transaction processing yields enormous
benefits not only in the actual processing but also in document
management and storage, and information retrieval.
“There will be ‘lights out’ transaction processing with
accountants handling exceptions and designing and
implementing systems and workflow changes” – John
Norman, Chief Financial Officer Asia Pacific, BP Australia
5.4 TRADITIONAL ACCOUNTANTS’ RESPONSIBILITIES
The traditional accounting and compliance aspects of finance are
well known, and are briefly discussed below.
Traditional accounting and compliance
Once regarded as the high-end of the profession, traditional
accounting and compliance now appears to have less relative
importance. Many businesses see little direct value from statutory
accounts so, while recognising they have to be produced, regard
them with less significance than in the past. So long as someone
in an organisation has technical expertise, there appears to be
little desire or need for others to have more than a reasonable
understanding of such issues. Traditional accounting is still very
important if for no other reason than that the law requires it as the
basis of statutory reporting.
However, traditional accounting has its flaws, for example often
the most valuable assets of many organisations are not in the balance
sheet (e.g. brand names and human capital) and different countries’
accounting methods can produce widely different results (e.g.
accounting for goodwill). The apparently never ending flow of
accounting standards and other pronouncements are moving towards
international harmonisation, but there is still a long way to go.
To assist understanding, just as economic profit measures are
useful internally, so they are also useful to external readers of
accounts. It may also be helpful for organisations to disclose a
fuller set of non-financial measures in their annual reports.
Analysts say that non-financial information is very important to
them in gaining a better understanding of companies, so while
such measures do not correct the problems of traditional accounting,
they do help people to understand a company’s performance.
“EVA will not die, but nor will accounting standards. The
latter are, in any case, moving towards a more value-based
approach” – Peter Day, Executive General Manager
Finance, Amcor Limited
“Fewer traditional accounting skills are needed – those
things have been re-packaged or outsourced” – Peter
McKinnon, Executive General Manager People & Culture,
National Australia Bank Limited
“A certain number of qualified accountants will always be
needed, but the finance team also needs people with
statistical, actuarial and analytical skills” – Steven
McKerihan, Chief Financial Officer, St George Bank Limited
“There is nothing wrong with traditional measures of
financial performance where there is a direct relationship
between product costs and revenues. However, you need
to use an economic profit framework where risk and capital
come into play” – Philip Chronican, Chief Financial Officer,
Westpac Banking Corporation Limited
Tax
With modern IT systems, tax compliance should be a straightforward
process. Many organisations ensure that regular management
reports and statutory accounts are produced by their IT systems
easily; leading companies also ensure that ‘first cut’ Income Tax
returns are also produced automatically.
While Australian taxation remains complex, it seems certain that
lawyers will have a major input to tax planning and management.
However, it is also likely to remain in the domain of accountants as
the full implication of tax planning schemes on the organisation
needs to be understood.
Capital and funds management
Another function for which other professionals have assumed
responsibility but in which accountants are still involved is capital
and funds management. This function will certainly not disappear
and it is likely that accountants will continue to participate in
raising and managing capital, and in day-to-day cash management.
However, the specialists tend to obtain other specific qualifications
rather than purely accounting qualifications.
Other traditional responsibilities
Other areas in which accountants will continue to be involved
include corporate governance and management assurance (internal
audit). Some organisations rely on their finance functions to
ensure that corporate governance standards are maintained.
“Organisations need finance professionals to speak up
when things are not right. They have a key corporate
governance role” – John Norman, Chief Financial Officer
Asia pacific, BP Australia
“Finance must drive corporate governance, including
ethics” – Peter Nankervis, Chief Financial Officer Asia
Pacific, Cadbury Schweppes
“Finance should also be independent and be concerned
with governance, controls and fiduciary issues” – Philip
Chronican, Chief Financial Officer, Westpac Banking
Corporation Limited
THE NEW CFO OF THE FUTURE 13
 1.5 STRUCTURE
Having described the business environment and the concepts and
techniques being employed by leading finance functions, it is
useful to bring the pieces together in a concise description of the
structure of the finance function of the future. The following
describes what this might look like…
In finance functions of the future, finance professionals may be
indispensable members of senior management and may play a
critical role in guiding and leading the organisation. They may
also be key members of business functions, such as procurement,
marketing, logistics and human resources. They may carry out
much analysis using sophisticated statistical techniques and may
be expert in using enabling software for this purpose.
Finance professionals in strategy and business planning areas may
provide the central business analysis, where all performance
management processes may be coordinated, including continuous
planning, forecasting and holistic management reporting.
Statutory accounting, which may include disclosure of much non-
financial as well as financial information, including environmental
and ethical information, may be part of this area’s communication
role to external parties.
Internal audit teams may comprise engineers, logistics experts,
industry experts, environmentalists, marketers, information
technologists and others, with a relatively small number of
accountants to ensure that the financial information reflects the
reality assessed by these other professionals.
Finance professionals’ roles in transaction processing may be to
assist in initial process and system design, and in negotiating
terms of trade with customers and suppliers. Other business
professionals in the procurement, logistics, marketing, human
resources and other functions may assume responsibility for day-
to-day management, including exception handling, as they have
relationships with customers, suppliers and employees.
In any case, transaction processing may become almost completely
automatic using straight through processing techniques. Doing
business electronically may result in greatly reduced transaction
and administration costs.
Chartered Accountants may be one of many categories of Certified
Business Professionals whose professional body has global recognition.
Those unable to gain admission to this peak body may be catered
for by other organisations.
The details of whether or not the above scenario eventuates is
open to debate, but one thing is certain; whether accountants play
the key roles indicated for finance professionals is up to them.

“There is an expectation that all managers have a financial

management competency – they need to be able to
interpret financial reports and understand the numbers”
– Norman Gillespie, Chief Financial Officer, Cable &
Wireless Optus Limited

14 THE NEW CFO OF THE FUTURE

6 SKILLS
Skills pyramids

CFO

Decreasing Middle Increasing

relative Hard skills management Soft skills relative
importnace importance

Junior
management

Hard skills are a pre-requisite for finance professionals adding value at higher levels of management, but their
relative (not their absolute) importance decreases. In other words, accountants can enhance their promotion
prospects by developing their soft skills while maintaining their hard skills.

There is no doubt that if accountants are to effectively handle the
business partnering and leadership responsibilities open to them
they must ensure they have the appropriate skills of the highest
order. The career path to CFO nowadays requires experience not
just in financial areas, but also in general business management.
The skills required fall under two broad headings – soft (people)
skills and hard (technical) skills – both of which accountants
generally possess but some of which they may need to enhance.
“We want well rounded business managers. If someone is
going to be a specialist they must be outstanding” – Peter
McKinnon, Executive General Manager People & Culture,
National Australia Bank Limited
“CFOs need to have had broad experience in different roles
and organisations” – Bill Birkett, Professor of Accounting,
University of New South Wales
6.1 SOFT SKILLS
Leadership
Social & cultural
Effective Business
Team building
Leader & Partner
Project
management
Change
management
S o f t s k i l l s a r e t h o s e n e e d e d f o r e ff e c t i v e l e a d e r s h i p
and management.
The higher level of business performance required and the faster
pace of change mean that the variety and depth of soft skills
accountants need are greater than has been necessary previously.
“Accountants must not be afraid to let their personality
shine through” – Peter Marriott, Chief Financial Officer,
Australia and New Zealand Banking Group Limited
“Finance people need influencing skills and vision to lead
change. They need personality!” – Ross Pinney, Executive
General Manager, Specialist and Emerging Businesses,
National Australia Bank Limited
“CFOs need the skills of politicians (to handle difficult
situations) and jet pilots (to quickly identify and solve
problems)” – Bill Birkett, Professor of Accounting,
University of New South Wales
Leadership
If accountants are to assume leadership roles both in finance and
in the business generally, they must be able to inspire others with
their vision and induce others to follow them towards it.
This requires that leaders articulate a vision that others understand,
accept and broadly agree with (perhaps after some persuasion)
Communication
and that the followers are confident in their leaders’ ability.
Leaders do not necessarily have to be liked, but they must inspire
respect and confidence. The ability to function effectively while at
times being personally unpopular is an important element in
Influencing leadership. Mental and emotional toughness are required.
Persuasiveness and charisma are other key elements of leadership
and they are specific to individuals with no one formula
guaranteeing success.
Negotiating
“Finance professionals need to demonstrate leadership at
all levels in the organisation” – John Norman, Chief
Financial Officer Asia Pacific, BP Australia
“Leaders achieve by challenging the boundaries and
getting others to see the possibilities” – Peter McKinnon,
Executive General Manager People & Culture, National
Australia Bank Limited

THE NEW CFO OF THE FUTURE 15

 Communication
Communication is not only a vital element of leadership, it is also
a vital element in accounting and almost all aspects of business.
Accountants spend a great deal of their time communicating
internally and externally, so it is essential they have good
communication skills.
Many messages are lost in communication and different people
can interpret the same words, numbers or charts differently. In
addition, people are bombarded with information from many
sources that has to be read, understood and assimilated quickly.
Getting the recipient to understand the message can therefore be
difficult.
Communication takes different forms, including written, verbal,
facial expression and body language. To be good communicators,
accountants therefore need to be able to write concisely and
unambiguously, display data and charts clearly, and present confidently.
“Finance people must have well developed communication
and people management skills as well as accounting skills”
– Steven McKerihan, Chief Financial Officer, St George
Bank Limited
Influencing and persuading
There are too many decisions to make in a high velocity business
world for them all to be referred to high-level management; people
at all levels must be trusted to make correct decisions. In addition,
people in Australia are sufficiently well educated and informed to
have opinions of their own about the way their job is structured
and the way the organisation is managed. To be most effective,
sustainably, people need to broadly agree with what they do and
with the organisation for which they do it. To get the best out of
people therefore, accountants must be able to influence and
persuade others to their point of view.
This can be very difficult as the people must reach the conclusion
the influencer wishes them to reach on their own. They are likely
to challenge and question before accepting a new idea and that
process may result in an improved final outcome. Accountants
therefore need sufficient self-confidence to react positively to other
peoples’ suggestions.
“CFOs must have a view and be able to explain,
persuasively. Influencing skills are critical” – Matthew
Slatter, Chief Finance Officer, AXA Asia Pacific
Negotiating
New business structures and finance professionals’ business
partnering and leadership roles in particular mean that
accountants are faced with a wide range of situations requiring
negotiating skills. In addition to many internal situations,
externally they may negotiate with funds providers, outsource and
service providers, auditors, lawyers, business partners, joint
venturers, customers, suppliers, governments and their agencies
and many others.
16 THE NEW CFO OF THE FUTURE
Most successful negotiations deliver ‘win-win’ outcomes, so even
from a position of strength negotiators need to understand the
other parties’ points of view. This may require a high and wide
level of knowledge about, for example, the industry and the particular
situation of the opposite party. Being well informed is important.
Change management
Even if welcome, change is rarely an easy process, bringing fear
of the unknown and disruption. Given the many changes that
finance functions are going through, it is clear that being able to
manage change is an important skill required of accountants.
Project management
Projects that involve introducing new concepts, techniques and
technology can be large and complex. Even normal day-to-day
management can require elements of project management. Good
project management skills are a key attribute of accountants.
Team building
Successful teams combine a variety of skills in a variety of people
to achieve given objectives, so understanding what constitutes a
good team and identifying people with the right skills is important.
CFOs need people with different skills in different parts of the
finance function. Often the emphasis is on the hard skills when
choosing people, but it is also important that soft skills are considered.
Social and cultural
Australia is a multi-cultural society and in an open economy
Australian organisations comprise and inter-react with people
from many different cultures and societies. Understanding key
aspects of a diversity of social and cultural backgrounds assists
accountants with all other soft skills.
6.2 HARD SKILLS
Analysis
Business
Taxation
Effective Business Information
Leader & Partner technology
Funding &
funds management
Processes
Technical
accounting
While hard skills may decrease in relative importance,
their absolute importance is still high. Maintaining
these skills does not put them in a ‘holding pattern’,
rather they must be kept up to date as new concepts,
techniques and technologies emerge.
Most accountants have good hard skills, but new business
demands require them to broaden and in some cases deepen these
skills, particularly for business partnering and leadership roles.
“Finance people need an ability to cut through complex
issues to the kernel and have good analytical skills” –
Philip Chronican, Chief Financial Officer, Westpac Banking
Corporation Limited
Analysis
Accountants are skilled analysers of data and of written material.
However, the new world demands that this analysis be more
sophisticated than, for example, working out the reason why actual
results differ from budget or forecast results. Given that information
is a competitive advantage, the ability to mine data to identify
hidden trends, perform regression analysis, apply probability and
queuing theory and other techniques are all skills that value-
adding accountants require.
“Accountants must have sophisticated analysis skills” –
Peter Nankervis, Chief Financial Officer Asia Pacific,
Cadbury Schweppes
“Finance people need to be able to do sophisticated
analysis, of processes as well as data” – David Moffatt,
Chief Financial Officer, Telstra
Business
It may at first seem strange to suggest that accountants should
improve their business knowledge as their work usually gives them
a good insight to any business. However, it is important for them
to understand not only the relationships and causal links between
their own organisation and its customers and suppliers, but also
between their customers and suppliers and different industries.
Finance professionals need to be able to predict the impact on
their business of changes and trends in other industries, countries
and companies. This predictive ability includes a quantification of
the effect and the timescale concerned. This skill and knowledge
alone will make accountants very effective business leaders and
contributors.
Flowing on from this is the understanding of critical success
factors for the business and the measures (‘key performance
indicators’) that indicate how well the business is performing.
Armed with this knowledge and skill, accountants will be able to
better fulfil their role of providing the right information to the
right people at the right time.
“Accountants need to learn about business issues and
wider commercial initiatives by working with others. They
need to learn to articulately argue, defend and present their
case about issues outside their comfort zone” – Peter Day,
Executive General Manager Finance, Amcor Limited
Information technology
Almost all accountants use spreadsheets, some use database tools,
while fewer still use analytical tools. Most use the Internet and
many use ERP systems to access detailed information that they
may download into spreadsheets for analysis or other purposes. It
is therefore very obvious that IT tools are key to accountants’ work.
However, with the additional demands being made of accountants,
their ability to effectively use IT tools must increase commensurately.
Most people use only a small percentage of a spreadsheet’s
functionality; finance professionals must learn to effectively use
On-Line Analytical Processing tools. The ability to find and
interpret useful information in a mass of data is critical in the
highly competitive world of business.
In addition, the reality is that data is still stored in different systems,
both internally and outside an organisation. The ability to extract
and manipulate data is necessary.
Processes
Understanding financial processes is a good base for accountants
to understand other business processes and how to improve them.
Good financial processes have internal controls, counter-balances
and checks built into them. These features are also required in other
business processes meaning that accountants can design, or contribute
significantly to the design, of processes for other business functions.
These may include risk management processes, logistics, marketing
and others.
Technical accounting
Many accountants will be pleased to learn that their technical
accounting skills are still an important part of their kitbag. However,
while accounting standards are important, technical accounting
skills are being applied in determining a wide range of measures.
Value Based Management techniques are now widely used in leading
businesses to measure and forecast business performance. The
shortcomings of traditional accounting measures in managing a
business are widely appreciated, so it is important for accountants
to understand the alternatives.
Understanding, for example, the differences between accounting
profit and EVA™, what each measure actually means and how it is
calculated, is firmly in the domain of accountants; other finance
professionals are frequently out of their depth in such matters.
“Technical skills are a ticket to the ball, a prerequisite” –
David Moffatt, Chief Financial Officer, Telstra
Capital and funds management
An area that accountants have always been involved in is capital
raising and funds management. While other finance professionals
are also involved in this work, accountants still have a vital role to
play, especially given the complexity of some financing and risk
management techniques, and the demands of accounting standards.
Taxation
Given the many, apparently unending, changes to Australian and
international taxation, this appears to be an area that will remain
lucrative for accountants for many years. Accountants need to
ensure they can compete for work with lawyers in this area.
THE NEW CFO OF THE FUTURE 17
 7 ENABLING TECHNOLOGY

Portal

Financial data
ERP system

Supply chain data

ERP system
Data mart/
CRM data Data warehouse
ERP system Analytical/Business
Intelligence Tool
External data

The name of the technology game is seamless integration allowing people with the requisite security profiles to access
whatever information they need, wherever they are in the world. However, accessing data is no longer an issue; making
sense of it is the hard part. Finance professionals can add a great deal of value by turning data into usable information.

There is no doubt that if one thing has changed the face of finance
processes in the last thirty years it is information technology. The
array of technology now available is at once stunning and also
frustratingly inadequate, as reality lags behind the claims made
for software.
Few people say the IT revolution should be abandoned; rather, it is
the pace of change and the actual functionality that is sometimes
questioned. So what are the technologies that leading finance
functions use?
Enterprise Resource Planning (ERP) systems
Almost all leading finance functions have used ERP systems for
some years now, yet business benefits derived are sometimes
comparatively small. In the last two years, many organisations
have spent vast sums upgrading systems for ‘Y2K’ and the
introduction of the Goods and Services Tax without achieving
any real business benefit, despite the functionality that ERP
systems confer.
For finance functions, transactional information is now easier to
access via drill down capability but system rigidities often make
reporting difficult and unresponsive to modern business needs.
In some organisations ERP systems have enabled the implementation
of process improvements such as shared services and, more recently,
straight through processing. It is perhaps surprising that more
organisations have not leveraged their ERP systems to derive real
business benefit from their investment.
useful information necessitates the use of OLAP and modelling
tools. Portals (effectively tailored Web sites) allow access to
information in the warehouses globally via the Internet or intranet.
A data warehouse stores information interfaced from financial and
non-financial systems throughout an organisation and from
external sources for all authorised employees to use. The centrally
maintained data is used in a decentralised fashion throughout the
organisation. Ensuring that there is ‘one version of the truth’ and
that all people who need to can access data is much easier with a
central data warehouse.
In an era when information is truly a competitive advantage, data
itself is often not much use. It is the trends, patterns and linkages
within and between data sets that is useful information. Finance
professionals and others need to use OLAP tools to mine the data
to provide useful information, financial and non-financial, to the
business.
Competitive pressures are forcing many organisations to implement
data warehouses and OLAP and modelling tools. It is likely that in
the not too distant future they will be regarded as essentials, just as
transaction processing systems are now.
“The major benefit from the enterprise information system
is in making management information available to
everyone in the organisation” – Steven McKerihan, Chief
Financial Officer, St George Bank Limited

Data warehouses, On-Line Analytical Processing (OLAP) and The Internet and intranets

modelling tools Probably the technology that has had the greatest impact on
business and finance processes in the last five years and which
The growing need for many people throughout an organisation to
seems certain to impact still further is the Internet and company
easily access a wide variety of information leads to the necessity for
intranets.
a central data warehouse. The need to convert that data into

18 THE NEW CFO OF THE FUTURE

The ability to access information globally from almost anywhere
and to transact business electronically is only just beginning to be
used. However, it may be that ideas are now racing ahead of the
practical technology in some areas, and the technology is racing
ahead of peoples’ ability to assimilate it in others. A period of
consolidation may be appropriate and, for various reasons, that
appears to be taking place.
Caution may be advised from other perspectives too. For business
to be commonly transacted over the Internet requires a highly
robust network, one that will stand up to significant and deliberate
disruption. Whether the Internet has reached that stage of
robustness may be questionable.
Further, security concerns are a very real issue, for a wide range of
reasons. These include access to an organisation’s confidential
information and the theft of credit card details. Until such issues
can be adequately addressed, the growth in the volume of business
transactions over the Internet will be constrained.

B2B e-commerce
According to eBusiness Trends of IDC (a global market intelligence
and advisory firm), the volume of worldwide business to business
(B2B) e-commerce is expected to rise from its current level of
approximately $500 billion annually to approximately $2.6 trillion
by 2004. The volume of B2B e-commerce is therefore increasing
rapidly, and while ERP and other systems are being tailored to
accommodate it, the technology is not always easy to apply in
supporting the concept.
However, the potential benefits of eliminating significant time,
data re-keying and paper handling and storage are large, and so
efforts to implement it across a wide range of businesses appear set
to continue.
Public exchanges, effectively electronic wholesaling organisations,
are being developed to enable organisations to achieve greater
economies of scale in non-strategic purchases, such as stationery.
While having the potential to reduce costs once implemented,
implementation is not easy from technical and business
standpoints. There are also competitive (or lack thereof) issues
and concerns that in the longer-term the model may fail on the
supplier side.
Another easier technique that leading organisations are using to
reduce the cost of non-strategic supplies is reverse auctions.
Conducted over the Internet, these work by suppliers bidding for a
supply contract, with the lowest bidder winning. It remains to be
seen whether this technique is sustainable, particularly for suppliers,
and supplier boycotts may render them ineffective for purchasers too.

THE NEW CFO OF THE FUTURE 19

 8 WATCH POINTS
Most of the techniques and technologies described above are
already used by leading finance functions and professionals, but
there are other concepts and technology that are emerging or that
have been around for a short time but which are not yet in general
use. Three of these watch points are described briefly below.
Triple Bottom Line
There appears to be a growing feeling in the community that
organisations should be accountable not only for their financial
performance, but also for their environmental and community
(social/ ethical) performance. The reason, argue the concept’s
proponents, is that to be sustainable, organisations must not only
be financially viable but also environmentally and socially viable.
Therefore it makes sense for an organisation to report on the three
‘bottom lines’.
The community’s environmental awareness is also growing due to
issues such as global warming and soil salinity.
Triple Bottom Line reporting and accountability may become much
more important for several reasons, including:
■ The growth Socially Responsible Investment (SRI) funds that
do not invest in companies they consider to be environmentally
or socially unsustainable or irresponsible (for example, cigarette
manufacturers, and lottery and gaming companies). Such
funds are growing very rapidly in Australia, although from a
very small base, mirroring overseas experience;
■ The ethics of organisations are often closely scrutinised by
members of the public and ‘non government organisations’
(NGOs). Ethics are a reputational risk that NGOs and others
sometimes highlight when an organisation’s actions appear
unethical or environmentally irresponsible;
■ Environmental taxes. Currently most organisations view
environmental resources as being free and therefore do not take
“Business must be open and honest; ethics are important”
– Grant Logan, Chief Financial Officer, Goodman Fielder
“Ethical and environmental reporting are looming issues”
– Steven McKerihan, Chief Financial Officer, St George
Bank Limited
“The Triple Bottom Line is important but accountants are
not involved in producing our environment report” – Stuart
Rowley, Vice President Finance, Ford Motor Company of
Australia Limited
XBRL
XBRL (Extensible Business Reporting Language) is a sub-set of
XML (Extensible Mark-up Language). It enables data to be
gathered from different sources without software programmer
knowledge. It potentially has wide application when used over the
Internet to collect data from many different organisations or from
many different sites of the same organisation. It is effectively a
data gathering management system that is relatively easy to use
and appears to simplify a vital accounting function that has
previously been under the control of software programmers.
XBRL has been successfully implemented in a small number of
Australian organisations and its growth could be rapid, although it
is still an evolving technique.
M-commerce/ WAP
How, or even whether, mobile commerce or the Wireless
Application Protocol (WAP) will impact on finance functions is
difficult to say at this time. Travelling sales representatives could
use it to submit information for invoicing customers or to obtain
the latest account information. Remote workers could use it to
submit timesheet information. Managers and others could use it
to access data and other information while on the move when no
convenient land connection is available. On the other hand, it may
lead to a completely different way of organising the finance
function, although that seems less likely.
Wise finance professionals will monitor developments.

them into account in decision making. Imposing

environmental taxes may be one way to at least make some
effort to ensure that organisations internalise environmental
costs. There are many issues surrounding the idea of
environmental taxes, such as international competitiveness,
what taxes they would replace and the fact that, despite any
efforts made, they would be to some extent arbitrary; and
■ Environmental accounting. Activity-based techniques have
been developed to measure the resources used and wasted in
making products and delivering services, and to identify
achievable cost savings (use fewer resources, reduce financial
cost).
The above all points to the growing importance of the Triple
Bottom Line and this appears to be an area of opportunity for
accountants.

20 THE NEW CFO OF THE FUTURE

9 IMPLICATIONS FOR THE ICAA
There are serious implications for the ICAA (and other accounting
bodies) with the changes happening in the business environment
and within organisations. It may be that with the new demands
being made of business professionals today, the ICAA will have to
provide an increased level of support to its members to ensure that
accountants are regarded as business professionals of choice.
Alternatively, those accountants ambitious, motivated and committed
enough to obtain the training, skills and support they need to
succeed will obtain them from other sources.
It is important that Chartered Accountants have their say in the
future direction of their Institute. Some thoughts for consideration
are set out below.
BRAND
One of the most important functions of the ICAA is to give
Chartered Accountants a valued brand. If Chartered Accountants
are to be leading business professionals, the wider community
needs to understand what good accountants can contribute that
other professionals cannot.
For CAs to be regarded as the professionals most suited to the
roles of CFO and business leaders and partners in the future, then
considerable work on the brand is required. To regain its status,
the brand must be upgraded commensurate with the increasing
demands being made of finance professionals.
However, this requires that the reality matches the brand rhetoric.
The ICAA must ensure that its members are equipped to be the
leading finance professionals of the future.
TRAINING
It is clear that accountants need a wider range of skills than ever
before and the new, broader CA Program is a step towards this.
However, it is not just at the graduate accounting level that better
training is needed. Qualified accountants need to be able to access
quality training and education throughout their careers. This
training needs to be set in a clear, comprehensive framework.
The standard of training also needs to be improved in line with
the increasing expectations of business. The implication is that if
accountants are to be elite business professionals then not everyone
has the ability to reach such heights. Entry to the ICAA may need
to be made more demanding or for there to be different levels of
membership.
However, this training need not and perhaps should not be
provided by the ICAA itself. Rather, the ICAA should accredit
other institutions such as universities and business schools to
deliver the training required. This would result in ICAA members
being able to receive high quality training from specialist education
providers throughout their careers, perhaps globally.
“The ICAA cannot deliver MBA or Executive Development
courses but should lend its brand to those who do” – Peter
Day, Executive General Manager Finance, Amcor Limited
“A career development path solely in the accounting
function does not lend itself to progression to senior
finance management positions” – Stuart Rowley, Vice
President Finance, Ford Motor Company of Australia
Limited
DIVERSITY
Currently, it is necessary to have a commerce or related degree to
become a Chartered Accountant in Australia. Some other
countries have no such constraint resulting in accountants with a
wide variety of university educations. In addition, the first profession
of at least one of today’s greatest accounting thinkers, Robert
Kaplan, was engineering not accounting.
In an era demanding that business people have a wide knowledge-
base and when different combinations of skills and education are
producing some of the best innovation, there seems to be a strong
case to widen the permissible range of backgrounds for Australian
Chartered Accountants.
In addition, other professionals requiring a business qualification
may find some recognition by the ICAA attractive. After suitable
training, they may be able to be admitted to the Institute with a
different grade of membership than Chartered Accountants.
“People can enter a vocation too early; some of the best
accountants have history and philosophy degrees. The
profession should accept anyone with a good degree” –
Peter Day, Executive General Manager Finance, Amcor
Limited
“People need to get relevant work experience before
committing to a career. Being locked into a career straight
from university is wrong” – Trevor O’Hoy, Senior Vice
President & Chief Financial Officer, Foster’s Group Limited
MENTORING
Charting a career through the minefield of business life can be
very difficult, especially in times of fast, deep and broad change.
Knowledge that was once highly regarded can quickly become
irrelevant, while new skills often need to be learned. Some people
will change their careers during their working lives, moving into
completely different fields, while the average tenure of employment
appears to be getting shorter. In addition, it is likely that most
Chartered Accountants and other business professionals will be
retrenched at some stage during their careers, some more than
once. People must pro-actively manage their careers to increase
their chances of being successful.
In such an environment, obtaining the advice of respected and
independent people can be invaluable. Career mentoring is
something the ICAA may be able to facilitate for its members to
their great benefit.
THE NEW CFO OF THE FUTURE 21
 A CONTRIBUTORS George Maltabarow John N. S. Lee
The researchers and author of this paper are General Manager - Finance Corporate Controller
grateful to the following people who have Energy Australia Limited Orica Australia Pty Ltd
freely given of their time to be interviewed Stuart Rowley Rick Francis
or who have completed a survey for this Vice President Finance Group Financial Controller
project. Thank you! Ford Motor Company of Australia Limited Origin Energy Limited
Trevor O’Hoy Vin O’Halloran
Peter Day
Chief Financial Officer Group Finance Director
Executive General Manager Finance
Foster’s Group Limited Pratt Holdings Proprietary Limited
Amcor Limited
Alan Richardson Darcy Edwards
Peter R. Marriott
Finance Director Executive General Manager – Finance &
Chief Financial Officer
George Weston Foods Limited Corporate Services Queensland
Australia and New Zealand Banking Group
Grant Logan Investment Corporation
Limited
Chief Financial Officer Cary Clarke
Peter Meehan
Goodman Fielder Limited Chief Finance Officer
Chief Finance Officer
Martin Mulcare Queensland Rail
Australia Post
Chief Financial Officer Keith Barry
Bronwyn Constance
ING Australia Manager – Treasury
Finance Director
Sam Chachaty Rio Tinto Limited
Austrim Nylex Limited
Senior Manager – Funds & Peter Lockington
Matthew Slatter
Foreign Exchange Head – Finance
Chief Finance Officer
Itochu Australia Limited State Public Superannuation Fund
AXA Asia Pacific Holdings Limited
Dieter Adamsas Steve McKerihan
David Irvine
Director Finance & Administration Chief Financial Officer
Chief Financial Officer
Leightons Limited St George Bank Limited
Boral Limited
John Nesbitt Ray Gunston
John Norman
General Manager Group Finance Chief Financial Officer
Chief Financial Officer – Asia Pacific
Lend Lease Limited Tattersall’s Holdings Pty Ltd
BP Australia Limited
Peter Jenkins David Moffatt
Mark Fitzgerald
Chief Financial Officer Chief Financial Officer
Chief Financial Officer
Mayne Nickless Limited Telstra
Brambles Australasia Limited
Edwin Jankelowitz Peter Colman
Norman Gillespie
Finance Director East Zone Controller – OP
Finance Director
Metcash Trading Limited The Shell Company of Australia Limited
Cable and Wireless Optus Limited
Makoto Yoshioka Professor William Birkett
Peter Nankervis
General Manager Accounting, Finance, Professor of Accounting
Chief Financial Officer Asia Pacific
Credit & IT University of New South Wales
Cadbury Schweppes Limited
Mitsui & Co (Australia) Limited Philip Chronican
Simon Hepworth
Michael Cameron Chief Financial Officer
Chief Financial Officer
Chief Financial Officer Westpac Banking Corporation Limited
Caltex Australia Limited
MLC Limited R. A. Carroll
Derek Murray
Ross Pinney Chief Financial Officer
General Manager – Planning &
Executive General Manager Specialist and Woodside Petroleum Ltd
Administration Food, Liquor &
Emerging Businesses National Australia Bill Wavish
Logistics Group
Bank Limited Chief Financial Officer
Coles Myer Limited
Peter McKinnon Woolworths Limited
Stephen Goddard
Executive General Manager People & John Stanbridge
Chief Financial Officer
Culture Chief Financial Officer
David Jones Limited
National Australia Bank Limited Zurich Financial Services Australia Limited
Robert Mittag
George Venardos
General Manager Business Development
Chief Financial Officer
e.colesmyer
Insurance Australia Group

22 THE NEW CFO OF THE FUTURE

B GLOSSARY
B2B Business to Business e-commerce
B2C Business to Consumer e-commerce
CA Chartered Accountant
CEO Chief Executive Officer
CFO Chief Financial Officer
ERP Enterprise Resource Planning software
EVA™ Economic Value Added
GAAP Generally Accepted Accounting Practices
ICAA Institute of Chartered Accountants in Australia
IT Information Technology
MBA Master of Business Administration
NGO Non government organisation
OLAP On-Line Analytical Processing software
SRI Socially Responsible Investment
VBM Value Based Management
WAP Wireless Application Protocol
XBRL Extensible Business Reporting Language
XML Extensible Mark-up Language
Y2K Year 2000 (the ‘Y2K Bug’, or ‘Millennium Bug’)

THE NEW CFO OF THE FUTURE 23

 For more information please contact:
Michael Nazzari +61 3 9602 5844

For more information please contact:

Scott Southall +61 2 9335 8685
Malcolm Simister +61 3 9288 6245

w w w. k p m g c o n s u l t i n g . c o m

© 2001 KPMG Consulting, Inc. All rights reserved. Printed in Australia. The information contained in this publication
should not be relied upon as a substitute for a detailed advice or as a sole basis for formulating business decisions.