2021 Predictions: Speed, Innovation and Technology Prepare Finance Teams for Whatever Comes Next

by Alok Ajmera

Here are four predictions about how finance departments will continue to transform in 2021 and what professionals need to know to adapt to these shifts.

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By the first quarter of 2020, nearly every organization across the globe had tossed out its business playbook and annual forecasts. Companies quickly realized the pandemic created a ‘new normal’ environment where financial planning became, by necessity, a dynamic process, with companies tweaking numbers and outlooks on a frequent basis to reflect a fluid and uncertain economic situation.

Finance organizations were already moving to adopt new technology-enabled processes to automate rote manual processes and allow finance leaders to draw better and faster insights. But the pandemic accelerated digital transformation in the office of finance -- and now there’s no turning back. Here are four predictions about how finance departments will continue to transform in 2021 and what professionals need to know to adapt to these shifts.

1. Dynamic Financial Planning Becomes the New Constant

The era of fixed planning models and rigid spreadsheets is officially over as businesses recognize the importance of cloud-based “if/then” scenario planning software tools. These tools empower FP&A professions with the capabilities to continuously reset forecasts (whether quarterly, monthly or weekly) according to real time data insights to meet changing market conditions. Expect to see this agile financial planning and continuous forecasting method take hold in the coming year as the ‘new constant,’ enabling businesses to remain nimble and quick footed in their strategic decision making and not only survive but thrive.

2. The Rise of Next-Gen FP&A Solutions: CPM 3.0

Even prior to COVID-19, the FP&A market was seeing a shift from first generation financial planning and reporting using Excel spreadsheets and on-premise solutions to cloud-based automated corporate performance management (CPM) software tools that enable finance executives to make timely and efficient data-driven financial planning decisions. In 2021, expect to see the emergence of “CPM 3.0,” including new AI-powered software. These tools help finance leaders manage the new complexities of today’s business environment, including a remote workforce, vast (and growing) amounts of corporate data, and expanded security and compliance directives. Consisting of predictive analytics and machine learning (ML) forecasting, anomaly detection and natural language interaction, this next generation of CPM tools provide finance teams with more sophisticated insights to meet emerging business demands, while ensuring ease of accessibility to these cloud-based digital tools for integrated planning across the entire business ecosystem.

3. The Era of AI in Corporate Finance Approaches

For the last couple of years, AI and ML have promised to be a game changer for the FP&A space -- just as these technologies have revolutionized consumer-facing apps. The question hasn’t been a matter of if these technologies will be adopted, but when? As the economy recovers and businesses are awakened to the many advantages AI-powered CPM tools provide (e.g., time savings, reduced errors, higher-level insights around the future of the business, especially while the workforce remains remote), the need for these advanced technologies has accelerated. We anticipate 2021 will be the year AI-powered CPM finally goes full throttle in adoption and usage, bringing with it the promised ROI.

4. The CFO’s Role Will Evolve to Chief Strategist

Thanks to modern day CPM systems that provide a new level of financial planning efficiency and automation, CFOs have the power to make strategic business decisions based on data-driven insights, transforming their role in the organization from number cruncher to advisor and business counselor. Never has this transformation been more apparent than during the pandemic, when the CFO took a lead role in steering the organization to recovery and financial stability.  As we see further advancements in CPM technology this year, including the adoption of AI, ML and natural language technologies to uncover hidden opportunities and close information gaps, expect to see the CFO assume a more permanent strategic role working hand-in-hand with their C-suite peers to drive the business into the future.

There’s no doubt many prognosticators’ 2020 predictions ended up being misses as the pandemic exploded onto the scene and upended the best laid plans in business and finance. But no matter what happens with the pandemic and the accompanying pace of global economic recovery, I have significantly more certainty about the importance advanced technology will play in the year ahead. The year 2020 was just the tip of the iceberg in terms of technology as an enabler for finance leaders to adopt a more nimble and agile approach to planning and leveraging trusted data to draw insights that deliver competitive advantage. Organizations have learned the hard way about the need for speed and automation in helping them model and adapt to a variety of business conditions. Outdated planning tools and processes are gone for good and that genie’s not going back in the bottle again.  

Alok Ajmera is President and CEO of Prophix Software.