Reimagining the Accountant/CFO Relationship

An interview with Mark Lee, accountancy-focused futurist

Mark is the most networked accountant in the UK – a qualified chartered accountant with top-tier experience, he has turned to helping accountancy practices navigate the challenges of a changing industry. A regular commentator in the professional media, he has worked with, written for and addressed audiences of thousands of accountants, and his articles have been viewed by finance professionals more than one million times. Prepaid card provider Soldo spoke with Mark about how the roles of CFOs and accountants are drastically changing.

The role of the CFO has changed dramatically in the past two decades; but you believe that CFOs also have more help than ever…

They do – and often that help comes from a more entrepreneurial perspective than accountants typically used to provide. One of the challenges for external accountants today is that CFOs can now call on far more people to extract knowledge and advice from financial information. They can access and interpret data that’s ever more freely available.

That’s because management consultants and business consultants these days have access to the same apps and technology as accountants. The more information is stored in the cloud and can be accessed through APIs, the more CFOs can then decide on the best person to provide advice to the business; whether that be in-house experts, the accountant or a business advisor, mentor or consultant.

Are we being unfair to accountants? Are they not becoming management consultants in their own right?

Yes, but it’s a journey. When I talk to accountants, historically the bulk of their services were compliance-focused.  And even though they might claim to offer proactive advice, to be honest, their clients generally had to ask for it. Most accountants were not that good at being proactive.

That advice falls into two distinct categories. You have impromptu advice, which is informal and probably happens over and above the more formulaic work around VAT and tax etc. every quarter. Then there is specialist expertise; maybe insolvency, corporate finance, business acquisition or a specific tax area.  An accountant might proactively encourage clients to take their specialist advice, but it’s still hardly a holistic approach to the business.

Today, however, it’s becoming much easier for clients to demand and access financial advice through apps and technology. These apps can tap into their systems and provide more information, whether that’s cash flow projections, staff expenses, invoicing or budgeting for the future. That gives CFOs all the information they need to handle day-to-day decision-making and compliance. Provided a CFO has people in-house to interpret the data (and modern visualization tools are making that easier than ever), the business case for external advisors for BAU is becoming increasingly weak. Accountants are therefore being squeezed here.

CFOs have a choice. They can get their advice from their accountants, or from management consultants with relevant experience. And – with respect to accountants – the CFO doesn’t necessarily need to be paying a premium for somebody with accounting qualifications to get strategic business advice.

That’s the basic service. We can all agree that they’re being eroded. What higher-grade services can accountants offer?

Well, we see a key emerging discipline called Profit Improvement Technology. But again, through today’s APIs, it’s much easier for the CFO to provide greater value to their internal customers and to other decision makers by analysing data in ways that would in the past have taken much longer and required plenty of hand-coding or copy-and-pasting into Excel. And as with day-to-day financial administration, accountants are offering this sort of service to clients who don’t have the analysis expertise, but finding the market rapidly eroded as CFOs discover that the tools are there to perform this function themselves.

That brings us to the ultimate ambition, which is for accountants to be delivering strategic business advice to clients. And there’s the problem: whilst this is theoretically a high-value service towards which automation is forcing the accountancy profession, CFOs have a choice. They can get their advice from their accountants, or from management consultants with relevant experience. And – with respect to accountants – the CFO doesn’t necessarily need to be paying a premium for somebody with accounting qualifications to get strategic business advice.  Management consultants have been offering these services for years, and have carefully honed the necessary sales skills to secure this work. Accountants, on the other hand, have traditionally relied upon clients’ legal obligations like filing tax returns in order to source the business. But with strategic business advice, there is no legal obligation. Accountants therefore need to gain a wider range of selling skills if they’re going to beat management consultants to the work.

That’s a big challenge for the accountant but, as you say, they’ve also got a way in through compliance activities…

They have in the past. But now, depending on the size of the organization, it’s easier than ever to prepare acceptable accounts and tax returns in-house, because the data can be directly fed from the accounting systems.

At some point in the future, and it may only be when they change accountants, CFOs will realise that they don’t need as much in the way of service and they will therefore rightly want to pay a lower fee, too.

This means that compliance will be less of an open door for accountants’ sales.

However, more subtly, it also means that accountants who fail to focus on the future will slowly fall behind, because the slow migration of existing clients is barely noticeable unless you actually go out looking for it.

As new developments and technologies emerge, only a small number of current clients are going to leave for another accountancy firm. Even fewer will do so specifically because they are looking for technical innovation. Most clients don’t care whether their service provider uses the latest cloud software, a desktop package or quill and ink. They enjoy the relationship they already have – and the peace of mind, confidence and convenience that it has generated over the years. The status quo is usually fine, and any move will be mandated by something sudden or strategic – a merger, a new CFO or a round of cost-cutting etc.

So it’s easy to think that because last year’s clients have largely stayed this year, the business is in good shape?

Exactly. An accountancy practice’s current clients are not a good barometer of change. It is new client acquisition which will drop off a cliff if you ignore the trend towards a more full-service offering. It is inevitable that start-ups will want a more modern accountant, equipped with digital service tools as standard, responsive and capable of offering top-class advice and additional services. The modern client will pay for agility and capability, not compliance, and it is essential that practices upskill in this way before it’s too late. Again, the warning signs won’t come from the existing client base.

All that said, there is one aspect in which accountants should be keeping an eye on their existing client CFOs; and that is in order to understand their transformation journey. One of the CFO’s responsibilities is to manage the shift in the skills, staff and services that will enable their organisation to move forward to becoming a better business partner than it is today.

That will inevitably be disruptive. For example, right now, an organisation might have a purchase ledger team of 10 people. The CFO may recognise that within two to three years they will not need all 10 people, so as some resign, the business does not look to replace them. And if that natural wastage isn’t enough, then the CFO will need to take the tough decisions required to refine that finance team further. I see an increasing use of outsourcing during the transformation process, which will be beneficial to accountancy practices. It is up to the practice then to demonstrate its ongoing value once the endgame for a client business becomes clearer.

That process of change can be painful for the CFO and the business. Can the accountancy practice – an external business – be any use in making this sort of change successful?

I think it’s critical that both the CFO and their financial counsel have a growth mindset, and it’s now an accountant’s job to assist CFO clients in propagating that mindset through their changing organisation.  There will always be three types of profile in a finance team (or indeed any team):

Those who are keen to do things in a new way – today that generally means digital natives, but it’s by no means an age-specific characteristic. Those who follow the CFO’s lead – this is the majority, which is why a CFO needs support from their external financial counsel. And, finally those who resist change – probably “because we’ve always done it this way”.

There’s a limit as to how much time you can spend on people in that third category. There will always be people with a fixed mindset who are frightened of the future.  We don’t give up on them, we don’t necessarily “manage them out of the business”, but don’t put too much effort into moving them in a direction they won’t want to go. Equally, any support the CFO can get with those first two categories will be welcomed, and whilst accountants are never going to be HR practitioners, understanding the changing role of the finance team will always pay dividends.

An accountancy practice’s current clients are not a good barometer of change. It is new client acquisition which will drop off a cliff if you ignore the trend towards a more full-service offering.

Take me through a five-year timeline for the relationship between the accountant or finance professional and the CFO. What’s that role going to look like?

Well, I’ve already said that over time, finance professionals are going to need less numerical and financial awareness, thanks to technology. But let’s narrow that down: the next evolution of tech will be AI, so smart finance professionals will focus on the skills that AI won’t be able to do. AI is not going to be able to build trust. It’s not going to be into collaborative problem solving and constructive questioning.

CFOs will be looking for more emotional intelligence and critical thinking skills. Finance professionals exercising judgment for their clients, providing hand-holding, care and support and people who can sense-check the computer-generated output rather than replicating it, are all going to thrive. AI is not going to be able to do any of that.

It’s always dangerous to stray into HR territory, but change is now constant. Organisational structures will be flatter. The propensity to move within and beyond an organization means that talent is now more mobile than ever before. The visible strategic horizon may be six months instead of three years (and in this respect, the CFO will increasingly be the guardian of risk management). Accountancy practices need to recognise the journey that CFOs are on to deal with this changing environment, and to understand where they expect to be in five years’ time. Both the CFO and their accountant must become more futurist than historian.

This interview is part of a series by Soldo, the prepaid company card solution that makes your expense accounting simple. You can read more interviews from Soldo’s interview series here.