“It’s not just about throwing the information out there. It’s about working with it. It’s about driving innovation from it, and it’s about improving technology functions and processes so finance and accounting become a true driver of value.”
(Joshua Azran, CPA/ABV/CFF, CGMA - owner of CPA firm Azran Financial)
Innovation is considered to be the Holy Grail of any business. Successful companies are ones who can encourage and nurture creativity for innovation and implement ideas effectively. Innovation can come from various functional departments in organisation and surprisingly including finance and accounting.
According to a recent survey, 30% of respondents said finance and accounting contribute to innovation to an extremely large extent whereas 36% said they only have a moderate effect on innovation. Even though most people agreed that finance and accounting’s function is a barrier to innovation, nearly 75% of CPAs participating in the American Institutes of CPAs Business and Industry Economic Outlook Survey for the third quarter of 2013 said finance and accounting should play an important or extremely important role in organisations’ innovation efforts. Here are why:
Technology can be a barrier
Although organisational CEOs and top executives encourage finance to have larger role in generating and promoting new ideas, the technology used in the company is normally complex that go beyond their control. Most of the time, the board member have little chance to work directly with the new technology so they need finance and accounting personnel to help explain the technical aspects to them and facilitate innovation. As far as innovation goes, decision-makers need to understand more deeply about the available technologies to be more innovative.
The second aspect that makes technology a barrier to innovation is resistance to change. Accountants and financial people usually are comfortable with the way things are going so that they do not pay much attention on upgrading the technology to improve the current process. As a result, innovative executives and managers find it difficult to apply changes in their organisations. Things were different ten years ago, when financial software solutions were rare and there were significant demands for them. Now, technologies are developed even ahead of what financial and accounting people need. Consequently, they feel puzzled and frustrated over new technologies which potentially help them deal with problems that they don’t even realise yet. Last but not least, financial innovation is time deficiency. Accountants sometimes are too busy getting their reports done to have time to think of anything else. Innovation process requires a lot of time to identify, analyse problems and find solutions for them. So, to achieve it, finance and accounting people need to strategically set time aside to “get the buy-in from top management that will allow them to spend the time on the proactive work versus getting the work done”, said Benjamin Harris, CEO of BLH Technologies.
Hurdles and tips
According to the survey, Most of the time organisations have no motivation on innovation mainly because of regulatory hurdles (48%), lack of budgetary resources (34%) and organisational aversion to risk (30%).
Fortunately, experts view this lack of drivers as an opportunity for finance and accounting to stand out. As finance supports the organisation in the backend process, the ability to recognise new opportunity will eventually increase. Things have changed a lot comparing to ten years ago. Nowadays, having the right information at the right time is crucial for every business. Companies need to work with lots of useful information to drive innovation from it. According to a management consultant at Azran Financial in California, it is critical to be able to improve technology functions and processes so finance and accounting can easily have access to useful information and become the true driver of value. Here are some tips:
- Build up a culture of innovation: Best companies of all sizes always involve finance and accounting in every meeting relating to how to do better for the company as a whole
- Leverage existing technology and don’t be afraid of it: Avoiding applying technology will do you no good; you should learn to understand what technology at hand can help you and reorganise your organisation to gather all disparate parts of technology.
- Become an expert in subjects outside finance and accounting: In contrast to common belief, there is no border between finance and accounting and other fields. Companies need to encourage finance and accounting to spend time on more innovative activities outside of reporting, compliance and budgeting which helps bring significant value to the company.
- Take time to analyse the data and think innovatively: Companies should allow more time for finance and accounting professionals to think outside of the box do the analysis which helps bring out innovation.
- Re-examine processes when installing new system: Companies should blend in the perspective when they re-examine and re-evaluate their processes in order to see the full value of the new system.
Innovation can come from anywhere in the business, including both finance and accounting. Although there are still barriers regarding technology, companies can still push innovation effectively by making finance and accounting be part of the team who foster and supports a culture of innovation.
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About the author:
Ken Tysiac is a senior editor for News at Journal of Accountancy. He writes and edits news and features for web sites, magazines and newsletters associated with the AICPA, a national CPA membership organization. You can reach him via his email at email@example.com.