# Finance innovation needs to be driven from the top, and supported from the bottom
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-04-28
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Why is Finance Innovation Stunted?
Meta Description: Discover why the finance industry struggles with innovation and technology adoption, and how CFOs can drive change for a brighter future. Learn more.
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/finance-innovation-needs-to-be-driven-from-the-top-and-supported-from-the-bottomhtml

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_**Andy Bottrill**_, regional vice president at cloud accounting software company BlackLine

**Innovation in finance is stunted – why?**

For millennia, the abacus was the most commonly used mathematical tool. Its first recorded use was in 2700 BC in Mesopotamia and it’s still used today to teach kids how to count. That we still use abacus around the world goes to show just how reluctant we can be to [innovate in the finance](https://www.financedigest.com/why-the-finance-sector-must-prioritise-mobile-security-over-innovation.html "Why the finance sector must prioritise mobile security over innovation") department. Despite significant [technological](https://www.financedigest.com/u-s-lighting-products-market-recent-strategies-trends-technology-innovation-analysis-application-by-tmr.html "U.S. Lighting Products Market: Recent Strategies, Trends, Technology Innovation, Analysis Application by TMR") innovation there are significant functionality gaps in core financial processes – these can stunt industry innovation and also stop the brightest and the best from choosing finance as their career.

ERP solutions are maturing and there is a breadth of corporate performance management suites to choose from, yet, the 2018 FSN Innovation in the [Finance Function Global Survey found that a failure to innovate is holding back the industry](https://www.financedigest.com/how-to-drive-a-data-culture-in-the-finance-industry.html "How to drive a data culture in the finance industry") as a whole. Even in groundbreaking companies, the finance department is still reliant on spreadsheets for reconciliations, [financial close](https://www.financedigest.com/fast-track-financial-close.html "FAST-TRACK FINANCIAL CLOSE") and intercompany accounting. But when the tools and the systems are there, why is there a reluctance to take risks and [embrace technology](https://www.financedigest.com/cfos-need-to-embrace-todays-technology-for-tomorrows-success.html "CFOs need to embrace today’s technology for tomorrow’s success ")?

**Problems finding talent**

One of the biggest hurdles to [innovation in finance](https://www.financedigest.com/innovations-in-finance.html "Innovations in finance") is the difficulty in attracting the right talent. Retaining it is just as tough. Demands on employees are increasing – as well as being able to understand investments and analyse data, recruiters are now looking for potential employees who can solve technology issues across different domains too. Training might be focused too acutely on skills rather than a broader view of the sector, which can make it difficult for those in the thick of it to acknowledge just how important innovation can be.

[Around 50% of European CFOs blame a lack of technology-savvy talent as a major obstacle to innovation](https://www.financedigest.com/the-soft-skeletal-implants-market-revolve-around-digitally-driven-innovation.html "The Soft Skeletal Implants Market revolve around digitally driven innovation"). The findings of the recent Innovation in the Finance Function survey were remarkable – the results showed that as many as 11% of respondents “rarely if ever discussed innovation and don’t have the time to devote to it”, while 54% openly admit they are uncommitted innovators who don’t have time or [funding](https://www.financedigest.com/female-founders-still-struggle-to-get-funded-time-to-rip-up-the-old-rulebook.html "Female Founders Still Struggle to Get Funded: Time To Rip Up The Old Rulebook") to dedicate time to it. Hearteningly, the report found that 23% in finance are dedicated to technology and are early adopters. These people make time for innovation, and reward innovation which is encouraging.

In a [world where tech](https://www.financedigest.com/financial-tech-what-will-stick-in-a-post-covid-world.html "Financial tech: what will stick in a post-COVID world?") and AI is being used to explore the solar system, there’s no real reason why finance departments should be unable to better utilise technology to do accounts, and ultimately, go paperless.

**[CFOs must](https://www.financedigest.com/10-questions-cfos-must-ask-themselves-about-privacy.html "10 questions CFOs must ask themselves about privacy") change**

Once CFOs show they are committed to adopting a more [innovative approach](https://www.financedigest.com/cavai-tests-innovative-new-approach-for-the-home-offices-parentwise-pilot-campaign-helping-parents-and-carers-in-the-west-midlands.html "Cavai tests innovative new approach for the Home Office’s ‘ParentWise’ pilot campaign helping parents and carers in the West Midlands"), it should be easier to recruit appropriate talent, who’ll want to go to where the innovation is. CFOs and senior finance professionals can [create the changes](https://www.financedigest.com/entrepreneur-investor-dale-w-wood-shares-how-he-is-using-his-funds-to-create-change.html "Entrepreneur & Investor Dale W Wood Shares How He Is Using His Funds to Create Change") needed to attract talent and stay ahead of the competition, but they must understand why it’s important first.

[2017 research](http://www.fsn.co.uk/channel_kpi_environment/fsns_future_of_the_finance_function_research_2017_finds_that_cfos_are_putting_their_trust_in_vendors_to_help_with_finance_transformation#.WtdExWrwaUk) showed that just 6% of CFOs understood the technologies available to them and only a quarter had enough time to look into how innovation could support their business. [According to a 2017 McKinsey report](https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Strategy%20and%20Corporate%20Finance/Our%20Insights/Strategy%20and%20corporate%20finance%20special%20collection/Final%20PDFs/McKinsey-Special-Collections_RoleoftheCFO.ashx), CFOs are more concerned with streamlining the business and cost-cutting rather than exploring how technology could help the business. It goes without [saying that these are not mutually exclusive](https://www.financedigest.com/exclusive-norway-eyes-high-gas-output-until-2030-says-energy-minister.html "Exclusive-Norway eyes high gas output until 2030, says energy minister"), and by innovating, companies can grow and thrive.

**Change is hard**

Other issues that may become obstacles for financial institutions looking to [innovate](https://www.financedigest.com/open-finance-can-help-unlock-innovation-across-the-financial-ecosystem.html "Open Finance can help unlock innovation across the financial ecosystem") are rigid and hierarchical organisations, and an out of touch culture. It can be hard for younger [talent to encourage](https://www.financedigest.com/encouraging-female-talent-and-entrepreneurship-in-the-supply-chain-industry.html "Encouraging female talent and entrepreneurship in the supply chain industry") change when their CFOs may find it difficult to commit time to understanding why innovation is critical.

Core financial processes are often still being done using spreadsheets and other manual controls. These [processes can be inefficient](https://www.financedigest.com/anti-money-laundering-doesnt-have-to-be-a-painfully-inefficient-process.html "Anti-money laundering doesn’t have to be a painfully inefficient process") and labour intensive – in addition, manual accounting can make it harder to manage workflow which is increasingly important as companies encourage flexi-working and use contractors.

Lack of technological progress isn’t just down to employees digging their heels in either. The [recent report](https://www.financedigest.com/most-recent-development-report-on-centrifugal-chiller-market-to-witness-exponential-rise-in-revenue-share-during-the-forecast-period-2021-2031.html "Most Recent Development Report On Centrifugal Chiller Market To Witness Exponential Rise In Revenue Share During The Forecast Period (2021-2031)") also found ‘unforgiving’ ERP and CPM systems that were resistant to change. For example, there might be an over-reliance on the IT function for small changes and other process gaps may be plugged by more spreadsheets.

**The future**

Fifty per cent of [European companies](https://www.financedigest.com/factbox-what-european-companies-are-doing-as-workers-face-high-inflation.html "Factbox-What European companies are doing as workers face high inflation") say they are afraid of innovation, compared to just 30% of American companies. [Innovation is no longer a choice – we must learn from our neighbours across the pond and understand the merits of allowing](https://www.financedigest.com/esg-innovation-allowing-everyone-to-meet-the-standard.html "ESG innovation: Allowing everyone to meet the standard") technology to help us rather than hinder us. Embracing [technology will accelerate innovation](https://www.financedigest.com/research-and-technological-innovations-to-bolster-developments-in-animal-model-market.html "Research and Technological Innovations to Bolster Developments in Animal Model Market") and, in turn, attract the very best talent to finance.


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