In recent news, after just one month on the job, the Chief Accounting Officer of Tesla resigned. Not to be outdone, after a year-long stint, the second go-around on his job, Tesla’s CFO also resigned. Analysts noted that the person who’s taking over the CFO position, just promoted to VP in December, has no specific accounting experience. How is it that a highly visible public company like Tesla came to have a CFO who’s not a dyed-in-the-wool accountant? Once a start-up that’s now 15 years old, Tesla may be emblematic of the tectonic shifts taking place within corporate finance. Namely, many of its key functions such as general operations, cash disbursement and revenue management, are becoming fully automatable.
This begs the question, is knowledge of accounting still important in the finance role? We recently conducted a study of millennials working in finance in the US and the UK, and found that 61 percent of them believe that accounting skills are still essential in order to be an effective member of a company’s finance team; put this side by side with the 68 percent who say they use or would like to learn data science skills. Nearly a fifth (17 percent) of the younger workers we interviewed already use data analytics skills in their day-to-day roles. Most tellingly, more than half (52 percent) said that advanced analytics offered a transformational opportunity for the finance function. Considering that these “digital natives” are already the largest demographic in the workforce in both the U.S. and the UK, we are hearing the opinions of people who will eventually be shaping the future of finance.
With those efficiencies being realized, knowledge of accounting is becoming a less critical part of the requisite skill set of a CFO. As we’ve heard so much across industries, Artificial Intelligence (AI) and access to large data sets are changing the game. Consequently, we see a cultural shift taking place in finance jobs, especially as a younger workforce comes in with far different and more technologically based capabilities.
With many rules-based functions being automated, it won’t be long before accounting plays a less critical role. Along with this shift in importance comes a cultural change in finance. Many functions that once relied on accounting know-how will no longer require it. This leaves room not only for more data analytics and insight but for teams of strategists and data-informed decision makers. Finance will attract—indeed, already is attracting—more creative thinkers. Decision makers with broader horizons in education and life experience will bring a more rounded view not only to the finance function itself but to their organization at large. They will have a view of the business of the company, not just the finances of the company.
What this means for younger finance workers is that they’re being presented with the opportunity to step into far more strategic, and less functionary roles. A recent A.T. Kearney study calls this new breed “trilingual” talent, individuals who are well versed in technology and business in addition to the language of analytical modeling. No longer toiling in a back-room “finance factory,” these uber-data crunchers are in the front office, predicting trends, managing risk and working side by side with the C-suite on the overall business strategy of the organization.
Where data sets are big enough and there are clear connections between inputs and outputs, complex statistical modeling and machine learning approaches are providing significantly better predictions of likely future outcomes and performance. One example of how this is already playing out can be seen in the financial and risk analytics company Refinitiv, which uses a data-driven platform for algorithmic sales forecasting. And looking a bit further ahead to the role of AI, machine learning is far better at spotting patterns, and correlations in data, than humans are—these tools hold the key to scenario modeling. Hence data, plugged into AI, will be providing those in finance departments the means with which to play a more advisory role within the company.
In light of these changes, aspiring millennials working in finance have begun to see it as a springing-off point for a career in business outside of finance. In fact, among the young people we interviewed who currently work in finance, almost a quarter of them (23 percent) hold the goal of starting their own business. Across genders, almost half of both women (49 percent) and men (42 percent) saw their future either heading a start-up or working outside of finance entirely.
Younger people—who will make up half the workforce by 2020—might have thought a career in finance, which traditionally involved bean counting and number crunching, was not exactly in line with the disruptive, legacy-challenging business they intended to start one day. And until recently, they wouldn’t have been wrong. Entry-level “finance factory” jobs were decidedly not for them, so graduates fresh out of college, and armed with degrees in new areas such as econometrics, moved in droves to much sexier-sounding data scientist positions. But now, I’d like to make the case that getting your career off the ground in finance, even if a lifetime job is not what you had in mind, will open many doors.
Case in point: unless they were raised in a household of entrepreneurs, most young people don’t instinctively know how to run a successful business. They may have a great idea, an enthusiastic team, and even startup capital, but they don’t have the skills they need to sustainably run a business. For example, they probably lack the ability to do financial forecasting, figure out how to float debt, or attract investors for second and third rounds of capital, and beyond. Acquiring a mastery of the finance function of a big company can help them understand the nuts and bolts of these skill sets.
The key to becoming a good financial analyst is to really understand the drivers of financial performance—that is, understanding the business model and how the external and non-financial indicators combine to influence the financial outcomes. And finance is a critical underpinning for many other roles in business—particularly senior leadership roles. All businesses target and report on financial outcomes; gaining a firm footing in finance will also lead to understanding the dynamic among the profit and loss sheet (P&L), balance sheet and cash flow—incredibly important skills for start-ups. For instance, a business could be highly profitable on paper, but could run into trouble because it gives its customers long payment terms while having to pay its suppliers up front.
Finance is increasingly about data—which data sets matter, what you can do with data, and how it can be used to influence better business performance. Understanding data is an enormously transferable skill. This understanding, combined with technical knowledge of how to work with data, makes for brilliant strategists.
Another large part of the finance job in today’s companies—and another hugely transferable skill—is about reporting and communications, providing information to stakeholders internally and externally that helps get important messages across, and better decisions made. It plays a key role in business transactions, agreeing on commercial terms for big sales deals and also inorganic activities like disposals or acquisitions. Having this experience will prove valuable in many other operational roles.
However, I’ll add this qualification to finance-turned-founders folks. For those looking to start their own business, there is one key area that working in finance won’t give you: experience in sales and marketing—the lifeblood of any startup. In his book The Wealth Elite, a study of the backgrounds and mindsets of 45 ultra-wealthy entrepreneurs, German sociologist and historian Dr. Rainer Zitelmann reports that his subjects almost unanimously attributed their massive success to sales skills. So young people moving out of finance and into their own startup would do well to gain a mastery of sales and marketing, too, as they turn into entrepreneurs.
To sum up, from our vantage point, data and AI are revolutionizing the finance function, and with it, the culture surrounding it. Entry-level jobs in finance have gone from an almost feudal layer of repetitive, rules-based number crunching to far more empowering analytical and strategic positions. For entrepreneurially minded millennials in finance, being a contributing part of this shifting culture could serve as excellent grounding for that dream of leading a successful startup.