FinOps, or Finance Operations, is our name for a massive hole in the accounting sector.
It’s a skill set, perhaps even an entire industry, that is desperately needed, but doesn’t yet exist. It’s a hole that’s causing a lot of frustration; both for accountants in their careers, and for businesses that desperately need help. In this post I’m going to explain why that hole exists, and how we stumbled into it. We’ll then look together at the change that’s coming, and how you can be a part of it.
To understand the accounting career path, it’s helpful to start at the beginning. In accounting, there are two main entry points. You can train in an accounting firm or you can directly join a business. As you can imagine the experience that you gain in each of these two options can be very different.
I haven’t been able to find any statistics, but in my experience by far the most common route for graduates is to start their career at a large accounting firm. My own entry to accounting is probably a relatively typical one, and with the benefit of 2020 hindsight, it holds a lot of the clues for what was to follow.
Like many university graduates unsure of their career direction, I joined one of the Big 4 accounting firms as an auditor. I still remember the prestige that it carried with my parents and teachers, and the sense that it would open the doors to the rest of my career.
It didn’t take long, however, for that image to break down.
One of the first things you do in any job, is take a look at the people a few years ahead of you. In my case I was surprised to learn that these experienced auditors weren’t brimming with pride at the prestige of their profession. All they wanted to talk about was how quickly they were going to get out the minute they qualified.
This dissatisfaction isn’t unique to the audit world either. A recent study, published by the Chartered Accountants Benevolent Association, revealed that young accountants are amongst the least happy groups in the entire workforce.
This unhappiness, right at the very start of the career path, compounds many of the issues that we’ll talk about later on. Traditionally accounting has provided a safe and prestigious job for life. Unfortunately that focus on tradition has become confused with a fear of modernity and innovation.
Young people today are looking for variety and impact, but accounting sells them tradition and stability. Because they aren’t able to find the fulfilment that they’re looking for, many of the best candidates leave the profession early on.
The opportunity for formal training and qualifications, is what attracts a lot of people to the accounting profession. The precise qualifications available to you differ slightly whether you’re in a practice or a business, but both share many problems.
In my case I was very excited to continue my formal education. However in college, as in the workplace, I was soon to be disappointed. The exams focused on theory, and in particular theory for year-end compliance work. The sort of thing that is very important to accounting practices, but less so to the day to day running of a business.
We learnt how to do something called ‘T accounts’, and how to make entries into books of prime entry. These are arcane techniques that bear no resemblance to the modern profession. On the other hand how to use the latest software was never mentioned.
I quickly learned that the skills I had developed working in an accounting firm, and studying accounting exams, had left me totally unprepared to solve problems in a real business.
One problem that we had as a marketplace business, for example, was that we needed to pay thousands of suppliers every fortnight. How could we automate that process without risk of error? And how could we make sure that we updated their records and the customers in the backend system? How could we ensure that our own financial software reflected the same reality, all whilst treating VAT correctly?
These are accounting problems, and the most innovative businesses in our economy are looking to accountants to solve them. The issue is that they’re just not problems most accountants get any training in.
Gradually I gained experience in solving these problems, and eventually founded Quantico to tackle them head on. As I developed further up the career path, I discovered more and more of the factors that are holding accountants back.
At the top of the career pathway is the Chief Financial Officer, the CFO. It’s the role that leads all finance functions. As a result it’s what most accountants aspire to become.
When we started Quantico, we assumed, in spite of my experiences to date, that the most prestigious role would also be the most valuable. For that reason we started off positioning our service as an outsourced CFO service.
Gradually however, we uncovered more clues that might not be the right approach.
Firstly as we got to know people in this market, we spoke to dozens of portfolio and interim CFOs, most of whom were very good. When we came to hire people at the more junior end of the profession however, they were much harder to find.
In every profession the economy needs a small number of strategic leaders, and a much larger number of more junior operators, forming a pyramid structure. What we found available in the finance sector however, was precisely the opposite.
The overwhelming prestige of the CFO role, had led to a huge imbalance in supply and demand.
We realised that not only is the CFO role extremely coveted, but it’s operational counterpart, the Financial Controller, actually has something of an image problem. It’s characterised as the most boring side of the accounting profession. It’s quite rare to find accountants in the early stages of their career who aspire to be a financial controller.
The extension is that young finance professionals are often keen to position their skill sets on the strategic side, rather than the operational. When we asked the most ambitious finance people how they solved operational problems their answers were telling. More often than not, they suggested hiring more junior people to work on them. Some even made the explicit point that systems work was beneath them.
How is it that the strategic side of finance has become so prestigious, at the expense of the operational?
When you place the traditional accounting job roles on the spectrum between strategic and operational, a few things strike you.
Firstly, as we’ve seen, the leadership of the function resides squarely on the strategic side of the function, not in the centre. Over time this leadership focus has no doubt led to the perceived primacy of the strategic side of the function over the operational side.
Secondly. as one individual progresses up the traditional career pathway it is highly likely that they will zigzag back and forth across this central line. This is in spite of the fact that the skills needed on each side, and the personality types that excel in each area, are radically different.
This explained a complaint that we had heard several times from startup financial controllers; that once they have cemented their position as an excellent FC, it is incredibly difficult to get the people who hired them to see them as a strategic CFO.
Thirdly, there is a big hole in the diagram!
When I had originally joined a startup, I was shocked to learn how unprepared I was to help build their financial operations and systems.
Now I was learning that the problem went deeper. It’s not just the qualification that’s causing problems, it’s also the career path itself. The primacy of strategic over operational finance has created an imbalance of supply and demand.
When businesses encounter theoretical tax or accounting problems, the exam pathway has ensured that they will be addressed. If they have strategic finance problems, the prestigious CFO role has drawn many candidates to address them.
When they encounter operational or systems problems (and they overwhelmingly do) then they struggle.
We’ve seen the startup community evolve new roles to serve its needs over the past decade (SalesOps, Customer Success, Data Science etc) and we hope that we can build on these solid foundations.
For that reason we’re calling for the creation of a new role: Finance Operations, or FinOps.
To be successful this new Finance Operations (or FinOps) role must:
FinOps is the discipline of designing, building and operating the financial systems needed for a business to thrive.
In a traditional business a Financial Controller might be responsible for ensuring that financial reporting is accurate and timely. A CFO might then be responsible for interpreting those reports within the context of a business’ objectives.
In comparison a FinOps leader would be responsible for ensuring that the correct systems are in place for both of those individuals to do their jobs. That means building and operating reporting systems, ensuring that data is collected rapidly and accurately, but also the systems needed to execute any growth strategies that arise.
FinOps is a technology focused discipline, creating savings through automation, and insight through data.
Crucially it must be a discipline focused on growth. Accountants are often criticised for focusing on the past over the future. By building the systems to enable the future FinOps will become an enabler and driver of business progress. The rest of the business will look to FinOps to set the pace for sustainable growth.
The very best CFOs and FCs incorporate an element of FinOps in their thinking. In fact we published a blog six months ago listing Finance Operations as one of the top three skills that a CFO should master.
However both of these traditional roles are primarily focused elsewhere. CFOs, for example, see strategic decision making as their key function of their post. Many are unwilling or unable to engage with the detailed elements of accounting or technology.
FCs, on the other hand, are much more engaged in detailed work, but don’t engage with FinOps for other reasons. Firstly the role is traditionally focused on historic reporting, meaning that they don’t interact with the forward looking elements of FinOps. What’s more, their focus on the past has resulted in a lack of comparative prestige in the FC role, so it is often seen as a stepping stone to CFO. Candidates looking to adapt to CFO roles as quickly as they can are more likely to focus on their strategic competencies than FinOps skills.
In an ideal world, the roles of CFO and FC would adapt quickly to our changing world. But sadly accounting is not a sector that is quick to change. Both the CFO and the FC roles have historic baggage that define how they are perceived and where they are most likely to focus their energy.
The only way to create the rapid change that is so clearly needed is to invent an entirely new pathway, from the very bottom to the top of the career ladder. We’re sure that specialist CFOs and FCs will continue to exist into the future, in particular in large organisations where more specialisation is required. However we believe that increasing FinOps roles will become increasingly important and prevalent.
Like the strategic CFO pathway, we see FinOps as a progression rather than a single role. In Quantico we have FinOps Leaders who work across multiple businesses and problems, FinOps Managers who design and build systems and FinOps Associates who carry them out. As with other pathways the skills required evolve over time. But crucially the objectives remain the same.
So how can we all be a part of the positive change?
At Quantico we’re in the process of launching a new programme that trains accountants in the FinOps skills that the traditional qualifications miss. It’s based on the same training that we developed internally, but we want to make it available to the world.
We’ve also formed a community of leaders in the new FinOps world. It’s a space to exchange ideas, share resources and most importantly, interact with like minded individuals.
You can join the community here.