Businesses all over the world have fundamentally changed in the past decade, and so have their finance teams. Finance teams have evolved from a siloed team into an integrated element of business planning, strategy, and operations. Although seen as a partner to the business, finance teams are split between accounting and reporting and gathering strategic insights for the organization. While the former is a necessary function of the finance teams, the latter has become increasingly important for internet businesses amid the convenience economy. Organizations today can learn about the rapidly-changing customer behaviors and expectations, explore cross- and up-selling opportunities, uncover growth opportunities, and analyze the impact of their campaigns on their business using financial data. Several players in the market are already using predictive insights and data-driven recommendations to improve their performance.
And yet, finance teams are struggling to keep up with the current pace of technological change. Most of them are drowning in spreadsheets, books that were due to be closed a day before, and the requests for analysis and reports that just keep piling up. So, why is this happening?
The finance function in modern-day businesses
Business models have become increasingly complex in the past decade, especially in the consumer-centric era. Although the aim to provide a seamless experience to consumers has increased customer satisfaction and business outcomes, financial processes have never been more complex. Payment reconciliation, commission calculations, transaction processing, and monitoring have diminished traditional finance operations.
However, finance teams may be wasting their precious time in preparing outdated static reports, to deliver insights that don’t even matter anymore. Instead of waiting for year-end or month-end reports to analyze financial health, the decision-makers now require up-to-date insights to make real-time decisions and tap into new opportunities for business growth.
Primarily, it’s due to the proliferation of enterprise software, different kinds of order management systems, scattered transactions along with other specialist applications, which leads to a major problem- fragmentation of critical data. Finance teams need to collect and analyze data to make informed decisions. Typically, they export data from the ERP, dump it into formula-filled spreadsheets, fix the formula, and then present the data visually through pivot tables or charts.
In case any adjustments are made to the data, the static reports become outdated. The finance teams then end up updating and re-updating the spreadsheets and charts, which delays the process unnecessarily.
Secondly, since the preparation of these reports is a time-consuming process and involves huge cost, it’s nearly impossible for finance teams to customize the report for every user. Everyone, from the CFO to an entry-level executive ends up using the report to gather insights.
In a nutshell, finance teams are hampered by legacy technology along with systems that were never made with rapidly transforming internet businesses in mind, filled with poor and inconsistent data with highly qualified professionals spending time on routine and manually-intensive processes. At the same time, reporting will require more information and direct access, while business leaders see the scope for more tailored, rapid data analysis and relevant information.
Emerging from the fractured growth of finance
The overall economic uncertainty after the onset of the COVID-19 pandemic, as well as having to adapt to remote working, has put business planning processes under immense pressure. Additionally, the goal for most organizations has been to “survive first, grow later” and subsequently, postponing any project or cost item with minimal importance. If finance teams need to play an important role in business strategy, finance leaders need to reduce the amount of time that goes into looking at historical data and planning for short-term growth, instead of shifting their focus towards long-term growth. Organization leaders need to ensure that their teams are well-equipped and decisions are based on solid data and accurate forecasts.
One of the major challenges that finance teams face is data: not the lack of it, but too much of it in too many different places. The amount of data in the world is expected to reach 175 zettabytes (175 billion terabytes) by 2025, and the data required by finance teams to create competitive advantages for businesses will be no exception.
Finance departments need a clearly defined data-management strategy to guide the collection, storage, and interrogation of the rising volume of data needed to perform the types of analytics the business requires. To support the business—whether through more nuanced financial-scenario planning, insight into how to better manage liquidity, or improved guidance on where to best deploy assets—finance must be able to quickly marshal high-quality, trusted data and ERPs can only get you so far.
Additionally, the use of advanced analytical techniques to solve pressing business problems is increasingly a requirement for finance departments. More often than not, finance teams working with ERPs or spreadsheets will need to acquire technical skills to churn insights from raw data, which can prove to be extremely time-taking and may not be free of errors. Beyond providing analytical insights, the finance teams should also be able to deliver effective information on company performance and the actions needed to improve it. The finance teams need to be equipped with systems that can handle complex and sensitive transactional data securely and process large scale transactions with high accuracy and in real time.
In addition to infrastructure technology changes, finance leaders should also look into automating mundane finance tasks, such as manual data collection and consolidation of financial and operational data. There will be greater control and visibility of the data with reduced compliance risk since teams will no longer be using multi-line spreadsheets to complete their duties. Streamlining these tasks frees up finance to assume a greater strategic role for the business and become agents of change.
Looking forward: The finance teams of the future
As organizations give their finance teams the ability to act beyond “number keepers” with agile planning methods, finance will eventually play a major role in business planning. Finance teams armed with the right tools will be able to anticipate changes, produce insights, and operationalize relevant responses among different departments. In other words, when teams start looking forward and emerge from hampered systems, they can act as a strategic and driving force in the business through COVID-19 and beyond.
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