Financial reporting, operational reporting, financial planning and analysis—there’s no shortage of work for finance teams to do as organizations continue to adjust to the new economic realities that the pandemic thrust upon the world stage in 2020. At a time of great uncertainty, the role of finance professionals has, of necessity, evolved into an ever more strategic one.
As organizational priorities shift, so too do the priorities of finance teams. In February and March of 2021, insightsoftware partnered with Hanover Research to discover current trends in finance teams. Approximately 500 participants, each of whom was either the primary decision-maker or shared in decision-making in their organization, responded to the question, “Which of the following best describes the main priorities for your financial team in the next two years?” Here’s what they had to say:
Priority 1. Balance Growth with Profit Effectively
Growth and profitability are both essential to a business. Profit is, after all, the key to basic financial survival in the here and now, whereas growth is essential to generating profit and for long-term financial success.
Regardless of the industry, every company must determine its own balance between growth and profit. Finding that balance is dependent on understanding the present financial condition of your organization fully.
When determining whether to prioritize profit or growth, finance teams must take into account the organization’s cost of equity capital and long-term return on equity (ROE). Typically, if debt and equity costs are high, the preferred strategy may be to favor profitability over growth. Conversely, when ROE is much greater than the cost of equity capital, the balance may shift in favor of pursuing a more aggressive growth strategy.
However, the current economic uncertainties caused by the global pandemic of 2020 and the potential regulatory changes that may result in some industries still loom large for finance teams, exacerbating an already complicated balancing act between growth strategies and cost-cutting measures.
These factors may well be part of the reason that the respondents in our survey also identified a lack of time spent on analysis as the number one challenge finance teams currently face. Without sufficient time to analyze the data they have thoroughly, finance professionals are hard-pressed to draw the type of in-depth insights they need to form strategic plans for balancing growth and profit effectively.
They are allocating budget to the task, however. Our survey revealed that 35 percent of respondents have confirmed budget allocation to address this challenge, with another 42 percent in the process of finalizing their budgets at the time of the survey.
Priority 2. Enable the Organization to Make More Flexible, Timely Decisions
Balancing growth and profit is not the only strategic guidance the finance team needs to provide. The Office of the CFO supports other decision-makers throughout the organization by translating financial data into business insights. For example, finance professionals help the C-suite understand:
- Key drivers of performance for the business
- The viability of new revenue models or investment opportunities
- Risk and compliance issues that may impact certain actions or decisions
- How overarching organizational goals align with underlying financials
- How to apply resources more effectively to achieve organizational objectives
It’s a tall task, and one that is time-intensive. Much like the first priority on the list, enabling the organization to make more flexible, timely decisions calls for the finance team to spend more time doing value-added analysis, something teams can ill afford given that finance teams identified time-sucking manual processes as the number one reason they are unable to execute tasks across the board completely today.
Interestingly, 2 other priorities making the top-10 list for finance teams for the next 2 years have an impact on helping the organization make decisions. Those priorities are: automation of current responsibilities and tasks (27 percent of respondents listed), and enabling functional leaders to make informed decisions (26 percent of respondents listed).
With the end goal of addressing these priorities, respondent companies have allocated budgets as follows:
|Enable the organization to make flexible, timely decisions||37%||27%|
|Automation of current responsibilities and tasks||39%||27%|
|Enable functional leaders to make informed decisions||34%||35%|
Priority 3. Increase Working Capital
It comes as no surprise that increasing working capital is a top priority for the next two years. When the pandemic hit, many businesses experienced sudden sharp declines in cash flow, but now that the pandemic has lingered into another fiscal year, the question becomes, what will the long-term impact be on working capital for your organization?
Forward-thinking finance teams are busily engaged in scenario planning, working through the potential implications of the situation as it applies to their organization’s unique set of circumstances. Regardless of the industry, it seems a likely bet that increasing working capital is a smart goal.
To do that, the Office of the CFO must keep its finger on the pulse of several key areas, including:
- Monitoring KPIs such as net working capital ratio
- Automating processes when possible
- Improving inventory management
- Streamlining and incentivizing accounts receivable
- Improving and optimizing supplier management
- Optimizing accounts payable
- Improving credit risk analysis
- Improving tax planning processes
Each of these tasks are time-intensive and require access to accurate, up-to-date information. Accessing accurate data was identified as one of the top 3 challenges for finance teams in our survey. Without the tools in place to provide that information, finance teams face a steep uphill battle to meet their goal of increasing working capital effectively.
How insightsoftware Can Help
In our survey of financial professionals, we found a few common themes among our respondents. Whether they were discussing the challenges they are facing or their priorities for the next two years, respondents are feeling the pressures of spending far too much time on manual processes such as data dumps from ERP systems to spreadsheets for financial reporting, operational reporting, and financial planning and analysis.
Lacking sufficient time for the type of in-depth analysis that leads to actionable insights, finance teams are frustrated in their efforts to provide strategic direction to decision- makers in their organizations. They need an easy way to access data from multiple systems, analyze those data, produce reports and refresh them as needed, and do it all as quickly as possible so that the data are not outdated by the time the report is complete.
If that sounds like a tall order, the good news is that it doesn’t have to be. insightsoftware’s tools are purpose-built to accommodate the specific needs of finance teams. Our tools pull data at a more granular level from more ERP systems than any other tools in the world, all with the purpose of helping the Office of the CFO access the data it needs to do the job efficiently and effectively.