About: This written Q&A with Kenny will delve into expenses, employee fraud, remote working, the challenges faced by CFOs, and the importance of digital transformation across the finance function.
What are the challenges CFOs have been tackling in the transition to hybrid working?
CFOs have felt the heat when it comes to navigating their people strategy between existing legal requirements, evolving national guidelines on office working, business travel, and responsibility towards staff safety from mutating COVID variants. Now, as it stands more than 80% of firms have adopted hybrid working, and leadership must determine the hybrid structures best suited for optimising working environments for employees.
Though hybrid structures enable ‘heads down’ time for individual work while the office evolves into a space for more collaborative work and relationship building, we are yet to see the full effect of the financial consequences from these new ways of working. For instance, though hybrid and remote working structures provide more flexibility and enhance work-life balance, proximity bias can occur for those who are out of sight and therefore out of mind. There’s talk that this could influence promotion and remuneration structures. For CFOs this raises the issue of salary – with Londoners moving away to live in the countryside, for example, are they still entitled to living cost compensation in the form of London-weighting?
The dispersal of staff from offices also unearthed large weaknesses in the manual, 20th-century approach to spend control and internal audit, with reports citing hybrid models have been linked to fraud committed by employees. The types of expenses in themselves have changed too, along with budget requirements such as expense claims for city dwellers who have since migrated out of the capital. If a previously office-based employee is now based several hours away, should they be allowed to expense travel for an in-person meeting, when those who have remained local aren’t reimbursed? Clearly, there are numerous issues to consider for those controlling the purse strings.
How has expense management evolved over the course of the pandemic?
As we transitioned into lockdown, we found companies continued to issue paper invoices and cheques, but the finance teams working from home simply couldn’t process and pay these in a timely manner as before, due in no small part to no longer being in the office to collect the mail.
Lots of companies also needed to reimburse their home-based employees for mobile phone bills and office equipment such as monitors. The added task of managing remote working resources has made this an increasingly challenging period for CFOs. The real issue, though, beyond expense types, is digitalising paper invoices and eliminating manual cheque runs – processing payments in a timely manner – could be critical for a mid-sized business in times of financial strain and uncertainty. CFOs are tasked with forecasting and monitoring the financial health of a business, and all finance streams, from expenses to invoice, contribute to the overall stability of an organisation.
Without moving these fundamentals to the cloud, key financial processes pretty much ground to a halt for some businesses, which made digital transformation an even more critical issue for those with outdated systems and information silos. It highlighted the dangers in operating on paper and clinging on to traditional ways of working. Since then, we have seen many companies really accelerate their finance transformation initiatives to maintain a competitive advantage. Digital processes are no longer simply a ‘nice-to-have’ – they’re pivotal to how we work in this new environment.
How best can SMEs and enterprises out-smart fraudulent behaviour?
For smaller businesses it can be a challenge to keep on top of fraudulent behaviour and spot red flags. Intentional or not, financial leaks for a smaller business can have a devastating long-term impact if left unaddressed. Expense reimbursements (14%) and billing (20%) tend to represent the most common type of employee fraud, so these need to be closely monitored.
When it comes to identifying fraudulent or out-of-policy spending activity, human error is an unnecessary stressor considering how many tools are on offer to automate and optimise the process. It’s a good idea for SMEs to look at automation as something that can help with approval workflows and analytics. AI-based audit functions, too, can help prevent fraud and non-compliant spend from slipping under the radar undetected. Analytics solutions can also help to eradicate waste and fraud, by enabling teams to easily spot patterns or discrepancies that could point to potential misspend.
Beyond the data, leadership must look internally, examining the cause behind any employee-driven fraud, and make greater efforts to detect the motivations. Are toxic cultural influences provoking this behaviour in the first place? That’s the real question.
What should finance teams look to do differently?
As employees continue to move jobs in considerable volumes, the ‘Great Resignation’ itself has triggered a new phrase – ‘The Great Reshuffle’, as millions reconfigure their careers and re-evaluate what is most important; from pay and mental health care, to culture and work-life balance. With that in mind, CFOs may have their hands tied. Alongside accelerated adoption of hybrid working and work-from-anywhere structures and benefits, it’s a real challenge to reduce high staff turnover and attract new talent.
That’s why leadership should continue to be agile rather than force workers back into the office full-time against their will. Traditional industries like financial services clearly want to revert to their old ways, with bankers and accountants amongst the first to be summoned back. Remote work is here to stay, but companies who cancel it may not be.
On top of this, remote working intensified anxieties surrounding disorganisation, which comes down to manual process documents, silo data, and inefficient ways of communication – essentially making work just about work. That’s why undergoing digital transformation and adopting tools that combine smart technology with independent human verification to analyse expense transactions against pre-defined criteria, ensure compliance and eliminate wasteful spend is the best way forward. This approach will empower businesses and their workers and ultimately alleviate admin-heavy processes. It will also help to reduce stress, humanising work for finance teams and giving CFOs, Finance Directors, and their teams time back to focus on what really matters.
