Neil Davidson, Regional Vice President, EMEA and APAC
In recent years, the role and expectations of the CFO have evolved. The CFO now plays an even bigger role in driving the business forward, leveraging their insight beyond the finance function, into digital activities and organisational strategy. The unique insight of the CFO brings huge benefits across the business, enabling better decision making and enhanced performance. The problem is, rising pressure for the CFO – while these additional responsibilities come with opportunities, they also come with additional pressures. Layer on top cost of living crisis putting a strain on company finances and the role of the CFO becomes an intensified business-critical operation.
The cost-of-living crisis is putting a strain on businesses of all sizes in all sectors. As such, British businesses are building resilience to combat these challenges, protecting and enhancing their bottom line. CFOs now play a key role in driving decisions to contain costs. With the oversight of the company’s long-term financial priorities, their unique insight cannot be underestimated as businesses continue to face uncertainly.
Over the last couple of years, much has been written on how CFOs reimagine their role in direct response to digital disruption and rightly so. Increasing volumes of data, senior leadership engagement and ongoing regulatory changes are diversifying the role for the better. However, the imperative question will be how technology can support the CFO in long term value creation. Holding opportunities for transformation, today’s CFOs must use this moment to design the future state for the finance function and define technology’s evolution within it.
The challenge hitting CFOs
In my experience working with CFOs, many finance departments rely on multiple, disparate spreadsheets to store, monitor and analyse a company’s finances. From project costs to employee salaries, each insight is stored separately, but then cross-tabulated in a multi tab nightmare or a “mega spreadsheet”, exacerbating risk.
With various costs, clients, projects, fees, profit margins, invoice data and project extensions stored separately, the CFO and team are forced to lean on the individual departments to share information needed upon request – which can often take weeks to collate. Many CFOs face frustrations as financial control is ultimately out of their hands, with critical business insights lost in a mirage of folders.
A common challenge I’ve seen is that CFOs are unable to manage profitability or control costs without facing hours of admin. When these inefficiencies are across the business’s financials, whole team capacity can be restricted spending unnecessary amounts of time on admin, limiting new business opportunities. According to the Professional Services Maturity Benchmark Report, the average sale from a consultant remains outstanding for 42 days. That’s 42 days of credit rather than cash.
As a result of these manual processes, CFOs and their teams face increasing administration pressures that impact the wider business. It can also leave employees feeling de-motivated and reduce productivity. CFOs need to be digitally empowered to overcome any economic challenge as we head into uncertainty. It’s time to move beyond spreadsheets.
Transforming with technology admin
The good news is, there is a solution to address the endless admin and streamline the businesses financial data: digitalisation of processes. With the cost of living reducing the margin for business error as overall profit margins shrink, addressing these simple administrative heavy tasks holds the potential to not only increase profit margins, but give the finance teams additional time to focus on wider business priorities.
By adopting a project-based ERP, we’ve seen the admin in finance be streamlined and de-risked, while transaction processing is streamlined, cash flow increases, and payment cycles are shortened. Automatic invoices can be generated which are correct the first time and every time. CFOs can rely less on spreadsheets, improving reporting accuracy consistently with less admin.
Automation holds the ability to not only streamline admin but connect all the businesses key data and insights into one platform. CFOs can leverage real-time and historic financial data to inform their strategic decision making with the wider senior management team. For example, they can easily draw critical insight from data to see where projects are going over-budget and take action to address the problem.
Although, a core barrier for CFOs is the fact that digital transformation has been put on the backburner. According to the 2022 Deltek Clarity Report, the pandemic slowed digital transformation down for many Architecture and Engineering Firms. It’s an obstacle that needs to be addressed as we head to 2023, empowering CFOs with the latest technology to super-seed expectations. With the cost-of-living crisis putting a crunch on teams, focussing investment on tech-led growth will enable greater flexibility to respond to economic issues with speed and precision.
Control over profit, loss and working capital
Every business can benefit from greater control over profit, loss and working capital as well as putting in place metrics that draw out drivers and long-term financial planning and analysis. But wider than the businesses bottom line, it enables efficiencies to be made which will benefit the business as a whole. An ERP solution can reduce the time from record to report.
The economic climate is uncertain. As we head into a challenging economic time, digitalisation will enable firms to put their best foot forward and unlock opportunities for growth and diversification. Whether it’s forecasting the businesses revenue or streamlining financial processes, digital transformation holds huge opportunities for finance departments.
The role of the CFO and how they will be measured has changed. Working alongside many progressive CFOs, I’ve seen first-hand their resilience. CFOs are in a really strong position to play a vital role in leading not just financial processes, but digital transformation and unification across the business in an integrated way. Forward thinking firms are and will continue to leverage the CFO as the human interface to business-wide digitalisation and data management. To enable this innovation and respond to change, companies must flex a different muscle and evolve in their digital journeys to achieve project success and ensure a proactive approach to tightening economic conditions.
