The finance department touches every single area of the business, from internal operations to customer contracts. Yet the finance function has been relatively stagnant, often seen as “bean counters” warning of new spending while the rest of the organization embraces technology and new techniques.
Until now. Facing both macroeconomic pressures and pressure from within the business, the finance function is at a precipice: needing to transform and add value in a way that will help companies navigate any economic circumstances.
A recent report by Float featured interviews with startup finance experts, exploring in detail why financial transformation is essential for startups now, impacting their people, processes, and systems.
The finance function serves two very crucial roles in the business. First, it tracks the flows of cash in a business, ensuring that both the metaphorical and physical lights remain on; a big part of this role is also revenue collection.
Accenture research found that transforming the finance function can result in a 35 to 40 percent decrease in period close times, and a 25 percent reduction in cycle time for delivering reports.
“That’s the most critical piece, and no matter what else is happening, it’s needed for the business to continue driving forward,” said Ata Haee, controller for Toronto-based Amazon cross-selling software platform Carbon6.
Second, finance provides the reporting that is necessary for financial, accounting, and regulatory compliance. Finance can also be a strategic partner to the business, but that role has typically been pushed to the back burner as the other two roles took up the lion’s share of time and resources. This dynamic changed dramatically with the COVID-19 pandemic and ensuing changes to the working world.
Brendan White, Float’s Head of Finance, said a series of “significant shocks” forced businesses operating from 2020 to 2023 to balance interest rate changes, increasing environmental, social, and governance (ESG) demands, remote and hybrid work arrangements, and inflationary pressures. These pressures also changed how buyers do business, adding complexity to how companies make, reconcile, and receive revenue. An increase in employee expenses or new line items such as remote work home set-up packages only added to the mess.
This storm of new business pressures pointed to a simple reality: businesses could not weather the storm without insights about where their money was going and insights about where best to invest their resources.
“It’s required finance teams to be more agile, to think more critically, and to really think about root causes, understand systems a lot better, and understand data more than they’ve ever had to,” said Haee.
The four pillars of finance transformation
To navigate this forcing function of change, the experts cited in the report said finance leaders need to think about four key things. First is an advanced reporting function that can be used to gain a clearer growth picture: for example, understanding more about customer patterns by comparing purchase data (from finance) with marketing campaign attribution data (from marketing). Without a proactive reporting function from finance, the marketing team will only get half the story.
This is also where cloud computing can add immense value. White explained that financial information often used to be siloed in different platforms, but “now the systems can talk to each other,” making it easier to connect the data necessary for advanced reporting.
“It’s about asking the strategic question and connecting the dots that exist in the data to answer it,” said White. “That’s where the finance leaders have really changed; before it may have just been focused on finance, and less on the actual business, now it’s all one big data story that needs to be told, and the person who understands all sides of it is best suited to tell it.”
After high-quality reporting comes process automation. Even small automations—for example, automatically compiling payroll rather than doing it manually in Excel—can save hours of work and remove the risk of human error. The report cites Accenture research which found that digitally transforming the finance function can result in a 35 to 40 percent decrease in period close times, a 25 percent reduction in cycle time for delivering reports, and 99 percent accuracy in reporting.
“In every Excel doc you’ll find errors,” said Robert Ashe, the director of finance for Carebook Technologies. “So, part of [automation] is saving time, saving dollars, but saving mistakes can be a huge part of it as well.”
The third pillar—interdepartmental partnership and collaboration in service of business growth—leverages the finance team’s position as the centre of operations, turning that into an avenue for finance leaders to extend beyond simply providing information and into advising on next steps. For example, the advanced reporting function helps deliver customer purchase data in collaboration with marketing’s customer segmentation and automating manual tasks saves time. With that insight and time, the CFO can work with the marketing team to dive further into financial data, helping the marketing team identify which channels are the most profitable so they can double down. Finance also has a financial health ticker for the business because they can see the big picture, which means they can sound the alarm on problems that need to be solved.
To execute the previous three pillars within the business, finance professionals need new skills. That means leaders need to prioritize talent development to ensure the business can transform. While a CPA designation covers a lot of financial data analysis, it doesn’t teach overall “technology expertise,” a skill cited by research firm Robert Half as crucial for career development. Experts in the report say that university programs may catch up over time, but in the meantime, companies have to add it to their onboarding and professional development training.
“Online resources are amazing, so a lot of it is doing research by yourself,” said Ashe.
For leaders looking to provide a curriculum for their team, Ashe said the key is to build a basic understanding of the relationship between databases and APIs, noting with that knowledge “you can understand any finance system in a couple days, because they all kind of work the same.”
Beyond skills training, leaders need to be aware of a cultural hurdle: a lot of finance employees don’t think they need anything more than a CPA designation.
“It’s kind of funny, you get a CPA designation and think you’re set, but it’s really not the case anymore,” Ashe said. “The knowledge you get just from watching YouTube videos and learning systems that way is actually becoming much, much more important.”
Finance leaders face more complexity than ever, and a need to move beyond a back office function to continually add value. To accomplish this transformation, leaders need to build the infrastructure that turns existing financial data into value-add insights for the business. They also need to think about how to apply technology to not only save time but generate insights that manual analysis cannot deliver.
“If you don’t have people that are actively looking for ways to contribute value to the business, it won’t happen,” said White. “With the right tools and training that individual should be able to accomplish these initiatives themselves.”