Why Finance Teams Need an Upgrade this Budgeting Season
Digital transformations and tech upgrades for the team are necessary at some point, and strategic timing should be well though-out, but for many the planets don’t align, and further difficulties ensue.
Below Finance Monthly hears from Adam Rice, VP Product Development, Centage Corporation, who touches on the need to expand budgets and care3fully account for said upgrades.
For many businesses, the third quarter is budget season. It’s a busy time for the finance team, as they meet with department heads and general managers to predict what the coming 18 months will look like for the business. As preoccupied as they are, I think they would be wise to take the time to upgrade to a cloud-based planning platform sooner rather than later. Why? Because in the end they will save themselves time, work more efficiently and achieve better results. Specifically, a cloud-based platform will enable the organization to move to a solid financial plan with a rolling forecast, updated on a monthly basis. And when you think about it, a rolling forecast is far more accurate than a budget created in July 2019 that attempts to paint a picture of what December 2020 will look like.
If changing horses in the middle of the race sounds daunting to you, consider all of the circumstances small to midsize companies face in today’s business environment.
SMBs Need to Step-Up to Global Challenges
SMBs have long been the backbone of the American economy and we count on them for job growth. According to the U.S. Small Business Administration, small businesses employ 58.9 million people, accounting for 47.5% of the country’s total employee workforce.
Technology has fostered competition from all over the globe. Manufacturers are competing with countries where labor costs are low, as are retailers that are now competing head-to-head with ecommerce sites that offer international delivery. For example, the Alibaba Group, which owns AliExpress, earned over $30 billion in sales in a single day in 2018.
This kind of competition means that SMB leadership teams need to make better decisions faster. What is the impact of opening a new sales office in the Northeast, or applying for a loan to expand manufacturing capabilities on the P&L? What happens if we assume 20% sales growth but we only realize 17.5%? Business managers need to see the cause and effects of their decisions on the company’s financial statements – a feat that’s nearly impossible using a spreadsheet.
On the other hand, a cloud-based system allows financial teams to do what-if scenario planning quickly and easily. As with all things cloud-based that include intelligent APIs, it’s simple to connect multiple data sources together and then overlay analytics and data visualization to make smarter decisions.
Streamlined Implementation and Upgrades
SMBs have limited IT resources and they need to be extremely selective as to which platforms to purchase as a result. Investing in a project that ultimately fails can have devastating consequences, potentially threatening a company’s viability.
Cloud-based solutions tackle these challenges in multiple ways. For instance, many offer out-of-the-box workflows for financial reporting, forecasting, scenario validation and so on, which means implementation is streamlined. Upgrades happen automatically, which means IT resources are spared and end users get to automatically take advantage of new features and functionality. This is a critical consideration as many platforms are beginning to add artificial intelligence and machine learning to key tasks, such as compliance.
Scaling is also much easier, as native cloud-based platforms can scale up and down as a business grows or as seasonality affects demand.
Cloud-based systems often act like data warehouses, centralizing multiple data sources and tracking a wide variety of KPIs and metrics. This is critical functionality for business managers seeking to connect the dots and assess the cause and effect of their business decisions. And if the data is always on, meaning it’s pushed to the platform automatically, managers have up-to-the-minute insight into the health of the business.
Many platforms come with data visualization tools or dashboards that allow users to slice and dice information in myriad ways. The benefit here is that it allows all managers to view the data in ways that are meaningful to them. For example, the head of sales can monitor the key metrics that they care about with a higher degree of accuracy, and most importantly, drill down into the data to uncover the source of anomalies.
In fact, the data visualization tools allow the financial team to provide data-driven answers to the tough questions that CEOs, boards and leadership teams ask daily.
SMBs are on growth paths; increasing the size of their market share is always a top priority. As the business grows, and as planning becomes more complex, well designed cloud-based platforms can handle the complexity. These platforms let financial teams see into the future, test the impact of multiple scenarios and ultimately make faster decisions with confidence. They’re also far more likely to adapt to evolving business needs and goals. So while it may take a bit of work to transition this budget season, it will be time well spent.