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While investing in such technology has been vital to helping many businesses survive and thrive in the pandemic, one department that is often overlooked is finance. Rob Israch, General Manager Europe and CMO at Tipalti, explains why this needs to change.

Despite advances in technology and the adoption of cloud accounting software over the last decade, it is still common for businesses to complete many finance processes manually. In fact, we know from our recent research that nearly a third (29%) of CFOs in the UK are dealing with more manual financial operations than ever before. Not only is this wasteful in time and money, but it is also holding finance leaders back from working on important strategic initiatives. We know that driving international expansion, incorporating environment, social and governance (ESG) and sustainability, and dealing with changes brought about by the global pandemic and Brexit – are all causes of complexity for already-busy CFOs.

In order for finance teams to evolve and become the strategic heart of a business, instead of being siloed and viewed as only fulfilling statutory requirements, adoption of automation technology is vital. Any resistance around adopting such technology, which is often that the perception that manual operations is good enough, can be squashed when we look at the benefit it brings businesses. Applying new tools to automate everyday tasks such as payroll, accounts payable, purchase order management, invoice management, group consolidation, and expense management will increase the efficiency of finance teams, allowing them to produce fast and high-quality information. In turn, stakeholders can benefit from increased agility to act on timely management information. Below are the specific benefits businesses that modernise their finance department will see.

Payroll

Payroll is a critical finance task. Employees are one of the most important assets within any business, so it's important to keep them happy by paying them accurately and on time. However, it is easy to get wrong by failing to submit up-to-date information about leavers and joiners, and not providing accurate employee tax codes. Its completion also has added pressure due to being time-sensitive and needing to be performed within a precise and tight deadline each month.

Payroll systems usually are not connected, meaning finance teams have to manually key in or export data to core accounting software and banking providers. However, many payroll processes can now be automated using solutions connecting accounting software and banking providers to provide an all-in-one workflow - saving time and reducing the chance of human error by overcoming the need to move data into different systems, either manually or by exporting and importing CSV files. A particular benefit is not having to recreate payroll journals, which is a notoriously fiddly task.

Accounts payable

Similar to payroll, accounts payable is an essential and regular task for finance teams. Ordinarily completed once a week or fortnight, it takes significant time to collate all invoices, enter payment details onto banking platforms and attain the necessary approvals for payment.

Incorporating vendors that leverage automation to facilitate multiple approvals and pull payment data from accounting software to a banking and payments interface, removes the friction associated with payment runs so they can be completed seamlessly, while also reducing the risk of manual payment errors and fraud.

Many accounts payable solutions reconcile payments automatically, saving further time, which can be used to complete higher-value tasks. A further benefit is better supplier relationships, providing visibility of payment status and enabling proactive communication to suppliers, while also helping reduce the likelihood of invoices being paid late, removing the risk of late payment penalty fees.

As CFOs’ roles and responsibilities grow, an increasing amount of pressure is put on the finance team to focus on tasks that help grow businesses – it’s essential more importance is placed on adopting finance automation as part of businesses’ wider digital transformation plans.

Purchase Orders (POs)

POs play a key role in financial control, with many companies insisting on their use for spend above a particular threshold. The creation and approval of POs are commonly a pain point for companies. There can be a disconnect between budget owners and suppliers, resulting in invoices being raised with incorrect or fully utilised PO numbers.

Using an automated PO tool that integrates to the core accounting platform streamlines processes so they can be created on the fly or from within forecasts. Additionally, they can auto-match invoices to PO numbers when received, eliminating the risk of being assigned incorrectly and delaying payment to critical suppliers.

Group consolidation

A number of core accounting software providers don't include functionality to consolidate at a group level. Finance professionals can get around this by exporting figures for individual companies into spreadsheets and manually making adjustments to consolidate group companies. Alongside the risk of entering data incorrectly and a potential delay to month-end close, this approach requires judgment due to often needing to consider which exchange rates to use and making adjustments based on the accounting standards under which the parent company is prepared. For example, this may include whether to recognise unreleased foreign currency gains/losses in the balance sheet or profit and loss, or revenue recognition treatment.

Using core accounting software that has consolidation features, or a third-party consolidation package, will ensure consistent treatment across all group companies and save finance employees from the hassle of exporting and manipulating accounts data.

Expense management

Managing employee expenses has historically been a chore for finance teams due to having to chase colleagues for their reports at month-end, alongside also needing sign-off from managers for approval. Additionally, the quality of submitted reports is often patchy, with receipts missing and spend being taken to the wrong accounting category. Embracing an automated expense management solution results in more accurate expense reports, allowing for easy upload of supporting receipts, OCR data extraction, and easy imports into accounting software.

As CFOs’ roles and responsibilities grow, an increasing amount of pressure is put on the finance team to focus on tasks that help grow businesses – it’s essential more importance is placed on adopting finance automation as part of businesses’ wider digital transformation plans. Embracing automation for all of the above tasks will benefit finance teams and the wider business. Finance team members will be able to use their time to produce up-to-date reports, providing financial and operational insights into company performance to grow sales, optimise KPIs and finetune acquisition channels.

Finance Monthly hears from Colin Rowland from Apptio who asks the question: “Is this a trustworthy way to manage spend that is often billions of dollars across thousands of vendors and contracts, hundreds of employees, and more?”

Since the spreadsheet was popularised in the 80s, it has become the tool of choice for CFOs managing data and tracking costs across businesses. But in today’s digital age, spreadsheets are too cumbersome, slow, complex and constantly changing, to provide truly comprehensive oversight of costs and data in business.

Nowhere is this more evident than in managing technology spend, and it is abundantly clear that the IT department needs to upgrade its approach in order to properly provide CFOs with the monetary direction necessary to make smart, informed and strategic budgeting and investment decisions.

CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department. With Gartner predicting that by 2022 businesses will be spending more than $3.9 trillion on IT, there is a huge level of pressure on finance professionals who need to track and manage these outgoings.

CFOs are required to oversee budgets across the whole business, yet while sales and finance have a wealth of tools such as CRM and ERP to assist them, there has been no purpose-built system for the technology department.

Kickstarting the culture change

To kickstart a move away from managing spend in static spreadsheets, organisations need to implement a culture change when it comes to technology, tracking spend, and understanding value of investments. Once viewed as simply a running cost of the business, technology is now a key deliverer of business value and revenue generation. That means the way investments are tracked, managed and communicated needs to be clear, open and transparent between IT and the business in a way that was previously unnecessary.

One method some organisations are adopting is the discipline of Technology Business Management (TBM). It focuses on providing a practical framework for finance and IT leaders seeking to manage and communicate the value of technology spend. It encourages translating IT usage and cost data from a list of bills into a source of business intelligence that can drive digital innovation. This allows the CFO to make more informed decisions when it comes to IT spending.

However, legacy tools simply don’t provide the added value needed to enable the communication and discussion needed around technology costs. It’s effective for data input and manipulation, but that’s no longer enough when complex technology costs need to be given to finance leaders in a digestible manner. Where this budgeting data is stored in various spreadsheets that are all siloed from one another, it can be nearly impossible to settle upon a single source of truth for the overall figures.

Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.

Managing technology costs using… technology

This is where custom tools come in. They can provide additional capabilities and processes that enable businesses to not only accurately track their IT costs, but analyse them quickly and effectively, providing insights which are intelligible for those not well-versed in technology. And the more advanced technology solutions will be able to leverage machine learning to make this automated and free up employee time and resources for more value-additive work.

IT and finance leaders can then work together to drive forward business strategy based upon this knowledge. Spreadsheets do not enable actionable insights and cost analysis needed in the modern technology landscape for several reasons: they’re clunky, they’re rigid, and they’re slow.

Take the complex nature of public cloud spend, for example. A pay-as-you-go costing structure generates masses of data in by-the-minute billings that need to be tracked; meaning there is no guaranteed regular monthly spend to budget against. Even the most finely-tuned spreadsheet would struggle to track the thousands of lines on a cloud bill from separate business units, especially when many businesses are now embracing cloud services from multiple vendors.

The agility that disciplines such as multi-cloud bring also means that businesses must be prepared to adapt their cloud strategy quickly to suit their needs. Approaches that work now may be obsolete in three months’ time, and it is necessary to have a solid framework and the right tools to allow such changes to progress smoothly. For example, using Apptio’s TBM solutions, Unilever was able to move away from legacy infrastructure to cloud and increase the company’s digital innovation budget by more than 20% to provide consumers with an ‘intelligent’ buying experience online and in-store.

When it comes to technology, using spreadsheets to track and manage spend is holding businesses back.

Another complicating factor is the staffing cost associated with manning spreadsheets. Consolidating various spreadsheets to get a transparent view of IT spend can be a painstaking task, taking many hours and potentially resulting in human error. Custom tools can work to streamline and speed up these processes, while ensuring that errors do not occur. This allows IT teams to spend their time more effectively elsewhere, improving the overall efficiency of the department.

When it comes to technology, using spreadsheets to track and manage spend is holding businesses back. While custom tools may necessitate an upfront investment, they are undoubtedly worthwhile as a flexible long-term solution, providing agility, speed and clarity where spreadsheets cannot. By using such tools in conjunction with the principles of TBM, CFOs and the IT department can move away from spreadsheets and work towards a partnership in which insights into technology spend form a key part of the business’s ongoing strategy.

To hear about the future of the finance function and the need for bringing a data scientist into the finance environment, Finance Monthly speaks with Angela Mazza Teufer, Senior Vice President of ERPM at Oracle.

We are living in the age of data, one in which both traditional quantifiable information and unstructured data is being hoarded in huge amounts. It takes a specific set of skills to draw useful business insight out of this data, and that is why data scientists have become so crucial to the modern business.

The introduction of GDPR regulation earlier this year has forced companies to become more data literate, and has in some cases seen them appoint Chief Data Officers (CDOs) or build teams responsible for overseeing data governance.  This represents an important step towards a future where all businesses are able to make the most of their data, but it takes more than data management to turn data into value. This is where data scientists become crucial, and particularly in select business functions.

As a function that has always dealt in data and whose remit has expanded significantly in recent years, the finance team has a great deal to gain by bringing advanced data expertise into the fold.  Finance teams have traditionally been made up of people with a specific set of practical skills, including management accounting, auditing and forecasting.  While these remain important, businesses increasingly expect their finance department to play a more active role in driving organisational strategy, which requires a more diverse set of abilities. Data science is the most important of these.

What data science brings to the table

One of the biggest challenges faced by businesses is how to make sense of the enormous volume of data they collect, from customers, internally, and increasingly from third parties. Finance teams could easily spend all of their time just gathering and analysing data on business assets and performance, but the challenge today is to distil this information into something meaningful, especially as even financial reports are increasingly filled with ‘intangible’ assets that are not so clearly defined as revenue and profit, such as customer reach.

Having a data scientist embedded into the finance function will provide the specialist understanding and valuable resource to combine information in all forms, identify patterns that might otherwise have gone unnoticed, and most importantly draw out actions for the CFO or finance director to take to the board.

This also frees up other members of the team to focus on their areas of expertise rather than expecting them to pick up a whole new set of skills and take on a role they never signed up for. No matter the department, trying to ‘upskill’ an employee in data science underplays the importance of the role and makes light of the years of training and experience that specialist data scientists undertake.

Often, some of the most valuable information companies collect today starts life as an unstructured, chaotic set of data points. It ranges from concrete demographic data on their customers to news events and sometimes even weather patterns. The task of combining all of these streams of information and making sense of them requires the full-time attention of a dedicated specialist. It is certainly not something that core finance employees can accommodate on top of their existing responsibilities, nor can it be effectively undertaken without the appropriate training.

In short, it is much more effective to bring a data scientist into the finance environment and educate them on its specific needs, data types and ways of working, than it would be to pile complex data science responsibilities onto existing team members.

The future of the finance function

The changes to the role of the CFO and the growing demand on the finance function to be more forward looking and predictive have been well documented, but many organisations still find themselves in a period of transition. They understand what’s expected from them but are still setting up their teams and processes to deliver on this expanded brief.

It is enough of a challenge to forecast accurately in periods of uncertainty, without having to collect, analyse and process data from beyond the balance sheet as well, but it can be overcome with expert support.  By bringing the right mix of skills into the finance team, companies can develop the skills they need quickly and start reaping the benefits today.

Richard Stoffelen is the Chief Financial Officers of Centogene - an international privately owned BioTech/HealthTech company, based in Germany. Here he tells us about what it’s like to be the CFO of Centogene and offers his piece of advice for other financial directors. 


 

What were the goals that you arrived with when becoming the CFO of Centogene over a year ago?

My primary goals were to professionalize the finance department of this fast-growing company, to raise a first round of external capital (Round A/Pre-IPO funding), and to prepare the company for a successful IPO.



Would you say that you have started working towards accomplishing them?

Together with the existing and new Management Team and greatly supported by the Sr dir Corporate Finance/Investor Relations, we have been very successful so far, which was confirmed by successfully raising 25 million in the Round A funding.

Currently, we are working on the further continuous growing of the company and its processes, and towards the IPO plans in the near future.

 

What is the company’s growth strategy? What part do you play in it?

The company has been on a great growth trajectory ever since its foundation about 10 years ago. We have positioned Centogene in the international medical diagnostics field. We grow very fast in our pharmaceutical segment, where we deliver services to the global orphan drug developing companies: a.o. patient screening programs, assistance in drug-discovery and –development programs, longitudinal monitoring programs, developing biomarkers for monitoring the patients and improving the early diagnosis.

 

My role in all of this is to support the strategic business, with adequate financial modelling, planning, budgeting and funding.

You have over 25 years of broad experience with international audit functions – how did your career path lead you to becoming the CFO of Centogene? Which one of your experiences was foundational?

After being in the Audit profession for a long time, a lot of the roles I had played in that field have contributed greatly to my new role:

·         Running an office, and being part of the management team of KPMG for the south of the Netherlands has strengthened my managerial experience.

·         Doing management development roles in KPMG in the Netherlands, Hong Kong and China was a crucial experience that helped me in the development of the new management layer at Centogene.

·         Working on business development in audits in the past has provided me with valuable knowledge in relation to doing what I do now when securing funding for Centogene.

·         Working across the world in various roles proves to be extremely helpful in a managerial role, especially in a company with employees from over 30 countries.

·         Having been involved in many strategic processes, helps me tremendously to look around the corner of the pure finance function, which is crucial to deliver on all the needs for a modern CFO.


What is your motivation behind working for a biotechnology company?

It is fascinating to be at the brink of many new developments that really make a direct impact on the lives of many people around the world.
It is fascinating to be in this fast-moving industry, where new opportunities arise on a daily basis, and where we, as management, have to make important choices on a daily basis in relation to the right opportunities to pursue.

 

Where do you see Centogene in 3 years? What does the future hold for the company?

In my opinion, Centogene will expand significantly in 3 years and will be delivering even more services to patients and the orphan drug industry, having an even bigger impact on people around the world – and not just patients and their families, but also on investors in both our company and the orphan drug manufacturers.

What would be your top three tips for other CFOs?

1. Be aware of the business needs, don’t focus solely on the finance role.
2. Always be prepared for the unexpected.

3. Enjoy what you are doing and cherish the contribution you can have in the development of your company.

 

 

About Centogene:

Centogene - The rare disease company

Transforming global genetic date into medical decisions.

 

While only a small number of people are suffering from a singular rare disease, 350 million people worldwide are suffering from rare diseases, whereas 80% of rare disease are caused by mutations in our genome.
Centogene is ideally positioned to serve and support patients and physicians worldwide while accelerating drug discovery and development of orphan drugs.

·         we are the sole provider of a GLOBAL perspective to >3.200 rare diseases

·         we close the gap between the diagnostic and therapeutic hemispheres

·         we continuously translate scientific discoveries into innovation like new biomarkers and novel molecular tests to guide drug development and clinical practice

·         we leverage our vast –omic data to support the development of the personalized therapies of the future

·         we have the largest genetic mutation database (CentoMD®) regarding rare diseases with patient date from over 115 countries worldwide

 

Website: https://www.centogene.com/

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