According to data from the Office for National Statistics, the UK finance industry had more than five vacancies unfilled for every 100 jobs between April and June 2022 – putting the sector behind only hospitality and tech firms.
Finding the best way to embed new talent into the finance team is crucial in ensuring they stay committed to the business for the long haul, but as times have changed, so have the challenges. This was the very topic of conversation at our recent Tipalti Illuminate event, where a panel of finance leaders discussed everything from the automation journey, including key drivers and the implementation process, to the importance of keeping young talent engaged and retained in a competitive market.
Fresh talent want more than mundane manual tasks
When it comes to graduates joining finance teams. Traditionally, they are expected to spend the first few years of their career getting to grips with the intricacies of financial processes. Whilst in years gone by young talent has accepted this as a necessary step within their development, the time in which they are prepared to stick around just working on repetitive tasks within accounts payable (AP) for example, has significantly shrunk.
According to Tipalti research, a third (32%) of young professionals say modernising finance with technology would be the most exciting problem to solve if they became a CFO. Given the ambitions of young talent, entry into the finance profession should no longer be confined to purely budgeting, forecasting and financial operations. Young professionals should be given the opportunity to be part of the pioneering direction that a career in finance can provide – if supported with the right processes.
Capitalise on young talent’s ambitions to add value and thinking strategically
Those entering finance teams start at the very bottom, getting to grips with the basics. But, too much time spent on repetitive tasks will cause an issue much quicker than it used to. Alun Davis, Head of Finance at Plentific highlighted this during the panel, “What I was finding was that our young talent were getting bored quite quickly and losing their attention” - this prevented Davis from getting the best from his team.
Our research revealed that 40% of young professionals see identifying new opportunities to accelerate growth, productivity or profitability as an exciting opportunity as a CFO. It’s clear there’s much to be excited about a career in finance but when stuck in the tedious lifecycle of manually-intensive processes employees, both new to the business and existing, will quickly become disillusioned and churn will be high. Alex Rogers, CFO at Design Cuts, notes that if their junior account hires were carrying out mainly manual, often mundane, tasks then they probably wouldn’t stay at the firm.
Businesses should be capitalising on this passion, instead of isolating them into the back office function. For Maria Liston, CFO at Basebone, she didn’t want her team to be continuously processing. Instead, she said, “I want them to provide useful insights for the rest of the business.” When new talent enters the team, businesses should see this as an opportunity to capitalise on fresh perspectives for strategic insights. But to realise this opportunity, businesses need to be asking how they can limit the mundane tasks to create a more engaged, inspired and motivated team, who are likely to stay at the business long-term.
Facilitate cross-departmental collaboration by increasing efficiency
Crucial to success through global financial instability is ensuring the business is lean, the finance team have an integral role in delivering streamlined operations which are agile enough to withstand change. Currently, 56% of finance teams spend over ten hours a week processing invoices and supplier payments – these inefficient and time-consuming tasks are simply not fit to deliver strategy at pace.
Davis recognises how crucial automation is to increasing efficiency and providing strategic insights for the business. He said: “the automation journey is about getting the information in the timeliest manner in front of my C-suite. And if we can't do that, these guys cannot make the right sort of business decisions.” Liston added, “we’ve grown but our finance team hasn’t…the choice was to invest in technology and not in headcount”.
Not only is the ability to rapidly turn data into insights for the rest of the business key for agility in challenging economic circumstances, but working smarter by improving efficiencies and procedures can result in higher levels of collaboration across the business. Liston said, “I can see much more collaboration, people having conversations about what this data actually means for the business… Automation has elevated the role of my team in the eyes of their peers and in other departments... they’re now a bit more interested in what we do in the sense of where we are adding value.”
For new talent in the business, the ability to see that their insights are not just numbers in a spreadsheet but inform a key part of the decision-making insight for the rest of the business will boost morale and satisfaction in the workplace.
Making the difference
To realise the full potential of the finance team as a strategic asset within the business, and crucially retain that talent, it must stop being siloed and labelled ‘the process department’. Increasing the efficiency of AP through automation can give the team time and autonomy to be integrated, and starting to make the difference as the crucial strategic arm of the business, providing credibility and improved decision-making.
Scale-up businesses will quickly outgrow their current systems – and indeed their young talent – if they do not build a finance department that channels teams towards more exciting, strategic endeavours. To support finance professionals as they craft their trade, it is crucial that finance leaders lean on automation to unleash time for these opportunities. The business will be paid dividends in increased productivity and the ability to capitalise on their talents’ analytical expertise.
Budging and correcting your forecast should come as a benchmark practice. Below Finance Monthly hears from Chris Howard, Vice President of Customer Experience at Centage Corporation, on the growing importance of forecasting.
On January 1, a new set of tax cuts went into effect designed to stimulate growth in the small to mid-size business sector. I speak to a lot of CEOs who oversee companies with revenues in the $50 to $150 million range, and they’re approaching the start of the New Year with cautious optimism.
In addition to the tax breaks, there’s a lot to be optimistic about: low unemployment and inflation, coupled with steady growth in the GDP and stock markets. But there’s also plenty of reasons to be cautious as well. What happens if the tax cuts hit middle income families in states with high local and state taxes? Will they be able to afford their mortgages? If not, what’s the impact on the economy if many default on their mortgages?
Many CEOs tell me they’d feel more confident if they could keep better tabs on their financials. They’ve put their plans into place based on economic and market assumptions made a few months back, but will they hold up?
My message to them is always the same: forecast Quarterly, or even monthly. As one CEO of a manufacturing company who updates all of his forecasts weekly told me: “I try to analyze actual results against my forecasts on a weekly basis, because it gives my organization 52 chances a year to make corrections.”
Forecasting is a critical endeavor in times of cautious optimism. By treating your budget as a valuable asset that you consult regularly, you give your management team the opportunity to course correct as conditions change or new trends emerge.
To a certain extent, forecasts represent a best guess of what lies ahead. Predicting unforeseen trends and opportunities 12 or 18 months in advance is difficult in the best cases, and nearly impossible when the economy or specific industry experiences uncertainty or volatility. For this reason, it’s worth considering a shift to a rolling forecast (aka rolling planning system).
A rolling financial forecast allows financial teams to project out as the year progresses in order to accommodate trends that affect key business drivers. Typically, with a quarterly rolling forecast, businesses project out approximately four to six quarters ahead, irrespective of the calendar date or year. Of course, successful rolling forecasts depend on knowing a company’s key business drivers, so that the team can watch them for unplanned surprises.
I’ve also become an advocate for balance sheet forecasts. Few CFOs take the time to forecast their balance sheets, preferring to rely on their P&Ls to monitor their cash levels. Granted, forecasting a balance sheet is a difficult task, and nearly impossible to do in Excel. But I’ve seen how valuable the process is, given the critical details often missed when relying on the P&L.
For instance, let’s assume a company has earned $1 million in revenue in March, and incurred $800K in expenses. The P&L would indicate that the company has $200K in cash on hand when in fact, that may not be the case at all if the sales team offered unusually long payment terms for a client. That means the company won’t realize a chunk of revenue until some point in the future. And although it has incurred $800K in expenses, its own payment terms may mean it doesn’t need to pay an invoice immediately or all at once. Deferred revenue and liabilities are the kinds of details that the balance sheet alone can capture, which is why forecasting it monthly is the only way a CFO will know how much cash the company will have in the months and quarters ahead.
Any company seeking growth in 2018 would be wise to include sensitivity analysis as part of the balance sheet forecast. There are many ways to book actuals and financial teams may want to spend some time determining the optimal process for their company. For instance, experiment with sales and expenses within the P&L to see how they flow through to the balance sheet. This exercise will help the management team make better and more accurate decisions.
The largest part of a budget for many companies is workforce expenses. Salaries, hourly, overtime, taxes (employee and employer), 401(k) contributions, insurance, employee stock purchases, garnishments, pre-tax items, post-tax items, holiday pay, sick day pay and vacation pay, are just a few of the items that make it complex. And that complexity will only increase as a company grows and adds headcount. The more detail entered into the workforce expense forecast, the more accurate it will be.
Getting There
Earlier I noted that many CFOs want to forecast regularly, but don’t do so. Coordinating data to analyze, report, and predict performance simply requires too much time and effort, but that’s changing for two reasons. First, new budgeting platforms streamline the process, applying intelligence to ensure inputs are applied accurately and automatically.
Second, critical business systems, such as CRM and HR platforms, generate robust data that can be entered into the budget modeling software, enabling CFOs to create highly detailed forecasts. When combined, these two trends allow financial teams to quickly identify where, when and why actuals differ from plan, and inform the management team so it can take appropriate action.
Every employee of a company has a part to play in meeting the business plan set forth in the year ahead. One of the best things a CFO can do is to jettison Excel, and replace it with an automated platform.
By Daniel Mason, Managing Director UK, Prophix Software
Headquartered just outside Toronto in Canada, Prophix Software is a leading developer of innovative performance management solutions, designed to automate financial and operational processes. Thousands of finance leaders in nearly one hundred countries use Prophix to empower their organisations and gain valuable insight into business performance. Prophix and its partners deliver superior value by combining high-end functionality with low cost-of ownership and fast implementation. Daniel Mason has been with the Prophix organization for just over 7 years, having spent a total of 17 years working within the corporate performance management sector. He is currently responsible for Prophix’s UK operations, including sales, marketing and professional services.
Here Daniel explores the modern finance function, the skills finance leaders need to recruit and offers his views on how organisations can prepare for the future by investing in their finance teams.
You can’t handle the truth
The truth of business comes out in the numbers. Not just revenues and profits, but headcount and staff turnover, customer churn and marketing reach.
Finance has historically been the natural home for numbers in an organisation. But recent reports show that finance teams are struggling to keep up with the growing demands of modern business. A lack of data literacy, continuing reliance on manual tools, and poor collaborative skills, are seeing the finance function side-lined as business transforms in this data-driven age.
The challenge is more acute now, highlighted by the capabilities brought by global connectivity and new technology. But issues of skills development and technology investment in finance are not new.
I’ve been working in the finance world for the last 17 years and the same issues were apparent when I first moved over. Prophix was founded on the recognition of some of these issues 30 years ago. Yet still, many – perhaps most – finance teams have not changed their practices. Why?
Barriers to progress
In my experience there are three things that hold the finance function back.
The first is a lack of resources. Even though IT was born out of the finance function in many organisations, investment in IT for finance has long been hard to secure. Because it doesn’t have a visible ‘front line’ effect on sales, it’s often overlooked.
The second is the knowledge base. Too few finance professionals have been on a mission to grow their skill base and expand their knowledge beyond its current bounds. The reasons for this are sound: the realities of operating a modern finance function haven’t left much room for personal development. But breaking the cycle of all-hands-to-the-pumps manual processing requires that time to step back and analyse the current processes.
The third reason is a lack of soft skills across the function - particularly communication. This isn’t about lazy stereotypes of finance professionals. It’s about formalised training in building collaborative relationships and releasing staff to have the time to go and build them. While other functions have moved on in this regard, finance has all-too-often remained static.
Building maturity
It’s possible to begin to quantify the problem, or at least recognise just how widespread it is amongst finance teams. The global analyst firm Gartner created a ‘Maturity Model’ to map the transition from historical finance practices to new. That means moving from a messy world of manual data manipulation, isolated in its own silo, to being truly smart about data, and providing strategic insight across the business.
In this Maturity Model, Level One represents those unaware of corporate performance management (CPM) tools – the term for technologies that enable more automated and integrated data handling in finance and beyond into business operations. Level Five represents companies making best use of data – connecting across departments and driving business strategy.
What’s interesting about Gartner’s analysis is that in the most recent update of its research, no companies were found to have reached Level Five. That’s no companies, of any size.
At Prophix, we work primarily with mid-market companies. We, and they, often expect that the largest global organisations will be significantly more sophisticated. But it seems not. It seems all finance teams in every size of organisation might be facing the same barriers to progress.
The ideal modern finance function
These barriers aren’t just bad for the finance function. They’re bad for the business. Finance’s requirement to look backwards as well as forwards puts it in the strongest position to drive strategy within the organisation. By underinvesting in skills, development and infrastructure to advance the finance function, the business is missing out on better insight, evidence-based strategy and enhanced day-to-day decision making.
There are three core areas where investment can unlock a transition of huge value to the organisation.
The first is what might be called ‘Smart Compliance’. Finance teams invest untold time – and sweat – in the production of mandated reports of one form or another. Still today, most organisations produce these reports through manual manipulation of spreadsheets with very poor repeat-ability and little robustness. The skills of manipulation required for a particular task are often locked in the head of a single individual, and audit trails are incredibly hard to produce.
Technology can remove the burden and often manual process of compliance through “Smart Automation”, which not only frees up human resource, but dramatically increases transparency and reduces risk. With time freed, finance teams can start to address more forward-looking issues of strategy and operational readiness.
This operational readiness forms the basis of the second major step. In an accelerated world, getting good information at speed is critical to good decision-making. Given the resources, finance can be the home of “Operational Intelligence”, giving leaders and departments the insight they need to improve decision-making. Analysis can be made available in near-real time against external events.
Of course, sometimes organisations need to look well beyond today and it is improved “Foresight” that forms the third pillar of improved service from finance that can be unlocked with investment. Planning stops being an annual trudge through budgets and likely expenditure, and becomes a process of acquiring and qualifying strategically valuable foresight. This delivers increased accuracy of forecasting, multi-dimensional modeling, resource correctly allocated to sales expectations and much better reconciliation of cross-functional planning. Imagine being able to quickly realise multiple future scenarios and explore the impact of different factors and decisions on the organisation’s success.
Partnering across the business
The ideal finance team should be seen as finance partners, having the trust and understanding of all departmental managers. It’s not enough to simply have the skills and collect data, analyze and report it as required. Since almost everything a company does is ultimately routed through finance, finance leaders need to be able to cooperate, partner and work efficiently with the teams and departments that report to them.
This highlights the importance of investment well beyond technology and systems. Skills remains a big gap in the finance function, both technical and more general.
The technical skills gap is in systems thinking, and financial planning and analysis. With so much effort devoted to manual processing, teams have lacked the opportunity to go beyond the immediate challenge and start to look to the future. There has been little opportunity below the most senior levels to examine operations – both in finance and the wider business - and consider improvements. Freeing time through automation creates this opportunity and the skills gap rapidly becomes apparent: even when the tools are available, teams don’t have the skills to apply them to their maximum potential. For this reason, investment in CPM should be paired with investment in up-skilling to maximise the benefit.
The softer skills gap is in communication, though perhaps calling it a ‘soft’ skill underplays its importance. To deliver the most value to the business, finance teams need to get well beyond the borders of their function and learn to communicate effectively, gain mind-share within departments, and socialise ideas. Building trust across the business will allow finance to enhance every department’s capability with better insight and support for improved foresight and operational decision making.
The truly modern finance function features a mix of skilled individuals who understand new technology, and who are able to interpret data, come up with a solution, point it in the right direction, and then are able to take that information and communicate it effectively through the organisation. Finance leaders need to look at training the people they have, but also at recruiting individuals who bring this mix of skills. People who have the financial intelligence and commercial acumen to understand the data, and see what’s going on within an organisation, and who are confident interacting with their colleagues and communicating information and ideas.
Preparing better for the future
At Prophix, we see lots of finance leaders who are happy with a large team dedicated to manually processing data. They don’t want to grow their role. They don’t want to embrace change. Until a risk is realised, or competitive advantage is lost. By then it can be too late – for the finance function, which has lost its role as the arbiter of truth. Or in the worst cases, for the business.
Finance leaders with ambition need to get closer to the CEO and push the business case for change. They shouldn’t just be signing off big-ticket investments in all the other areas of the business going through rapid transformation, it should be part of that transformation. Performance management may be thought of as a low priority because it’s a ‘back office system’. But extensive research shows that companies that invest in performance management generally outperform their peers 2:1 within the marketplace. The business case for change is strong.
Investment is just the start though. As Gartner’s Maturity Model shows, building a truly modern finance function is a journey, and one that all organisations are still on. 70% of organisations are still only at Level One, not even aware of how much better things could be.
Delivering the business benefits of a modern finance function requires continuous evolution, review, and investment. It's not a one-off project and it certainly can’t be addressed purely with technology. Skills and talent are absolutely crucial, both developing existing talent and recruiting the right new people into the organisation. People who blend technical skills with systems thinking and the confidence to deliver that value across the organisation.
As with any journey, the starting point is to assess where your company is right now. At future-of-finance.com we have developed a comprehensive audit tool that will give you an immediate idea of your position and provide you with a 17-page report with practical guidance on what to do next. So get going today.
Read more at www.future-of-finance.com
