Finance functions have suffered chronic underinvestment for many years. Compared to the front-facing customer functions, finance, and the back office that facilitates sales, are under increasing pressure as businesses grow and change. Putting finance investment on the backburner isn’t just an unnecessary business risk, it also means missing out on the substantial rewards of an innovative finance department.
The risks of underinvestment in the finance function.
According to FSN’s Innovation in the Finance Function survey, 45% of CFOs and senior finance executives say their rate of innovation is too slow and they risk getting left behind their competitors. And 36% are concerned that their finance processes are in danger of not keeping up with the rest of the business.
This is the key risk of underinvestment in finance processes. New sales channels, marketing initiatives and customer obligations are placing increasing pressure on finance, to ensure seamless and accurate fulfilment and produce more complex reports that provide statutory financial information as well as forecasts and business analysis.
The Innovation in Financial Reporting survey found that over 60% of respondents couldn’t easily see the status of their reporting at any given time, and 37% said the number of reports was growing uncontrollably. Only 47% said their spreadsheets were well-controlled and error free, leaving the other half without the requisite control of this essential part of the process.
And yet 64% say they never miss a reporting deadline.
This means finance executives are using all their resources (overtime, manpower), just to keep up with the required reporting requirements, leaving little or no margin for delays or error recovery. The whole business is at risk, of failed sales, customer losses, reputational damage or missed statutory obligations, if the finance function is left to shoulder the increased burden of responsibility without commensurate investment.
Rewards of meaningful finance innovation
Risking the company is only half the problem of underinvestment in the finance function. The other half is missing out on lost opportunities from a finance function with fit-for-purpose technology and processes that is much more than just a back-office tool.
Finance sits at the centre of every organisation, with a broad view of all the machinations of the company. From this vantage point, CFOs and their senior finance executives are in a unique position to provide business partnership and leadership that can benefit the whole organisation.
This functional shift, from a purely financial cost centre to a valued contributor across the company, is already visible in the changing role of the CFO, who is increasingly called to the top table to contribute strategically, alongside their financial role.
As business models are forced to change to keep pace with disruptor start-ups and the increasingly popular service model of licensing everything from software to airplane engines, finance has a pivotal role to play in the success of these new directions.
It’s still some way off though. 67% of survey respondents from FSN’s Future of the Finance Function survey reported that business units involve their business partners too late in critical commercial developments. And almost half felt a lack of trust was an obstacle to effective business partnering.
Investing in finance innovation is the first step in providing the finance function with the analytic ability to contribute strategically, bolstering their position as a business partner and improving data flow and strategic visibility across the organisation.
That’s not to say that companies shouldn’t continue to invest in their customer-facing functions, but FSN’s survey data shows that balancing investment across an organisation leads to better outcomes in key performance indicators including accuracy of forecasting and speed of reforecasting.
Technology has changed the business landscape permanently. To stay relevant, organisations need to ensure their customer-facing innovations aren’t hamstrung by inadequate finance systems, and benefit from the insight and value of a well-supported finance function.