7 biggest challenges faced by a CFO

26 April 2023

The seven biggest challenges faced by CFOs and how to solve them in an instant

It’s not a new concept that CFO’s face challenges, often driven by external factors. The modern CFO faces a unique set of challenges to respond to such as:

  • Compliance and governmental regulatory changes
  • Increase demand to provide overall business counsel
  • Satisfy the demand of the business for real-time data
  • To be the business forecaster not the historian
  • Introduce automation of finance processes to scale with the business

 

Big Challenge 1

Automation of key finance processes

The World Economic Forum (WEF) report on The Future of Jobs says, “As the Fourth Industrial Revolution unfolds, companies are seeking to harness new and emerging technologies to reach higher levels of efficiency.”

A recent survey of CFO’s found that more than 9 in 10 (92%) financial decision-makers are hopeful that artificial intelligence (AI) and machine learning (ML) can automate mundane or repetitive tasks. There are a number of processes within the finance function where AI and ML can be used to deliver advanced levels of automation and improved accuracy.

In this special report we are going to look at four key service areas where automation can improve agility and scalability whilst driving down the cost to deliver these services to the business:

 

The Challenge…

Accounts Payable automation

Most invoices are or can be received from your supplier electronically via email. Are you still taking that electronic document and rekeying it into your finance system? Then perhaps emailing it internally for approval before payment is eventually made.

This process is very manual, prone to errors and is time consuming. On average this process costs a business £10 – £15 to process a single invoice. But don’t worry this is not an uncommon approach to Accounts Payable (AP). The good news is there is an effective solution…

The Solution…

What if your Financial Management System could automatically consume the electronic invoice direct from the E-mail… use AI and ML technology to interpret it and then enter it into the Accounts Payable system for you. Then using workflow route the invoice for approval.

Now the function of Accounts Payable becomes a fast review process instead of the old error prone data entry process. With this process in place, you can support your businesses growth, delivering them a world class Accounts Payable service, without the need for increasing headcount.

It does not end there…

Once invoices are approved, they can flow seamlessly into a payment queue, where once flagged for payment will form a payment batch that is imported to your on-line banking platform.

Details of the payment being made are emailed to suppliers, so everyone is keep informed and the need to handle inbound enquires is minimised.

AP Automation will drive down the cost of processing supplier invoices in your organisation whilst speeding up the processing time and improving accuracy. Studies have shown savings can be 25% or more.

With best-in-class financial management systems such as Sage Intacct this level of AP Automation is a reality and surprisingly easy to implement. With accord at the helm, in just a matter of weeks this process could be live in your business.

 

The Challenge…

Billing and collection automation

Many organisations have to touch billing transactions multiple times before the invoice is eventually sent to the client. Each manual intervention slows down the process and is an opportunity for errors to occur.

Sending the invoice to your customer for payment is only half the story, obtaining payment is arguably the most important step.

Many hours are spent within credit control identifying late payments and chasing for payments. A variety of tactics are used from phone calls to email messages. Lots of manual note taking often in a form that is hard to share.

These activities all form pieces in a collections jigsaw which is hard to piece together in order to see the full picture.

The Solution…

With a world-class financial management system at the centre of your billing and collection process you can speed up the production of invoices and automate many of the collection steps. Even having the system send out courtesy emails in the lead up to the invoice due date.

The use of modern collaboration tools, kept in the context of specific invoices, will allow credit controllers to chat with colleagues outside of finance to rapidly answer any disputes. All the while the chain of chat messages should be neatly held in context against the correct documents or customer record.

The end result of this automation is to reduce debtor days through more accurate billing and more efficient (and automated) collection techniques. The improved cashflow equals more working capital available to grow the business.

Continued

 

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Big Challenge 1

Automation of key finance processes

The Challenge…

Bank Reconciliation

Completing and fully reconciling your Bank is an important control in the period close process of any finance function. Whilst it is not a complex task, matching entries in your bank statement with your Cash Book, it is, as you know, very time consuming.

The Solution…

Automating that task starts off by consuming your bank statement data in an automated way into your Financial Management System.

From here, the system can use AI and ML to automatically match transactions.

Where a transaction is in the Bank but is not yet in your Financial Management System it can be automatically generated and matched.

Any unmatched transactions can be reviewed and matched.

This automation means the bank reconciliation process becomes about dealing with a small number of exceptions whilst allowing the system to do the heavy lifting.

 

The Challenge…

Detection of incorrect journal postings

Every month a plethora of general ledger journals will need to be posted. Payroll journals, accruals… the list goes on.

Unfortunately, human nature plays a part, and some mistakes will be made. This means a correction journal needs to be made.

Finding the incorrect posting, investigating it and correcting it takes up a disproportionate amount of time.

The Solution…

Imagine you had a system where through AI and ML it could detect potential miss postings in your General Ledger journals as you were entering them.

The 80/20 rule applies here.

The vast majority of your journals will be correct, that’s your 80%.

A small number of entries maybe incorrect and that is your 20%.

A system with powerful AI and ML functionality will detect those outlier journals and alert you before they get posted, saving you time and improving the accuracy of your accounts.

Leveraging the cloud

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Big Challenge 2

Leveraging the cloud

The fast pace of a modern business shows no signs of slowing down. If anything, it’s getting faster at the same time scarcity of human resources to do the work doubles the challenge.

Increasingly businesses have to operate in an always on mode where results are expected almost instantly. But your incumbent system is letting you down.

Traditional finance systems were designed for an era when it may take weeks to collect and process information. This mismatch to todays high-speed expectations means the right answers are not arriving when they are needed.

CFO’s have been telling us that their modern, ambitious, and growing businesses need a finance system that is adaptable, always available and can deliver timely answers on demand.

It can be tempting to put off a decision to take the necessary action. But you run the risk of missing the crucial warning signs and remaining blind to the action that needs to be taken to keep your business on the forecasted trajectory. Margins will stay tight as it is difficult to find the data needed to put downward pressure on costs.

A modern cloud based financial management system can be implemented in just a few months. Instead of the finance function acting as a break on progress, it enables you to embrace and facilitate change.

In fact, here are 3 examples of why a cloud based financial management system will benefit your organisation:

The Solution…

Supports business

agility

A cloud financial management system support business agility as it offers you the freedom to adapt rapidly. Finance staff can easily reconfigure workflows or data points without the need to call IT for support.

Automation, ease of use and the ability for end users to adapt reports and dashboards means you have the flexibility to analyse new cost centres, revenue streams and other metrics. The business does not need to hold back on new initiatives through lack

of the right systems to support them.

The Solution…

Share business information

seamlessly

If your business managers and leaders do not have a day-to-day view of performance then controlling spending, sales and margins is not as effective as it could be.

Keeping finance isolated in a silo that only reports business performance days or weeks after the month has closed mean insight is less actionable and business managers are less informed to make decisions.

When a financial management system runs in the cloud, the data is available in real-time to business leaders and business managers no matter where they are.

Even better is the ability to blend financial data with business metrics… putting finance into context for even more accurate monitoring of how the business is performing..

The Solution…

Automation makes

you lean

Up-and-coming businesses gain significant competitive advantage when they leverage cloud solutions to streamline productivity.

Most established businesses find it hard to respond because their systems are rooted in processes that were based around passing paper from one team or person to another to get things done. These manual processes constantly burn money – employee productivity is not optimised, time is wasted on repetitive data entry and all this paper has to be stored somewhere.

A single cloud based financial management system that integrates easily with other cloud-based systems will enable you to eliminate time consuming, manual processes… leading to a much more agile finance team running at a lower cost

 

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Big Challenge 3

Unlock value with the keys to a faster close

To thrive and not just survive in today’s changing business environment, a company needs to be able to pivot in different directions and make proactive decisions.

For the finance team, this often entails having to constantly reforecast, re-think, analyse, and act on new data on top of the traditional finance processes. That’s why it’s more important than ever for finance professionals to be able to close the books faster, so you get the time you need to be agile and respond to the ongoing needs of the business.

A survey of 1,400 senior finance professionals undertaken in February 2022 revealed that 93% of respondents are under pressure to close the books faster.

Traditionally a business would have to throw more headcount at the problem. But that’s not sustainable for a growing business and is not cost effective for an established business.

60% of respondents said they would spend the time saved on closing the books faster on better quality analysis to uncover important trends and insights.

What are the factors that slow down closing the books? Time spent on manual processes such as bank reconciliation, volume of adjustments, correction of errors and wrestling with spreadsheets.

The Solution…

Key 1

Automation

It’s no secret, today’s finance teams
are working longer and harder and are under pressure to accomplish more in less time. To help save time and reduce your month-end stress, the first thing you should consider is automating
your key accounting processes. We discussed some of this in Challenge #1

Automation eliminates manual, time- consuming processes that drain your productivity. It eliminates error-prone spreadsheets, broken formulas, and chasing emails. Plus, automation keeps your team happy by freeing up time for them to focus on the strategic side of finance and feel the satisfaction of adding greater value to your company.

Key 2

Continuous Accounting

The continuous close or continuous

accounting is another way to ease stress at the end of the month. It allows you to run month-end close processes continuously throughout the month rather than all at month end.

It is an approach that captures data in real time, enables continuous reconciliations, and allows you to make adjustments as you go. The continuous close gives you a clear and accurate picture of your financial numbers at any given time, without going through period-end close procedures..

Key 3
Improve accuracy with Artificial Intelligence (AI)

AI is an instrumental tool for finance teams working to close the books faster and more efficiently.

It not only has the ability to check large volumes of data for accuracy, it also has the ability to learn from data and generate valuable insights.

And because AI captures data in real time it enables you to operate with real- time visibility into key metrics and outcomes, so your organisation can identify opportunities for growth.

While AI is relatively new to accounting, there are many proven use cases of

 

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companies reaping benefits from it.
In particular, early AI adopters are using AI for repetitive, manual tasks such a data entry, reconciliations, and exception management, which are normally time consuming and error prone.

Since AI can perform these tasks with greater speed and accuracy than humans, it makes sense they are an early target for the application of AI in accounting.

Completing a close requires the coordination and execution of a series

of processes. Some of these processes may be inefficient and need to be automated or could be redundant and not even needed. To achieve a more efficient and faster close, just like any other process or series of processes that need to be streamlined, you need to invest.

40% of survey respondents said their companies adopted new technology such as cloud based financial management systems to help with the close.

Drowning in a sea of spreadsheets

Big Challenge 4

Drowning in a sea of spreadsheets

My first ever spreadsheet was created on a Data General connected to our minicomputer system. I’m sure I have created thousands of spreadsheets since that time!

Since the advent of Excel, finance departments have developed an over reliance on spreadsheets. I’m not blaming Excel, in many cases clever finance professionals have used Excel spreadsheets to plug gaps in their core financial systems, to develop management reporting and to aid decision making. These are all noble causes, but often at the sacrifice of efficiency and accuracy.

As your sea of spreadsheets expands it can feel like you are drowning in them. Here are just some of the challenges you may be facing:

  • You have so many spreadsheets you lose track of what you have and why you created them. Are they even being backed up!
  • They become ever more complex, and formulas easily break when you insert new sheets, rows and columns. You end up spending countless hours maintaining and fixing a broken spreadsheet or worse still issue management reporting with unseen errors in it!
  • Key staff become “experts” on certain spreadsheets and only they know the black art needed to make them work or to maintain them!
  • As your business grows so do the number of spreadsheets you need to create, maintain and disseminate around your business. It’s just not a scalable way forward.
  • Ever been in a meeting with Sales who have their own spreadsheets giving a detailed analysis of a set of sales figures that do not tie up to your spreadsheet? There’s nothing more frustrating than multiple versions of the truth!
  • Downloading data into a spreadsheet can be a slow and arduous process as a great deal of time is spent manipulating the data into a useable form.

A Study by Ray Panko, a professor at the University of Hawaii, showed that up to 88% of spreadsheets contain errors.

According to Forbes, “JPMorgan Chase lost more than $6 billion in its “London Whale” incident, in part due to Excel spreadsheet errors”. Barclays Bank made unexpected losses on an acquisition due to hidden cells in a spreadsheet.

I work with many different companies and when we first engage with them, we look at what they are using spreadsheets for. Here is a list of typical spreadsheets: • Management Reporting Packs • Cashflow analysis • Budgets and Forecasts • Fixed Asset and Depreciation calculations • Employee Expense forms • General Ledger Journals (for importing) • Analysis of Accruals and Prepayments • Bank Reconciliation • Month End checklists

The Solution…

Sage Intacct Throws You A Lifeline

In section 3 we discussed the keys to a faster financial close at month-end and year-end. Drowning in a sea of spreadsheets is one of the most common factors which slows down a financial close.

While spreadsheets still have their uses, when it comes to reducing time spent on data entry, keeping accurate records for your business, and being able to work anywhere and at any time, using a cloud based financial management system like Sage Intacct can massively speed up your business processes. Leaving you with more time to work on the things you enjoy and being able to add more value to the business.

A world class financial management system such as Sage Intacct will contain modules for Fixed Assets and Employee Expenses.

 

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The automation these bring, drive down the processing costs and time taken to process when compared to a spreadsheet-based approach.

Automation of Bank Reconciliation with electronic feeds of bank statement data directly from your bank will wipe out hours you are spending on this task using spreadsheets.

When looking to cut costs, you could trawl through your many spreadsheets and remodel wages and overheads. But this takes time and is much easier to do in a cloud-based accounting software like Sage Intacct.

Sage Intacct allows you to collaborate on the budget plan in a single, secure application. This removes inefficiencies and security risks, as you will not need to share multiple versions of sensitive

information via email. You do not have to update multiple spreadsheets – you simply make changes once and watch the model update in real-time.

Turn production of your management reporting into press-button process with all the reports you need being generated directly from Sage Intacct… leaving you time to spend on verification and analysis of the numbers. When a correction is needed, simply post the required journal and regenerate all your reports in just minutes.

Eliminating your over reliance on spreadsheets and implementing a cloud based financial management system like Sage Intacct will leave you with more time to work on the things you enjoy.

Actionable insights in real-time

Big Challenge 5

Actionable insights in real-time

As the business grows so does the demand on the finance team to provide up to the minute actionable information to business managers. Gone are the days when management accounts issued weeks after the end of the month are a sufficient tool to satisfy the needs of your wider management team.

How do you get to a place where you can be pro-active with the information you proved; working longer hours is not a sustainable solution, throwing more headcount at the problem is not scalable in the medium term either.

Having the ability to be agile is going to be vital as we move closer to more challenging market conditions. For example, being able to see sales performance and trend by salesperson in real-time will help to ensure the sales team are operating at optimum all of the time.

Managing cashflow to fund growth or even to take a more conservative view in leaner times to “lengthen the runway” is a strategic goal of any CFO. You need the right systems in place to ensure you can reliably forecast.

The Solution…

Real-time insights to keep your business on the right path with Sage Intacct

Data-driven decisions that transform organisations require broad and deep visibility into financial and operational data. Where other systems rely on external tools for visibility, Sage Intacct provides built-in tools to display real-time, drillable source data.

Turn data into customisable reports, graphs or dashboards, you decide. Schedule reports to run and be sent 24/7 allowing Sage Intacct to do the heavy lifting so that you don’t have to.

You can even give business managers access to role-based dashboards so they can see up to the minute analytics and KPI’s relating specifically to their part of the business

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