Finance and Accounting: an Overlooked Port in the Economic Storm?

BlackLine is a Business Reporter client.

Critical intelligence exists within finance and accounting that could help companies respond to ongoing instability. Mike Polaha, Senior VP of Finance Solutions and Technology, explains why modern technology and processes are key to unlocking these insights.

2022 was undoubtedly a challenging year for finance and accounting (F&A), with global inflation reaching an estimated 8.75%, the highest annual increase since 1996. With economic instability showing no signs of abating as we enter 2023, businesses are entering survival mode and ensuring that F&A has a clear role in decision-making. Planning has never been more critical.

Most F&A professionals have worked through at least one recession and multiple peaks and troughs in company business cycles, but few have experienced the bigger economic, business and geopolitical challenges that we currently find ourselves facing. To further understand how businesses can weather this storm, we surveyed 1,400 C-suite executives and F&A professionals to help pinpoint areas of concern, and to reveal reasons to believe that calmer waters could be on the horizon.

It comes as no surprise that 61% of C-suite executives surveyed said that it will take them up to a year before they feel confident about the economy again, and almost two-thirds (63%) indicated they expect a worldwide recession within the next 12 months. Furthermore, responses suggest that company finances will be under the microscope in 2023, with six in 10 (63%) saying financing will be harder to secure, and a similar number (62%) agreeing that being able to view their company’s financial data in real time will be paramount for business survival over the next 12 months.

Cash visibility remains key

Six in 10 (62%) said that understanding cash flow in real time will become more important for their company’s survival over the next year. The flow of cash into and out of a company has always been a contributing factor in a company’s financial health, with our research suggesting that this factor is now even more crucial in the current economic climate.

There is notable concern among those surveyed, with almost all respondents (98%) agreeing that they could be more confident in the visibility their company has over its cash flow. Almost half (49%) said a lack of visibility leads them to think that their company is making decisions based on inaccurate or out-of-date information. This suggests that a large percentage of global organizations could be making strategic business decisions based on unreliable data.

In such turbulent times, it is important for companies to respond to volatile market changes efficiently and effectively. Our research shows that 48% of respondents think that a lack of cash flow visibility will make it harder for their company to respond to market fluctuations throughout 2023. As a result, 44% say this lack of visibility makes them doubt whether their organization can remain competitive over the next 12 months.

Important steps toward financial automation

When we surveyed the same pool of respondents in 2020, during the Covid-19 pandemic, many said that the addition of technology that helps them manage and track financial data would be essential to help their company remain competitive. This narrative remained the same in 2022.

More than a quarter (28%) of organizations say they have both invested in their data analytics capabilities and implemented or scaled automation technologies. On top of this, 76% of respondents have improved financial planning, analysis, budgeting and forecasting as a result of automation, and 75% have automated financial reporting and filing.

These figures suggest that around 80% of organizations that said, in 2020, that they would implement these changes have now done so, taking concrete steps to improve visibility and controls and reduce risk by implementing tools that improve real-time oversight of financial data.

Trust in financial data remains in the balance

Our findings highlight that confidence in the accuracy and reliability of financial data is growing in line with the continuing investment in financial automation. However, challenges still exist for F&A professionals. While trust in the accuracy of financial data was found to be higher than in previous years, nearly half (48%) of our 2022 survey respondents still didn’t have full confidence that the data their company is using is accurate.

The main reasons for this were:

• Large proportions of teams are working remotely, making it difficult to know if the right processes are being followed.
• Data is being pulled from too many sources, making it difficult to know if all data points are being accounted for correctly.
• Companies continue to rely on clunky spreadsheets and other outdated processes that leave finance teams in the dark until month’s end.

This highlights the unnecessary level of risk for many large organizations, especially if important strategic decisions are being made using inaccurate information.

C-suites are aware of the importance of accurate cash flow and other financial data to ensure business survival in 2023 and beyond. By automating the right processes, businesses can have far greater visibility and control over this data, leading to smarter, faster decision-making. This won’t happen with the flick of a switch, but if companies work to improve the way their F&A departments operate, they will have access to more reliable, accurate insights, which could make navigating the economic storm a little bit easier.

To read BlackLine’s study on F&A’s role in responding to economic uncertainty, click here.

This article originally appeared in Business Reporter.

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