Eight elements a company needs to consider as it grows in size

Sage's Pieter Bensch: All the digital trends that were at play before the pandemic have accelerated.

Before the outbreak of the coronavirus, we were already witnessing a shift in the CFO’s responsibilities. Senior financial decision-makers were stepping up to help shape business strategy and the digital transformation agenda. Now, South African businesses face even more complexity than before and are accelerating their transition to digital business models.

Today, 90 percent of South African CFOs play a key role in their organisation’s digital strategy, with 15 percent being fully responsible for digital transformation, according to Sage’s new research, ‘CFO 3.0 – digital transformation beyond financial management’. The digitalisation of the finance function is a priority, with some 90 percent of senior financial decision-makers having adopted emerging technologies in some form.

In this world, C-suite executives with businesses that are diversified across product ranges, channels and geographies need to pay close attention to financial reporting and analysis. Not only is accurate insight into the business’s finances essential for compliance, but it is also vital to making better decisions in a complex and uncertain world.

Naturally, financial reporting is an area that gets more complex; the larger a business gets. It is because demands will increase when it comes to declaring:

  • The financial health of the company based on current knowledge and expectations for the future;
  • Accurate reports of operating results and cash flow; and
  • Financial statements to reflect economic and business reality, helping investors make decisions.

 Let’s look at some elements a company needs to consider as it grows in size.

1. Begin with the team

While technology is the key to generating accurate financial reports and gaining real-time insight into the business, getting it right starts with putting the right team in place. Such a team will start with an appreciation for the role of accurate data and robust reporting in compliance and in making sound financial decisions.

Financial controls and checks are essential, including segregation of responsibilities so records can’t be manipulated. Different team members should initiate, approve, record and reconcile transactions. At the same time, an organisation could put fail-safes in place in areas such as inventory management by adding a third-party review.

2. Auditing

Executives running a business that is growing in size and complexity may consider regular audits, even if they don’t breach the thresholds that trigger a required statutory audit under the Companies Act. Undergoing an audit shows a commitment to transparency and may help management pick up discrepancies and inefficiencies overlooked by the internal finance team. It can also help build confidence among lenders, investors and other stakeholders.

3. Driving productivity with analytics

A growing business will be presented with multiple data sources and disparate solutions that may well not integrate, causing poor communication and collaboration. The finance function may still be working with spreadsheets. It takes time and energy to consolidate and summarise this data – and it might be out of date already when the report is compiled.

 Managers can’t use this static data to develop forecasts and create ‘what-if’ scenarios, which are crucial in understanding the drivers of success in the business. It may well be worth investing in an analytics solution that can improve the organisation’s ability to gather, organise and analyse its data. The business will want to be able to:

4. Connect and analyse financial and operational data through automation

With the ability to connect to data and analyse it, executives can start building a repeatable and reliable process that leads to automation, increasing the speed and reliability of analytics.

5. Consolidate multiple entities

Consolidating data imports across multiple entities provides up-to-date information that will ensure forecasting and planning is accurate.

6. Generate self-service reports

Instead of forcing reporting through IT, it will pay to empower business users with software that offers strong analytical capabilities, allowing them to streamline analysis without any reporting delay.

Two-thirds of senior financial decision-makers in our research reported that they use data analytics to drive productivity in finance. However, the rest say costs and data integration are affecting their move to next-generation finance technology. There is thus some way to go before finance functions unlock the full value of their data.

Technologies such as the cloud, artificial intelligence (AI), robotic process automation and machine learning are empowering finance leaders to make decisions based on real-time data. This amalgamation of technologies is creating a new breed of trailblazing senior financial decision-makers who use data and emerging technology to drive their function.

7. Making sense of an uncertain world 

Before Covid-19, we were already living in an uncertain world of rapid economic, social and technological change. All the trends that were at play before the pandemic – the move to the cloud, managing remote work, and getting on top of compliance – have since accelerated. Now, CFOs face new challenges such as ensuring compliance across a decentralised network, a distributed workforce, and a larger attack surface.

With all the uncertainties businesses face in our complex world, it’s sometimes hard to decide whether a course of action is right or not. With analytics, a team can get to the correct data to build a quality picture of what’s happening in the organisation. This reduces complexity by providing a single, real-time version of the truth.

8. Conclusion on business reporting and complexity

Dealing with complexity is not simply about predicting the future or reducing risk – it’s about continuously adapting and learning at speed. Businesses need structure and conditions that push adaptability, learning and creative problem solving, and they must encourage an environment where pooled intelligence is allowed to flourish. And an ability to communicate in real-time, giving expert individuals the right information when they need it.