With issues ranging from supply chain disruptions to cybersecurity threats and continued business uncertainties due to the pandemic, 2021 was a difficult year for CFOs across the globe. These challenges were exacerbated by a significant shortfall in Digital Transformation, as determined through recent studies, that hindered the ability of finance teams to anticipate and respond to business changes. This next year, however, represents an exciting moment for finance executives who are now more than a calendar year removed from the uncertainty of the COVID-19 pandemic and are ready to meet challenges head-on.
Alok Ajmera, CEO of Prophix Software, said: “Last year, our Agility in Planning, Budgeting and Forecasting survey findings, done in conjunction with FSN Research, identified most finance departments still face challenges in their Digital Transformation with sizeable gaps in abilities and outcomes in nearly every survey category – ranging from speed to insight to forecasting accuracy, to the ability to conduct scenario planning.
Our benchmark report underscored the need for Digital Transformation to help fundamentally change the role of finance from reactive to proactive, better anticipate change and take a stronger role as a business advisor. By leveraging more advanced tools within corporate performance management software, including Artificial Intelligence capabilities and intelligent automation, finance executives can be better prepared for what comes next.”
Ajmera shares five predictions for finance teams looking to close the Digital Transformation gap in 2022:
Dynamic financial planning will be the antidote to continued business disruption
From supply chain shortages to rising inflation, businesses most likely will continue to deal with various disruptions in 2022 – and dynamic financial planning tools such as cloud-based ‘if/then’ scenario planning software will emerge as the sure proof solution for businesses to remain nimble and quick-footed in their strategic decision making.
Strategic finance and operational planning will go together in 2022
To unite FP&A strategy with operational planning to meet long-term goals, companies will focus on obtainable financial and organisational targets, ensure their budget supports organisational plans, make use of financial planning software to optimise strategic planning.
A focus on intelligent automation, not hyperautomation
Hyperautomation will not be the silver bullet for CFOs seeking to streamline their reporting processes in the year ahead. Instead, finance executives will apply intelligent automation technologies to specific areas of the business to reduce manual work, increase the speed of decision-making and improve data accuracy for reporting processes.
Zero-based budgeting makes a comeback
Zero-based budgeting (ZBB) is gaining in popularity and it is not the slash-and-burn tactic it once was. Instead, with the help of automation, cloud platforms and AI, ZBB allows businesses to roll out budget changes quickly while increasing a company’s nimbleness in other aspects of FP&A.
The era of AI-powered corporate finance is here
As businesses emerge from the volatile pandemic period, expect to see CFOs finally taking the plunge into AI-powered finance technologies, kickstarting the next era of super-charged corporate finance.
Intelligent CXO spoke to three industry experts about how business can alter their financial strategy to tackle the coming year…
Lee Howitt, Director of Finance and HR at Checkprint, a member of The TALL Group of Companies
Financial planning has always had its challenges and understandably the pandemic has made this even harder for organisations. Budgeting for the TALL Group became a real problem as most models rely on historic data trends to form the basis of any future results – the pandemic changed all of this and analysis of current trends and day-to-day key performance indictors became critical to the budgeting process, with reliance on market info and the best estimate of recovery times.
Accounting departments are used to accuracy, consistency and relatively predictable planning cycles, not the unknown economic conditions of a global pandemic. Forecasting over longer periods is now almost impossible due to the ever-changing business landscape and is limited to the next 12 months to give a reasonable degree of accuracy.
Debt management, whilst always a constant high priority within any business, became much more of a focus during the pandemic with all debts under scrutiny to assess the risk of bad debt. However, as a result of this focus, we have seen very little bad debt during the last two years of the pandemic.
Access to Grants, such as the furlough scheme, was very helpful to the business and allowed us to ride out the worst of the pandemic whilst keeping the majority of staff employed during the time.
Strategic decisions, that had been under consideration for some years, were acted upon quickly to enable the business to reengineer its cost base, support the reduced activity and still be profitable. Costs in the organisation came under greater scrutiny and, as a result, many established processes and procedures were updated.
Companies’ existing plans and assumptions will need to be revised when planning for the year ahead with regards to the rapidly changing global health situation, which is creating uneven economic effects across all industries. Conventional strategic thinking doesn’t seem to be an option anymore and it seems that the best advice comes from a hybrid approach combining traditional business strategy with the latest research findings.
Hugh Scantlebury, CEO and Founder of Aqilla
Over the last two years, practically every business has felt the financial pressures of the pandemic – a condition I’ve come to call economic long COVID. But what’s the cure? Is there a vaccine to reduce its impact? I believe it’s stability, predictability and firm leadership at a national and international level. Let’s hope that our leaders agree and we can all start to build back stronger.
Last year, businesses struggled to trade in the way they did before the pandemic – and the picture doesn’t look much different for 2022. Supply issues, delivery delays and staff shortages will continue to impact financial planning and spending this year.
Inflation will continue to drive these issues and cause further financial uncertainty. Staffing is particularly challenging because of the pandemic and the after-effects of Brexit – think ongoing HGV driver shortages and soaring shipping costs.
There’s almost a universal agreement that we need to tackle climate change and find more sustainable ways of living. However, the UK government’s laudable net-zero policy will also fuel – if you’ll pardon the pun – inflation by driving up energy costs for businesses and consumers alike. These changes impact cash flow and force organisations to adapt their financial planning and alter their spending. While there is nothing businesses can do to control or stop inflation, it’s vital to monitor it regularly – ideally, at least once a week. I know it’s like getting on the scales after Christmas. But it’s got to be done and you’ll ultimately feel better for it, I promise.
With all these obstacles to overcome, it can feel like a hopeless time for businesses. But don’t despair, it’s possible to take back control. Start by using solutions that provide real-time resource location, supply chain logistics and financial information. If businesses can also harness and analyse critical purchase, sales and warehouse stock data, they can mitigate some of the financial uncertainties that are beyond their control. They should also be able to use the data to predict future trends and help spot potential areas for concern.
In the spirit of New Year’s resolutions, organisations should invest in software, to deliver cost of sale analysis, cash flow updates and broader financial intelligence. I know these things are easy to say. I’m aware that finance professionals can struggle just to deliver month-end reports to the board. I understand that they may lack the bandwidth to carry out more detailed, proactive financial analysis. This leads me to my second suggested New Year’s resolution: automate financial reporting and analysis where it’s safe, secure and sensible to do so. It will leave more time to examine the output of financial reports and help move towards longer-term planning.
James Isaacs, President, Cyara
Over the last two years, we’ve seen the pandemic upend the way organisations work, plan and spend. This disruption forced businesses to evolve operations and rethink where to allocate resources.
The pandemic has accelerated cloud adoption and Digital Transformation projects within organisations. It has also catalysed a shift towards the online world, amongst both businesses and consumers, resulting in industries, such as e-commerce, skyrocketing like never before.
All this has led to consumers expecting and demanding an elevated customer experience (CX), placing it front and centre of organisations’ 2022 financial planning across the globe.
Below are four areas we believe organisations will be focusing their resources on this year:
Adoption of cloud platforms and automation
With the pandemic still ongoing, organisations are operating under a cloud of great uncertainty.
This year, we will continue to see strong growth and increased spending on cloud and automation technologies as organisations look for ways to reduce risk and improve productivity. Our research suggests seven in 10 (70%) Australian companies are pursuing Digital Transformation initiatives in Big Data and real-time analytics and automation.
Greater investment in customer experience (CX)
Nearly all Australian companies (90%) recognise the importance of Digital Transformation for enhancing the customer experience.
This year, more organisations will be innovating and investing in CX to ensure they can retain customers, grow their customer base and meet heightened expectations. CX will be a key focus for organisations across all industries, both in the private as well as public sectors. Organisations will be focused on building brand trust and confidence amongst customers, while also ensuring they can maintain loyalty.
Enhanced omnichannel communications
Voice/agent-based and digital channels became the storefront of many companies during the pandemic, especially throughout lockdown and we expect them to remain the primary means of communicating with consumers. However, companies that don’t provide customers with a seamless experience of moving from one communication channel to another with context, face a high risk of losing that customer.
Organisations will invest more heavily in training their contact centre staff and developing robust digital technologies, such as chatbots, to ensure they do what they are supposed to do.
Hybrid and working from home solutions
Working from home and hybrid work will continue into 2022 and beyond, however, poor-quality connections directly impact business metrics. Rather than spending resources on a perfectly managed contact centre, fitted with enterprise-grade technology, organisations will pivot to investing in equipment, solutions and software to ensure every employee, in every location, has the tools to deliver exceptional customer interactions.