Becoming a next generation finance director

As Neil Robertson, CEO of Compleat Software, explains, finance management is at last coming of age, and new technology enables forward thinking finance managers to proactively impact the day to day profit and cash performance of the business, benefiting their role and responsibilities and businesses they represent.

Delegating Control
Over the past twenty years, accountants have leveraged technology to systematically improve the financial information available to the business. As the functionality of technology and applications has improved over time, so has the quality and timeliness of the financial information which, in turn, improved the effective management of the business.

However, there remains one last bastion of manual processes that spans the entire organisation and its function could not be more critical and sensitive in the current commercial environment – the way the company spends its cash.

At the heart of the problem is delegation: the responsibility, process and the management of corporate spending has traditionally been delegated out through the board to the business management and staff, leaving the finance team to report historically on what actually happened.

It is the delegation of the maintenance and management of corporate budgets to departmental staff which typically causes overspend; whilst delegating procurement to each department simply creates an ever growing list of suppliers. There are no attempts to achieve best price and significant wasted money. And by delegating the purchase order generation and purchase invoice approval processes across the business, financial managers have absolutely no chance of imposing control, achieving consistency or ensuring that paid for goods and services have actually been delivered.

Manual Dependence
Given the reliance upon these manual processes, today’s financial managers have little choice but to delegate control to the rest of the business. But the resultant lack of up to date information within the accounting system is untenable in today’s cash strapped economy.

How can an organisation operate successfully with no up to date visibility of financial commitments? The vast majority of businesses are still reliant upon best guess when it comes to calculating and posting accruals at month end, and are then basing the management accounts and cash flow forecasts on those estimates – only to get a nasty shock at year end.

What organisation can seriously carry on making critical corporate decisions based on estimated historical data, and without any ability to make instant changes to the company spending should the need arise?

Yet nine out of ten finance managers rate this process as good to very good when questioned on the effectiveness and efficiency of the process. Has no one explained there is a better way?

Financial Control
The delegation of responsibility is set to end as “next generation” finance managers are seizing the opportunity to take control of the critical process of how the company spends its cash. They are delivering quantifiable and significant savings to the business that instantly benefit the bottom line and cash flow.

Indeed, most organisations expect to make ongoing and sustainable savings of between 4% – 8% of total expenditure simply by taking control of the process by which they spend the corporate cash. In reality, the savings can be considerably greater and include cash that remains in the bank account instantly hits bottom line profitability.

Key to achieving this is the automation of the entire purchasing process, from the moment a requisition to purchase is raised to the posting of the approved purchase invoice into the accounts system. Removing paper from the purchasing process, delivers immediate productivity improvements. But, more critically, it enables the finance manager to take control over corporate spending across the business.

For example, the business now has control over suppliers and can confidently reject purchase invoices that do not meet the company’s purchasing terms. In addition, the purchasing manager has the complete, real time view of the company’s financial commitments and can act immediately should the need arise.

Effective Spend
This automation of the purchase to pay process is the foundation stone of spend control. It enables a company to take control of the spending activities of all staff, systematically improving the prices and terms achieved from suppliers.

And the financial benefits are significant with most organisations readily conceding that a 3% – 5% saving in prices paid can be easily achieved through a more focused and controlled approach to purchasing, and a further 1% – 3% by purchasing cheaper equivalents. But it is the right tools and processes that are key to enforcing spend control and enabling organisations to achieve these much needed savings.

The recession has fundamentally changed the core focus for finance managers – and this emphasis on cost control and real time commitment visibility is set to last for some time. Leveraging automated purchase to pay solutions is enabling the next generation finance manager to deliver significant quantifiable and sustainable savings that improve the profitability of the business and improve the cash flow – whilst presiding over an automated and highly efficient purchasing process, delivering more accurate management accounts and cash flow.

Finance management is at last coming of age, proactively generating cash instead of just counting it and making a real contribution to profitability.


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