CFOs are faced with many daily challenges, but some of the most important ones are in regards to budgeting. When it comes to budgets inside the finance department, many CFOs feel that they have an extra chip on their shoulder.
As companies grow and their data gets bigger and more complex all the time, business leaders are looking to keep up with the workload. There are essentially two options to deal with this:
1) Hire more finance experts to take on the workload of collecting and analyzing the data.
2) Switch to finance automation software that can take care of the manual workloads and give enough time for the employees to take care of analysis and skilled work.
This is a very important decision that CFOs face today since it affects both the direct finance team’s budget as well as influencing organizational decisions. What are the pros and cons of each one, and which will create the most sustainable, long term growth?
Building up the finance team
This option can be appealing for a number of reasons. To begin with, growing the finance team seems appealing. If there is more work to be done, adding additional employees is an obvious and justified answer. This option is especially attractive for startups and growth companies who want to show that their number of employees is growing fast. It looks good from the company’s point of view as well as for investors.
“Oftentimes when companies are scaling, there is a tendency to build a large team, which is good if companies have a linear path to growth,” Navneet Govil, CFO of SoftBank said during a talk at the 12th Annual CFO Leadership Conference. “And what I’ve learned is there’s never a linear path [to growth].”
In addition, companies enjoy having fresh perspectives and new outlooks, especially when a new employee comes with a high level of experience in finance. Finance experts come with real life experience and can provide further contributions such as storytelling and assumption analysis. Lastly, companies are having a hard time hiring skilled employees and the finance team is no different. If a company has the budget and opportunity to attract talent, many organizations want to jump on this because the talent shortage doesn’t seem to be going away any time soon.
Switching to Automation
Automation has some tremendous advantages, especially when comparing it to hiring new employees:
Overall, it’s far cheaper. Top of the line FP&A software solutions can go for less than $30,000 a year, and even the more expensive $50- $60,000 per year softwares are still significantly less than what a company would pay a skilled finance expert with experience. Even after factoring in the time and resources it takes to implement it, the price will almost certainly be more attractive.
In addition, there is no limitation to the amount of data that an FP&A software tool can process, while a human employee obviously has its limitations. As the company continues to grow, the amount of data will grow as well, and who says that when the work is too much a few months down the line that there will be the budget for hiring an additional finance expert?
Which one is ideal?
If a company has the budget and need for both, then taking advantage of the benefits that they both offer is ideal. But this isn’t always the case.
For companies who only have the budget for one of them, implementing financial automation software might be a better option due to the changes in the process of how financial planning works.
The biggest change is the increased importance of analytics. Past performance and historical data is still very valuable, but more and more companies are putting an emphasis on analytics and forecasting due to the speed of changes in today’s market trends.
“While historical information is important for areas such as reporting and tax, it doesn’t add a great deal of value beyond that,” Simon Kelly, CFO of Australian media company Nine Entertainment Co. says. “Value-add is in the real-time data about how things are trending in our business right now.”
Investing in automation solutions provides exactly this- real time data, advanced analytics, and higher processing speeds. In addition, having audit control and all of the data in one source helps increase data integrity and cuts down on mistakes.
But this doesn’t mean that hiring employees or investing in existing employees should be ignored. Even with the best FP&A tools in the world, finance professionals are still very much needed in order to analyze the data and provide detailed plans of action to management.
Therefore, financial automation is a must-have for companies looking to gain better insights, but having a strong finance team behind it is the key to successful financial management. Both together will produce long term growth.
Comments