How to Overcome 6 of the Biggest Obstacles Facing Your Finance Team Today
From the proliferation of different technologies to the impact of the pandemic, it’s safe to say that the past couple decades have been turbulent, and rife with new obstacles for the world of corporate finance. Different roles in finance teams have had to adopt new competencies responsibilities, and everyone has been affected by security threats and the development of new software. In order to ensure they yield the best possible results from their work, finance teams should nail down some of the most common problems they run into, and understand what solutions consistently serve as a successful remedy to such issues.
Six Big Challenges Finance Teams Face
1. Software replacing accountants:
Change within organizations and industries can happen quickly and unexpectedly. The pandemic has highlighted how unpredictable the world can be in the context of corporate finance. We’ve experienced a disruptive disaster we simply had never seen before, or imagined could happen even a year ago. Even without the occurrence of an unprecedented crisis, technological advances have been happening for decades, and have consistently had a profound effect on every kind of business.
As with many back-office functions, finance teams are becoming more streamlined, and a lot of what used to be traditionally manual tasks are now automated. But despite this technological progress, finance teams still need people with the proper skillset. It is important to ensure that you are well versed on all the new technologies and software that are now used by finance teams.
2. Adopt the best technology options:
Not everyone in a finance team needs to be a digital expert, but everyone should possess some awareness of the development of new technology related to corporate finance. An IT team in a given organization might be good at showing others how different tools work, but you need to talk to them about the functionality needed.
You don’t need to upgrade every single time a new program or application hits the market, but do carry out regular reviews of your software. If your competitors have systems that allow them to get information faster or more in-depth simply because they’ve got new technology while you are wedded to a legacy system, they’ll have an advantage over you.
3. Data protection and security:
Data protection needs to be a key consideration throughout all organizations – both because of regulatory requirements and because it’s good practice, particularly because threats are rising during this volatile period. But members of your finance team need to be aware that they have a particularly important role to play in this. They have access to a lot of personal data that would be of great interest to criminals.
This information is both internal and external. Internally, there are employee payroll details, names and addresses, bank account numbers and various other sensitive details. There is also information about the organization itself that would be dangerous in the wrong hands.
Externally, there is information about customers and suppliers – from credit card numbers, to bank account details, to credit histories and addresses that you have been entrusted with. A Financial Compliance Officer has some responsibility for all this, but all members of the finance team must be aware of their obligations, too. Monitoring and managing risk is a key financial department challenge, and you should always be on the lookout for possible gaps in security.
With the huge increase in remote work due to the Covid-19 crisis, there are more opportunities for cybercrime. Unfortunately, staff often use less protection when they are working off site, and criminals know this. Your colleagues in IT should be on their toes regarding this threat, but you should work closely with them.
All members of a finance team should be fully aware of your security policy, and what to do if they suspect something has been leaked or stolen. There should also be a process in place that gives access to sensitive information only to those who need it.
4. Regulations and compliance:
This leads on to the need for full understanding of all the regulations that you are required to follow. Laws have become stricter ever since the 2008 financial crisis, and accounting practices have got tougher as regulators look to crack down on bad behavior. It means you need to ensure that you are up to date with the rules on everything from the pension scheme to reporting regulations.
You should work closely with your Compliance Officer to ensure that all those within the organization who have roles to play in compliance understand them and have the necessary support to carry out their duties properly. Breaking the rules or failing to maintain good financial compliance can land your business in hot water, and can lead to the long term erosion of your customers’ confidence.
5. The role of anticipation:
Although the pandemic’s impact was something no one expected, finance professionals should always be aware that shocking, watershed events can happen anytime, and profoundly change the way organizations operate. Indeed, following 9/11 and the 2008 financial crash, COVID-19 is the third major event to turn the world upside down since the turn of the century.
It is important to note, however, the importance of being open to the possibility of smaller external shocks that can damage your business. You should carefully monitor your customers and suppliers, because if they start having problems it can hurt you, too, and that can lead to a huge financial management challenge.
Cash flow is one of the biggest risks. Many organizations that were in otherwise good health have suffered simply because of a lack of cash flow. Therefore, you should plan for eventualities to see how robust your business would be if one of your customers failed to pay or a supplier failed to deliver.
Imagine a worst-case scenario and see if you would be able to get through it. If not, you should start to address the problem. If you simply wait for things to go wrong before trying to hatch a plan, it could be too late.
6. Understanding the wider business
The finance department has a vital role to play in steering and monitoring the business. It is important as part of this to understand the aims, frustrations and challenges of other departments and build strong relationships. You might be able to identify potential problems before they occur and provide insight and guidance. Each function within the organization needs to share the same business-wide vision and be working towards common goals, so inter-department communication is key.