As more businesses attempt to consolidate operations and make full use of the talent available to them, businesses have had to change to meet the needs of their organization. The finance team used to be a past-focused, administrative department but has had to evolve to become a critical partner of a company's most important decision makers. Modern finance leaders spend approximately 19% more time on value-added activities compared to a decade ago. Read-on to explore this change and what it means for finance leaders.
3 Ways Finance Teams Have Changed over the Last Decade
1. Financial Data Has Become Critical for Strategic Decision Making
While every business needs to make responsible financial decisions to be profitable in the long term, this is especially important for early-stage SaaS businesses. As the SaaS market becomes highly saturated, investors are constantly looking for businesses that can prove they can make the most of the funds available to them.
It is not only important for SaaS businesses to engage in data-driven strategic decision making, they must also be able to prove the financial impact of each decision. Most business leaders collect and share important operational, sales, and marketing data with internal and external stakeholders but are unable to draw the link between these data points and their financial impact on the business.
2. Finance Teams Are a Key Component in the Executive Feedback Loop
Large, established businesses often spread resources over multiple departments, each of which has a fixed and specialized role. However, SaaS businesses, especially those in the growth stages, must be able to extract the maximum value from each operational and administrative team. This leads to executive and operational team leaders wearing multiple hats.
Executives with a limited or no background in finance are responsible for decisions that have massive financial implications. They rely on finance teams to bridge the gap between collecting financial data from the ground and transforming it into insights that are useful for decision making. This data is shared internally for decision making—and externally to assure investors and stakeholders that the business is viable and profitable.
3. Finance Teams Are Under More Cost Pressure While Being Required to Do More
Despite the expansion of their responsibilities, finance teams can’t always access additional resources to meet their needs. This cost pressure encourages finance teams to optimize administrative processes and simplify data processes to deliver accurate insights as needed. Manual data collection and analytics can be highly time and resource-intensive. They are also prone to human error, which can affect decision making at the highest levels.
A study by McKinsey & Company revealed that median finance department costs have steadily declined over the past decade. This is a combination of two factors: the limited funds that businesses have available to them in their early stages and the introduction of digital solutions that can help finance leaders extract the most value from lean teams.
What Finance Teams Need to Be Successful
Widespread Buy-in for Critical Information Gathering Processes
For finance teams to extract insights that are truly reflective of a business’s financial performance, they must gather data from every department across the operation. This can only happen when ground staff participate in information gathering and sharing. It’s critical that each team recognizes the importance of information sharing and are well-briefed on the processes that can help them share data effectively.
The data that eventually reaches finance teams should be accurate and shared in the appropriate format. Successful finance teams need to consolidate reliable data from multiple sources for effective analysis. Widespread buy-in also gives each team member the ability to contribute to decision making and share feedback where appropriate.
The Ability to Collect Insight in Real Time
Data processes require disparate teams to share data. This data then has to be organized and analyzed before insights can be delivered to top-level executives. This process, if done manually, can be very time-intensive—causing the insights that reach executives to be outdated when they’re delivered. SaaS businesses experience operational changes on a regular basis and require an accurate overview of their financial data in real time. Business leaders can embrace modern AI-based tools to quickly access important financial metrics that reflect the financial performance of the business with virtually no time lag.
Automated Processes for Accurate and Simple Data Collection
Modern finance teams are expected to engage with business leaders in strategic decision making. These responsibilities are added to their existing administrative responsibilities, which can cause finance teams to be increasingly stretched. Modern software can alleviate this pressure by automating business-critical but repetitive tasks such as approving expenses, managing receipts, and generating regular financial reports and forecasts. Once these processes are automated, finance teams can focus on high-value activities such as the analytics of financial data and executive engagement.
Financial teams have evolved significantly in recent years and will continue to do so. The introduction and popularity of digital solutions designed specifically for finance teams has aided in the expansion of their roles and responsibilities. The most successful financial teams will be those that can adapt to their new roles effectively and find new ways to deliver value to the organization in the long term.
To find out how Place’s solution can help your finance team thrive in its new role as an important strategic partner, schedule a demo with us today.