Growth is a primary goal for almost every business. However, in today’s environment investors, boards of directors, and CEOs are no longer satisfied with regular growth. They demand scalability in order to respond to the increasingly disruptive changes in market demands.
Many finance departments, however, were not built with scalable business processes in mind. Relying on spreadsheets and manual processes, they are limited to processes designed only to collect and aggregate data – not engage stakeholders in a deeper, collaborative dialogue.
If a company grows steadily at a constant rate, the absence of scalability isn’t necessarily a problem. But what if you consider an initial public offering, an acquisition, a new market segment, or a new subsidiary? That’s when things can get complex very quickly. The spreadsheets you have been relying on are suddenly not good enough and the processes too slow to keep up with these dynamic events.
Additionally, finance is expected to provide accurate forecasts that can be used to for this anticipated scalable growth - but an Adaptive Insights CFO Indicator report indicates that 45% of CFOs say their topline forecasts are usually off by 7% or more. 7% can be truly material on scaled future forecasts.
Too many sources, not enough time
Now the question is, why are financial forecasts so inaccurate?
One issue is the sheer volume of data. In that same report, 47% of CFOs still manually collate data from disparate source systems, with 41% saying their teams manage data from 3-5 sources. As a result, they’re spending most of their time trying to gather and consolidate the data, which means there is not time left for in-depth analysis that is required to create accurate scalable forecasts. In fact, companies spend an average of 83% of their time on non-strategic tasks.
To complicate matters, processing the final general ledger entries and producing the fiscal period-end report for the C-suite to approve frequently means that before everything is finished, next period’s cycle has already begun and there is simply no time for strategic analysis or development of what-if scenarios
More scale, less fail
Spreadsheets and manual processes bring a lot of time-consuming challenges. Luckily, there is an answer. Finance departments who are looking for scalability should be implementing cloud-based financial solutions. Using financial software allows you to automate data gathering, improve collaboration across departments, and simplify reporting. And those same benefits apply whether you’re organisation has turnover of £1 million a year, £10 million, £100 million, £1 billion, or more. – and whatever sector you operate in.
By using powerful, flexible software, it enables finance to implement driver-based rolling forecasts. By automatically refreshing and updating forecasts organisations can respond in real-time instead of once a quarter, keeping it agile and on track, which allows finance to develop planning time horizons well beyond a fiscal year end. The result is a pro forma income statement and balance sheet including cash flow projections far into the future, giving you insights into whether you have money to invest or need to borrow.
More time for analysis
One of the biggest influences and drivers of growth is the ability to effectively plan and respond to the “What if’s”. Implementing cloud-based AI driven software enables finance departments to quickly model a variety of scenarios with more accuracy, detail, and speed than linked spreadsheets can handle. Additionally, by having a single source with all your information you can instantly visualise data in dashboards and reports to accelerate insights. Instead of spending that 83% of time of on collecting data, you now have much more time for strategic analysis enabling you to make decisions that drive growth on a massive scale.
Find out more about cloud-based finance solutions and how it can help you scale and become more agile to effectively adapt to changing environments.