4 ways to increase efficiency in finance

One main cause of inefficiency is manually rekeying financial information from one system to another.

On-premise software don't allow disparate internal functions (sales and finance, for example) to ‘talk’ to each other. And entry-level software like Xero, while great at this kind of integration, can’t handle more complex tasks like producing consolidated accounts from multiple legal entities. The rekeying that is required is not only mundane and time-consuming but is also inherently prone to human error.

Then there are pain points around consolidation for multi-entity groups, the time taken around month-end close, the amount of manipulation needed to provide meaningful reports. Many businesses are hampered by their existing, outdated systems, which don’t enable sufficient depth of analysis – at least, not without being dragged down by huge cost and complexity. Management accounts data might have to be exported into spreadsheets to analysed. That takes time, leaves key people waiting for vital information and has risk of errors.

What FDs really want is to be able to do high- level analysis quickly, sorting, shaping, slicing and dicing their data in any way they want. For example, by region, cost centre, customer type, service type.

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Here are 4 ways to increase efficiency in your finance function:

#1 Automation

Automating tasks traditionally done manually can save a great deal of time, freeing up staff to do other things, putting information into the right hands faster, and giving the FD confidence that tasks are being done correctly. Having a flexible, configurable system that automates the things you want it to automate, means the system is servant, not master. Automation is particularly useful around month end, where the time taken to produce management accounts can shrink from seven days to two or three days.

There are numerous tasks that could be automated…

E-commerce sales and dispatch: Manually entering into the finance system orders placed online by customers slows down the process of getting the orders to the operations or fulfilment teams. There are inherent efficiencies in automating this – quite aside from improving customer satisfaction around the speed of delivery.

Month end accruals: For example, when an item has been ordered but the purchase order not yet received, it’s a big manual task to work out what each item is.

Prepayments: Spreading, for example, the cost of annual insurance premiums over the year.

Foreign exchange gains and losses: Calculating the effect on prices and payments of exchange rate fluctuations.

FX Revaluations: A month-end or sometimes even daily task for entities operating in other currencies.

Deferred income: Taking into account predicted income, such as contracts, subscriptions, or bookings for future events.

Revenue recognition: Where the system takes into account payments spread over a year. For example, project income based on work completed over time.

Automated intelligent Bank Reconciliation: Taking a live feed from the bank account into Finance, making it easier to do reconciliations without someone having to manually tick off each item.

Automated project invoicing: Generating invoices for time-based services provided on an ongoing project basis (such as the supply of temporary staff).

Automatic credit control: Typically done by teams of people or by someone doing credit control on top of their day job, the tasks of sending reminders, debt chasing and dunning can easily be automated. The system can manage the escalation from gentle reminder up to legal action, making credit control more proactive, more timely. It can even identify trends in payment patterns, making it easier to spot good customers in financial difficulties.

Procurement, expenses etc: As businesses get bigger, they have more staff and buy more items, so they need an efficient and flexible procurement process.

#2 Consolidation

Consolidation is where the financials of two or more companies within a group can be seen and analysed collectively. The more companies, the more important accurate consolidation data is and the more efficiencies it can bring. The data of any acquisitions can be added to the mix quickly and cost-effectively by an accounting package with consolidation capabilities.

Here are some examples of how modern, cost-effective accounting systems can help with consolidation work:

Intercompany transactions: Where Company A sells to Company B, the raising of invoices on both sides and the payments or transfer processes can be complex and involve a whole team of people. The system can do it all automatically and provide the resulting figures in real time across both organisations.

Group VAT calculation and postings: All the companies’ related VAT figures have to be added up for entry into one VAT return. The system manages that, collecting data from all the companies and making all the subsequent intercompany adjustments automatically.

Real-time group eliminations: Intercompany transaction figures (sales, loan movements or cash transfers for example), need to be available for internal use yet removed from the accounts seen by the outside world. It’s a complex procedure that used to require a big enterprise accounting system. But now there are systems that can do it far more cost- effectively, enabling FDs to accurately display or hide eliminated transactions or account balances in real-time. This can save days of work.

Inter-company bulk payment runs: Where Company A pays the shared supplier on behalf of the sister companies and makes all relevant intercompany adjustments in the subsidiary ledgers, rather than multiple sets of allocations and transfers having to be manually raised.

Multi-company purchase invoices: Where separate companies use the same suppliers, there are underlying efficiencies if purchases from those suppliers can be input once and expenses shown correctly against all entities in the group. A supplier that services several sister companies (for example, a photocopier company) can send one invoice to cover everything and the system attributes it automatically to the other companies.

#3 Better internal controls and processes

Companies often carry on with systems set up years ago by a different FD, rather than face the pain of implementing from scratch again. They exist in a financial straitjacket that can’t cope with the future requirements of the organisation. A future-proofed system, flexible enough not to have to reinvent the wheel again in 10 years, should include:

Configurable flexible workflows and approvals, for example procurement, new customers approval and supplier bank account changes notifications.
Live foreign exchange rate updates.
Real-time bank account feeds for speedy bank reconciliation.
Unlimited dimensional General Ledger analysis to avoid manipulation of data outside of the system. This also means that the system can cope as the organisation evolves into new areas of business or new reporting requirements.

Then there is the internal fraud identification aspect. A modern system can limit the number of staff who are able to alter payment account details, and it can issue alerts if details are changed. This kind of attention to internal controls also has the added bonus of keeping the organisation’s auditors happy.

#4 Live reporting and enquiries

Having all the data in one place on the web, automatically updated and accessible from anywhere, on any device, means that the right people have access, at the right time, instantly, to real-time business intelligence. Non-finance department heads, for example, can go straight to the data that’s relevant for them; no need to wait for the finance team to produce spreadsheets at month-end then analyse the figures.

Modernising systems and processes can be challenging, but exciting too. It can result in faster, better-quality data for reporting and analysis and free up more time for the finance team to do big-picture stuff and make better-informed business decisions.

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Download our full guide on How to achieve finance efficiency in 2023.

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