5 most common challenges of the financial department – How to deal with them?

In our practice, we often see financial department employees confronted by the need for digitalization that creates questions of how it will influence their workload, responsibilities, and business processes. More often they tackle terms like digitalization, automatization, robotization, quickly changing environment, blockchain, new systems and implementation, requirements of new skills, and complete transformation of their work so far.

Optimization of financial processes related to the new technologies is essential for every company for it to succeed in the competitive environment in the long term. There are however different stages in which the companies and their financial departments find themselves. This should reflect the offered services reflecting actual stage and at the same time the goals and needs depending on the company.

Thanks to our experiences we know that general recommendations do not work, and close communication and collaboration are essential for us to help you define your current stage and future direction for us to support you in the whole process.it is always important to determine ambitious but realistic plans and goals that will move your company to another level. This does not necessarily mean that the next level is full digitalization and transformation of your financial department. Gradual steps can contain changes in technologies, processes, or people (roles, culture, skills).

Change is with a grain of salt the only constant in today’s turbulent world. It is completely understandable that for companies’ change is often difficult, unclear, and hard to define, but is an important component of growth that allows the company to take advantage of strategic opportunities. Based on our experience companies tackle problems like:

Optimization and adjustments of Chart of Accounts

Big and inflated Chart of Accounts leads to problems with incorrect usage of an account, insignificant balance in accounts, extensive training of the accountants, higher expenses for audit, and incorrect financial statements. Sometimes companies replace reporting strategy with extensive accounting warps, especially small accounting units try to use the accounting warp as their tool for reporting strategy.

WHAT CAN WE DO FOR IMPROVEMENT?

Based on our experiences the first step is evaluation of the current accounting wrap, clearing up which accounts are no longer valid, and creating a new structure of your accounts and reporting that reflects that. typical example: we need individual accounts for every supplier only because it’s comfortable and we are used to it? And can we answer the question if it has additional value for us? After that, it is important to again recommend and implement an accounting warp while using transmission bridges/mapping.

Closing process (monthly or yearly financial statements)

Do financial statements frighten you? Or can you handle it without issues thanks to run-in processes and reliable systems? Whether it is one or the other, we collected a few proven practical tips for you that could help you handle this disliked job better. Even though every company is set differently and has different internal processes we strongly believe that a small tutorial can be used by companies of all sizes.

WHAT CAN YOU DO FOR  IMPROVEMENT?

We prepared five steps we consider to be key steps and can help make the financial process statement faster. Of course, steps are connected, and it is important to approach the process of adjusting the financial statement process as complex. Even though this we believe that even a partial application of this advice will help you.

• Step 1 – Mapping of processes – Lack of systematic plans and clearly set processes and rules can lead to problems and complications.
• Step 2 – DataStream – Requires data collecting from sales, project management, transportation, and possibly other departments with connections to revenue and costs. Of the business.
• Step 3 – Definition of responsibility – does your company have established who is responsible for a certain process or its part? You probably know who is responsible for your financial statement.
  However, does this person know in what form and to whom to pass on this information? And is the person taking over a process or it is partially aware of it? If not, this can lead to unnecessary mistakes, delays, and misunderstandings.
• Step 4 – Tangled up accounting warp – Over complicated warp leads to mistakes., There might be accountants that have worked in the same company for decades and who can remember hundreds of different account codes and their variations, but for most workers, this does not apply. That is why it is important to have a clear, understandable, and structured accounting warp.
• Step 5 – In-house accounting – This should provide you with a detailed picture of cost intensity, effectiveness, and possibly the value of the individual business processes and products on a level of cost drives like for example cost centers, commissions, and profitability of the center that t the same time match the basic structure of accounting controlling objects during the planning process.

Record of actions/activity – Everything mentioned above will help you during creating a controlling list for financial statements meaning a plan that will show you where you currently stand, who is responsible for individual steps, how these steps follow each other, and what time frame they cover.

Finding the right mix of technologies

Making data more effective and adjusting new technologies should be a key part of the plan of the business/financial department. This will help to provide the financial directors with information and certainty for making hard but founded decisions in these difficult times.

WHAT CAN WE DO FOR IMPROVEMENT?

From our experiences, many companies run multiple software platforms (ERP, accounting tools, CRM, HR tools, consolidation tool, and excel charts) or they invested in technologies to seemingly solve their problems, but they are still missing a human talent for its smooth running. Make sure you understand the technologies and you have the right people that use them. Because separate systems often require manual input of data using charts, for example in the program Excel, and are one of the main reasons why many organizations don’t use the full potential of the implemented solutions. From our experiences, the key to finding the right mix of technologies is to create an IT/ system strategy, take into consideration your processes and new processes in software platforms or applications. Having a strong system with surrounding infrastructure is a solution that will pay off.

Acquiring and maintaining talents

Finding the right talent is the challenge of today’s age. Even in times of digitalization people are the key factor that influences the direction of your department in many ways. So how to find, allocate, use, and maintain the right people? How to choose and use the right communication? In the current changing conditions, the financial directors had to convert their employees to work from home. How to use the right communication tools? How to know you are using the right people for the required processes and that it is effective?

WHAT CAN WE DO FOR IMPROVEMENT?

Finding the right talent is more of an HR/recruitment process that could be an interesting topic but a different discussion. The first step to bettering is mapping internal processes and control of effectiveness. According to our experiences, a good tool is for example research of capacity. That means a list of information from available sources, based on good data collecting that identifies the capacity and limits f these sources (human, material, or technical). After that, you can make better decisions based on data on what process is best to make it more effective.

Management reporting

The current turbulent times with global connection of all valuable strings that have a direct and indirect impact on individual business processes put high requirements on financial business systems and their right set up. Outcomes from management accounting should provide you with relevant background for the effective financial management of the company in real-time.

WHAT CAN WE DO FOR IMPROVEMENT?

Pre requirement of effective functioning of the financially managing reporting system is an elaborate organizational structure of your company from a view of delimitation of jurisdictions and responsibilities and to that subsequent economical structure of the individual responsible centers in a form of cost centers, offers, and profit centers. These controlling objects should be in your financial information system defined in a level of detail with which you are capable of allocating costs and revenues from business activities. At the same time on this lowest level of detail, you determine goals and plan budget. Based on this setup of your ERP and correctly and timely allocation of financially-accounting values for individual objects you can receive relevant economic outputs in real-time for effective management decision making.

We stand behind the opinion that most changes are best handled collectively through cooperation. That is why we would appreciate your feedback or share your experiences with us that will allow us to help you. In RSM Technology CZ we like a challenge. We go by the words of ‘nothing is impossible, and we want to change the business world around us. Let’s change it together.