Small- and medium-sized businesses have felt the strains of the COVID-19 era more than most. These pandemic pain-points have heightened the need for SMBs to embrace digital transformation, accelerating the adoption of digital tools that streamline processes through automation or other methods. Yes, adversity breeds innovation – but where and how exactly can small businesses best utilize these digital solutions? A prime avenue for transformation is financial planning and analysis (FP&A), which includes planning and budgeting, management and performance reporting, and forecasting/modeling. In turbulent economic times, proper financial assessment and planning is more critical than ever.
But the potential of FP&A is often hindered and long -term value creation within the function of FP&A turns out to be a missed opportunity.
The Trouble with Financial Planning & Analysis
Today’s typical FP&A process includes manually inputting numerous data points and figures into Excel files, which yields two problems:
1) Manual data entry leads to unnecessary human error.
2) Employees are left to engage exclusively with rote, mundane tasks, leaving them uninspired and without the bandwidth to dedicate to the more innovative, interesting elements of their jobs.
Let’s break down these issues.
Finance professionals deal with enormous amounts of data daily. According to a recent survey, seventy percent of companies still use Excel in some way or other to support their budgeting and forecasting processes..
This reliance on manual data entry increases the risk of costly errors, like 16,000 lost COVID tests in the UK or a slew of unwanted contracts for banks. People tend to overlook how easy it is for even the most adept finance professionals to accidentally add a zero in a report or mistype a formula in Excel.
Fortunately, automated solutions that can digitally manage these repetitive tasks are on the rise throughout numerous industries. When properly implemented, materials can be processed and reviewed faster and more accurately.
Relying on manual labor for menial, repetitive, mundane tasks comes with hidden costs even beyond human. According to a recent economic report, cumbersome financial planning and analysis processes that pull on resources and prevent revenue-seeking activities will cost US businesses $7.8 billion in 2022.
How could that extra time be better used? According to a recent survey, CFOs could use the time saved from manual work by spending it as a strategic partner (52%) or on business analysis (44%) amongst many other value-added activities.
These tools also help employees avoid burnout over mundane data processing tasks as such repetitive tasks tend to have a negative impact on employee well-being – an ever-more important consideration amid the Great Resignation.
SMBs which invest in revamping their FP&A processes will separate themselves from the pack.
Take Amazon – their Prime offering was born from analysis that found that free shipping could be offset by a monthly fee, a model which is now a pillar of Amazon’s service. Yes, Amazon is an example on the absolute largest scale, but for companies of every size, it is increasingly difficult to yield innovative insights if teams are bogged down by the monotony and inaccuracy of outdated manual methods.
The pandemic has taught businesses that they need to be nimble in the face of uncertainty. Accordingly, companies large and small are prioritizing agile, forward-thinking FP&A capabilities. It is no surprise therefore that business leaders believe AI will be essential to their finance functions and, as EY reports, 90% of companies are prioritizing an increase in capital allocation toward digital transformation.
In the current economic environment of uncertainty and rising inflation, issues like daily burnout and human error take on added importance. Automating manual processes is a great start, but if finance departments are given the bandwidth to take initiative and be creative, they can focus their efforts on forward-thinking innovation that can be a force multiplier for business growth.
So, when allocating resources towards digital transformation, SMBs should look to FP&A. Such efficiency-forward innovation has always been the backbone of growth for small businesses – organizations that help individuals get ahead, produce the lion’s share of jobs in the economy, and inspire entire communities.
Didi Gurfinkel is the CEO and Co-Founder of DataRails.