What's Happening?
CFOs are being advised to focus on internal inefficiencies that can undermine growth initiatives, according to a recent analysis. While external factors like supply chain costs and talent shortages are often
prioritized, internal issues such as manual processes and data reconciliation are significant drains on resources. A study by Modern Treasury highlights that nearly all companies have some manual payment operations, with a significant portion of finance teams' time spent on data gathering rather than strategic analysis. This inefficiency, termed as a 'multi-entity tax,' arises from complex organizational structures and outdated systems, leading to errors, reduced agility, and talent drain.
Why It's Important?
Addressing these internal inefficiencies is crucial for companies aiming to sustain growth and remain competitive. The inefficiencies not only increase operational costs but also hinder strategic decision-making by limiting access to real-time financial data. This can delay market entries and complicate mergers and acquisitions. Moreover, the reliance on manual processes can lead to errors and increased audit timelines, further inflating costs. By optimizing internal processes, companies can better allocate resources, improve agility, and enhance their ability to capitalize on growth opportunities.
What's Next?
CFOs are encouraged to identify and quantify the costs associated with manual processes and to evaluate their core systems for handling specialized multi-entity workflows. Targeted solutions rather than large-scale transformations are recommended to address specific inefficiencies. By focusing on metrics and analytics, finance teams can better understand their current position and plan for future growth. Starting with small, manageable changes can lead to significant improvements, enabling companies to fund expansions more effectively and protect against potential setbacks.
Beyond the Headlines
The shift towards addressing internal inefficiencies reflects a broader trend in corporate strategy where the focus is not only on external growth but also on optimizing internal operations. This approach can lead to a more sustainable growth model, where companies are not just expanding but also enhancing their operational resilience. The emphasis on real-time data and strategic analysis highlights the evolving role of finance teams from traditional accounting functions to strategic partners in business growth.
