How to create an efficient finance team: 3 areas to consider.
“Improve or change finance operations” was the top priority identified for 2021 by respondents to Airbase’s Annual Benchmark Survey of Finance Professionals. This goal is particularly important in light of other findings from the survey:
- 71% plan to meet or exceed revenue growth.
- 54% plan to increase headcount.
- Only 24% plan to completely return to an office environment.
To make those plans a reality, operations across a company must be efficient. A closer look reveals that finance teams may face even more pressure to increase efficiency, since about one in four companies planning to increase headcount don’t plan to add to their finance team, and finance teams don’t generally scale at the same pace as the rest of a company. The survey found that in small companies (50–100 employees) finance team members comprised 3% of overall headcount, whereas in larger companies (501–1,000 employees), they were about 1%.
Keeping pace with company growth will therefore require financial operations systems that scale easily, especially to meet revenue targets. The companies with the biggest plans for revenue growth also had the biggest plans to increase overall headcount, and both will have a big impact on the workload for finance and accounting.
How can finance and accounting teams improve operations to meet their goals? Here are three steps:
1. Eliminate (or at least minimize) manual tasks.
Manual processes are the enemy of efficiency. Not only do they take too much time, they have a higher risk of errors. Plus, there is a hidden cost to morale when well-trained finance professionals spend the majority of their time copying data, importing spreadsheets, or chasing down missing documentation. Nonetheless, the survey revealed that many teams remain mired in manual processes, something that must change to reach the targets for 2021. When asked what percentage of time is spend on manual tasks, our respondents said:
- Less than 5% of their time: 3.36%
- Between 5% and 10% of their time: 20.13%
- Between 10% and 25% of their time time: 10.60%
- Between 25% and 50% of their time: 38.26%
- Over 50% of their time: 10.60%
Clearly, if finance and accounting teams plan to improve their processes going forward, eliminating manual tasks should be a top priority. The survey showed that the top manual tasks are bank reconciliations and documentation gathering. Both of these are tasks that can be automated in part or in full.
2. Decide on the key players.
Team members and job descriptions shift as companies grow, and those for finance departments are no different. For example, a close look at our survey results show that many smaller companies (77%) lack a full-time CFO, whereas about half of larger companies have one.
Interestingly, every participating high-headcount company outsourced at least one finance function. Overall, accounting advisory was the most commonly outsourced task, and only one quarter of respondents outsourced their bookkeeping. A telling finding from the survey was that outsourcing often correlated with a shorter monthly close, suggesting that strategic outsourcing improves efficiency.
At a recent webinar on making your finance team more efficient, Stan Kong and Carolyn Basile, Principals at KongBasileConsulting, shared some commonly outsourced finance functions, as well as strategies for determining which should be outsourced and which should be done in-house. It’s important to note that this process is fluid, with different considerations coming into play at different times. Early-stage companies, for example, often don’t have requirements that are as complex as later-stage companies, or the number of staff, and therefore are more likely to outsource. As complexity grows, more finance functions are typically brought in-house.
Key points to consider when deciding what to outsource include:
- Personal preference: In addition to finance executives, this may apply to the CEO or board members, who often have strong opinions based on past experiences.
- Cost: Salaries and benefits for in-house employees are one reason to postpone hiring.
- Company structure: Funding stage, projected revenue, and number of employees can all be factors.
- Complexity: A SaaS company may have simpler needs than a manufacturing company with a complex supply chain, for example. Other factors include planned growth, geographic locations, audit requirements, whether or not an industry is regulated, and investor reporting requirements.
These points have to be balanced against each other. For example, a founder deciding to take on financial responsibilities themselves may seem like the lower-cost option, but this often requires more effort than outsourcing. Moving a function in house is typically the most costly option, but it lowers the risk of omissions.
3. Use the right tools.
Airbase’s Benchmark Survey found that inefficient software systems restrict efficiency for many companies. One striking finding was that companies who spend less on software actually spend less time on manual tasks — which seems ironic, since software is supposed to reduce those manual tasks. However, using multiple software solutions not only costs more, it can also lead to more time reconciling separate bill payment, corporate card, and employee expense reimbursement systems, and moving that info to the general ledger. As with outsourcing, businesses must continually evaluate their software needs. Many find they reach a point at which a consolidated spend management system is the best choice for reducing that kind of inefficient manual work. However, enterprise software solutions are often too expensive and complex to fit the needs of small and midsize companies. The best solution for those companies is one that can scale with them.
The right system can also present an opportunity to streamline processes. Prior to adopting Airbase’s spend management platform, the finance team at ecommerce company ReCharge used a combination of different software systems and outsourced their bill payments. Airbase not only replaced the disjointed tech stack, it also made the outsourcing unnecessary. Others have found that the right system streamlines in-house operations. Yatin Mody, Head of Finance at API development company Postman, reports that a consolidated spend management platform effectively does the work of one half-time employee.
It’s not surprising that improving finance operations is a top priority for many companies. Evaluating processes, systems, and staffing is an ongoing process as businesses grow. To find out how Airbase supports companies in becoming more efficient, from founding through IPO, schedule a demo with us.
Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.