Finance and accounting: an overlooked port in the economic storm?

2022 was undoubtedly a challenging year for finance and accounting (F&A), with global inflation reaching an estimated 8.75 per cent, the most significant annual increase since 1996. With fears of economic instability showing no signs of abating as we enter 2023, businesses are entering survival mode and ensuring F&A has a clear role in decision making and planning has never been more critical. 

Most F&A professionals have worked through at least one recession and multiple peaks and troughs in company business cycles, but few will have experienced the bigger economic, business and geopolitical challenges we currently find ourselves battling. To further understand how businesses can weather this storm, we surveyed 1,400 C-suite executives and F&A professionals to help pinpoint areas for concern, as well as reasons to believe that calmer waters could be on the horizon.

It comes as no surprise that 61 per cent of C-suite executives surveyed said it will take them up to a year before they feel confident about the economy again and almost two-thirds (63 per cent) indicated they expect a worldwide recession within the next 12 months. Furthermore, responses suggest company finances will be under the microscope in 2023 with six in ten (63 per cent) saying financing will be harder to secure and a similar number (62 per cent) agreeing that being able to view their company’s financial data in real time will be paramount for business survival over the coming 12 months.

Cash visibility remains key

Six in ten (62 per cent) said that understanding cash flow in real-time will become more important for their company’s survival over the next year. The flow of cash into and out of a company has always been a contributing factor to a company’s financial health, with our research suggesting this is now even more crucial in the current economic climate.

However, there is notable concern among those surveyed, with almost all respondents (98 per cent) suggesting they could be more confident in the visibility their company currently has over its cash flow. Almost half (49 per cent) said a lack of visibility leads them to think their company is making decisions based on inaccurate or out-of-date information. This suggests that a large percentage of global organisations could in fact be making strategic business decisions based on unreliable data.

In such turbulent times, it is important for companies to respond to volatile market changes efficiently and effectively. Our research shows that 48 per cent of respondents think a lack of cash flow visibility will make it harder for their company to respond to market fluctuations throughout 2023. As a result, 44 per cent say this lack of visibility makes them doubt whether their organisation can remain competitive over the next 12 months.

Important steps towards financial automation

When we surveyed the same pool of respondents in 2020 during the Covid-19 pandemic, many said the addition of technology that helps them manage and track financial data would be essential to helping their company remain competitive. This narrative remained the same in 2022.

In fact, more than a quarter (28 per cent) of organisations say they have invested in both their data analytics capabilities and implemented or scaled automation technologies. On top of this, 76 per cent of current respondents have improved financial planning, analysis, budgeting and forecasting as a result of automation, with a further 75 per cent having automated financial reporting and filing.

These figures suggest that around 80 per cent of organisations that said they would implement these changes in 2020 have now done so, demonstrating that many have taken concrete steps to improve visibility and controls and reduce risk by implementing tools that improve real-time oversight of financial data.  

Trust in financial data remains in the balance

Our findings highlight that confidence in the accuracy and reliability of financial data is growing in line with continued investment in financial automation. However, there are still challenges for F&A professionals. While trust in the accuracy of financial data was found to be higher than previous years, nearly half (48 per cent) of our latest survey respondents still don’t have full confidence that the data their company is using is accurate.

The main reasons for this were:

• Large proportions of teams are working from home, making it difficult to know if the right processes are being followed
• Data is being pulled from too many sources, making it difficult to know if all data points are being accounted for correctly
• A continued reliance on clunky spreadsheets and other outdated processes that leave finance teams in the dark until month-end

This highlights an unnecessary level of risk for many large organisations, especially if important strategic decisions are made using inaccurate information.

C-suites are aware of the importance of accurate cash flow and other financial metrics when it comes to ensuring business survival in 2023 and beyond. Through automating the right processes, businesses can have far greater visibility and control over this data, leading to smarter, faster decision making. This won’t happen with the flick of a switch but if companies work to improve the way their F&A departments operate, they will have access to more reliable, accurate insights, which could make navigating the economic storm a little bit easier.

To read BlackLine’s study on F&A’s role in responding to economic uncertainty click here.