Tightening the purse strings

Insufficient visibility over company spending makes it challenging for senior finance leaders to reach strategic decisions and can run the risk of hampering growth and profitability.

Inefficient spend management practices have created unnecessary and costly burdens for finance teams, affecting their ability to react quickly and become better strategic partners to the business.

On December 8, 2022, The CFO in partnership with Payhawk, hosted an interactive virtual roundtable for senior finance leaders. The discussion was led by Martin Sanders, strategic business advisor at Alitus (former CFO of Honda) and supported by Robbie Hadfield, finance expert at Payhawk. Payhawk are the leading global spend management solution, combining company cards, reimbursable expenses and accounts payable into a single product.

Participants discussed what levers could be pulled to manage uncontrolled spending, how to budget strategically and implement a company’s spending policy effectively to minimise financial risk.

The session was conducted under Chatham House rules so while this write-up will highlight key discussion points and takeaways, citations have been anonymised.

Managing large volumes of data within finance

The discuss started with an audit of what data management strategies and tools were being used by participants, with a specific focus on FP&A verification.

One participant shared that large volumes of data were not as much of an issue for them compared to how important establishing “a single source of truth” for data was. This participant noted it was challenging for their finance team to acquire the relevant data from other departments, specifically sales, given their overwhelming focus on targets over turnover. This often means the finance function cannot review accurate data, they said.

Another participant added that they often faced several discrepancies within their data sets given teams across the business were working off different versions of the data.

Payhawk’s aim, and purpose, is to help companies manage their large data sets more effectively and with better visibility. Many of Payhawk’s data entry and integration strategies are driven with accounting systems in mind to properly align data to entry rules, and mandatory fields, and provide more seamless synchronisation, visibility, and efficiency.

Improve the understanding and management activities

Participants agreed that data accuracy is crucial.

Many departments within a company use different systems to try to integrate tools and solutions to migrate data onto an ERP system.

It is difficult to get the correct information as transactions often contain errors due to manual and missing receipts, participants noted.

Enhancing the benefits of cash flow management

The panel discussed the importance of real-time visibility within the finance function, and how this enables a business through transparency on key areas such as employee resources and costs, and cash flow.

This is incredibly important in enhancing the cash flow management of a business. It also helps finance teams to eliminate subscriptions for employees on certain platforms or tools who are no longer employed which is a wasted expense.

Another participant mentioned noted their company has implemented several employee expense management systems which have eliminated the manual process of having multiple people work on these tasks.

With regards to cash flow, this participant’s business had implemented software which linked to their ERP system to access payment dates. This also helped when providing data to procurement for audits to understand what their cash flows look like, when regular payments come in, which can then be sent back to finance to forecast cash flow.

Timescales for the month-end close

One participant noted it took their business 3 days to get the books closed, however, to get the general ledger closed can take an additional 3 – 5 days. It all boils down to getting the right information out of the system at the right time.

Another participant noted that in their previous role, it would take five working days. However, since moving into the retail industry, they are required to close daily to validate what is being reported.

For others, timescales are far longer. One participant, who works for an organisation that owns 32 different businesses that are not integrated into one system, noted it used to take their business 20 days to close – this has since been reduced to 8 days.

The biggest factor in shortening this month-end close is having all the receipts in one place to reconcile the ledgers and inventory to drive efficiency.

How can the finance department learn from other functions?

The finance function can learn huge amounts from other departments within the business; marketing departments are one underutilised source – they have profound skill sets when it comes to data analytics and identifying trends for driving efficiency from small data sets.

For finance team members, the process of numbers is often still a manual task. Integrating certain systems can impact the role of finance to become more of a partner to the business and gain a commercial influence.

CFOs do not want their teams to be wasting time chasing receipts as this is a task that can easily be automated.

By spending more on company cards backed by expense management software, businesses have an opportunity to proactively govern and control, overcoming the need to chase manual receipts.

Card policies allow for different user groups within the company to have an expense system in place. For instance, if the sales team is required to travel more, but the spending limit needs to stay aligned with the company’s spend policy, expense management cards will allocate the budget and give visibility through operational controls on expenditure.

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