There are any number of reasons why 2010 is an interesting year to look forward to – from politics to economics, technology to sport, change is in the air. The start of a new decade and the promise of economic recovery brings with it optimism and potential for business growth.
Amid all the potential change is the underlying understanding that businesses should learn from their financial experiences during the recession. Cost-cutting and consolidation have been the order of the day throughout 2009, and many businesses have made some significant positive changes to their processes – and bottom lines – as a result. Economic recovery may be on the way but it is unlikely that financial matters will slip from the top of the business agenda in 2010.
So what is the future of finance as we move into a new decade?
Control and Supplier Risk
Chief financial officers (CFOs) still have their eyes firmly fixed on maintaining the cost reductions achieved over the last 18 months. Now that short-term cost-cutting measures, such as headcount reductions, have been exhausted, keeping costs down through controlled spending and purchasing have come to the forefront of the finance team’s priorities. Indeed, as high-profile closures have proven, businesses rise and fall on the strength of their supply chains and cash flow.
Closer relationships with first- and second-tier suppliers are hugely important factors in the equation for evaluating and controlling risk in the supply chain. Businesses that keep a close eye on their purchasing commitments, and the company they keep, so to speak, are in a much stronger position to identify potential threats before their cash flow is seriously threatened.
Similarly, achieving operational efficiency across the business has been prioritised by most executive boards. For finance teams, a closer look at their processes has thrown the shortcomings of manual systems into sharp relief. The old adage of ‘time is money’ has never seemed truer; teams that are able to cut down on errors and speed up processing time stand to come out on top when it comes to effective cost reduction. Automation offers great opportunities for consolidation of resources, allowing businesses to centralise operations that would otherwise become inefficient over time and distance.
Automated financial processes have been successfully adopted by a number of enterprise-level businesses – and where large-scale enterprise leads, small- and medium-size businesses (SMEs) will follow in time. As vendors increasingly offer tailored technology offerings for SMEs, business size, and more importantly budgets, will be less of a deterrent to mainstream adoption. Factor in the increased use of electronic payments in the consumer space – the Payments Council is deliberating on whether to abolish cheque payments completely as we speak – and it seems only a matter of time before e-finance becomes the norm across all population demographics and businesses of all sizes.
Although automation and e-invoicing have both enjoyed successful adoption levels in the UK, it is obvious that not every business has chosen to make the switch from manual systems just yet. While there’s definitely a cost element to be considered, most business adopters have been pragmatic in their approach to investing, assuming – correctly – that long- term return on investment (ROI) is a more effective metric than initial cost alone.
For businesses that have chosen to automate processes, different criteria have been of varying importance. However, one theme has been common across most, if not all: e-invoicing cannot exist in isolation. To effectively and realistically improve processing times and streamline operations, businesses cannot simply generate e-invoices themselves – they have to be part of a wider network of partners and suppliers with whom they can transact. Vendors who encourage expansion of these networks will increase the attractiveness of the automation proposition and, as such, will be key drivers of wider adoption.
Collaboration with Other Economies
With virtually every economy working towards recovery, operating a wider network takes on an added dimension; global trade offers opportunities to businesses of all sizes. For example, government purchasing in the European Union (EU) currently equates to around 16% of gross domestic product (GDP) across the continent, or €1.5bn-worth of business opportunities for those businesses that are able to secure the contracts and scale their operations accordingly.
Initiatives such as Pan-European Public Procurement On-line (PEPPOL), which aims to provide a standardised process for businesses from around Europe to bid for government business anywhere within the EU, are examples of how some of the borders of global trade are coming down. With legislation as a spur, it’s only a matter of time before vendor offerings adapt to allow businesses to evolve around changes in the market and industry standards. Combined with the cultural shift of recent years that sees the UK increasingly opening itself to a role on European and global stages, technology can be a great driver for collaboration and growth.
It doesn’t take an expert to work out the importance of mobile technology in today’s economy. With laptops and PDAs getting increasingly smaller and smarter, the rise of WiFi and mobile broadband, and increasing legislation around flexible working, there is no doubt that the traditional idea of office-based teams and working practices are long gone.
That said, while most business functions have embraced the versatility and productivity of remote working, finance teams have remained one step behind their peers – it’s still commonplace for suppliers to wait on payments because invoices have not been personally signed off by the CFO. And while there is no reason why stringent approval processes shouldn’t be implemented – after all, control is key – delaying payments simply because an individual is not in the office seems hardly fitting for the 21st Century.
With cloud computing being touted as the one of the hottest technology trends for the decade ahead, workforces across the world stand to benefit from increased productivity, reduced downtime and streamlined data access, regardless of size or geography. It is only logical to believe that mobile access to financial and payment systems will become more widespread as a result of this evolution. Indeed, some vendors already offer suitable applications; widespread adoption seems likely to be the next step.
As with any predictions, the reality remains to be seen. Whatever happens, one thing seems clear; technology lies at the heart of change. Vendors who develop it and businesses that adopt it will play their part in shaping how it looks, feels and works, but there is no doubt that the future of finance is electronic.
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