The role of CFOs today is fundamentally changing. They are facing greater challenges in focusing on revenue growth while keeping a tight lid on controlling expenses.
Not only are CFOs charged with managing business finance but they are also involved in making strategic decisions. When it comes to expense management, the biggest challenges they face is ensuring effective controls are in place, streamlining expense claim processing, and getting insights through analytics to understand where the brakes on spend can be applied.
CFOs, now more than ever, need to place controls over spending and to manage risk, while ensuring the business continues to operate efficiently against its financial targets.
Reducing personal and business risk
As signatory to a company’s financial reports, the CFO takes on personal risk. It’s the CFO’s responsibility to ensure that reporting is done in line with accurate and validated information.
The aftershocks of the last decade’s financial crises have raised awareness of deep-seated fraudulent activities. CFO’s are more risk aware that financial statement fraud will cast a deep shadow, not only on the company, but to themselves personally. It will impact individual investors, should the company be listed, and can also have flow on effects in terms of cashflows and cost containment.
The modern CFO now faces an important task to address business expenses in a risk management framework so that risk is assessed, understood and appropriately managed.
Reducing expense fraud and reigning in out-of-control expenses are principal measures to improve cashflow so the business can run more effectively.
Gaining confidence in governance and business expense oversight
CFOs now must ask themselves: “Is my company on the path for profitable growth?” Automating business expense management is more important than ever to ensure the finance team can manage and process the increased volume of business expenses that will inevitably increase in line with growth.
A growth rate of greater than 10% could mean hiring additional resources just to manage and audit receipts, input data into financial systems, oversee policy control, make GST reclaims and run Fringe Benefits Tax reports for entertainment.
However, hiring more staff is only the first issue to consider. Trusting that everyone (both employees who claim expenses and finance staff who check policies are being adhered to) is doing the right thing is a significant risk factor.
Consider this: according to global trends, most companies will be experiencing fraud of approximately 7% of total expense claims.
Do you know how much fraud – either unintentional or deliberate – is occurring within your business?
Automation: the final frontier
It’s surprising that in a country like Australia, where there are approximately 60,000 companies with more than 50 employees, it is estimated that fewer than 10% have automated systems to manage business expenses across all areas.
Most organisations are managing business expenses manually, which offers little recourse for auditing, reconciling and effective reporting.
While most business expenses are essential in running the operations of a company, the processes to approve spending and reconcile most individual items of expenditure within financial systems have been given little attention to date. Quite often, they are simply rolled up into line items on a CFO’s expense report.
By addressing inefficiencies within expense management through implementation of automation, companies can reap valuable rewards by containing costs and generating efficiencies in business operations.