5 Reasons Your Finance Team Isn’t Seen as A Strategic Business Partner

This quote from Warren Buffett says a lot with a little. As one of the most successful investors in the world, Buffett has made a name for himself by making smart decisions with money. With a fortune of over $100 billion, Buffett created his wealth over decades through careful financial preparation and strategy. He was always building an ark in case of any uncertainty. 

So, here’s a question for you: If there was a Warren Buffett on your financial team, would you listen to him?

Because the truth is, your financial team is an integral part of the business. It makes key decisions about budgets, fiscal year planning and tax preparation as well as paying customers, suppliers and employees. This team isn’t just responsible for managing budgets – it plays an integral role in the financial success and long-term growth of the company.

Despite the importance of this function, the finance team isn’t always seen and valued as a strategic business partner. Rather, the finance team is sometimes seen as a tactical function – one that’s just there to sign off budgets, approve expenses and disburse payments.

So, let’s dive into some of the reasons finance teams aren’t valued as a strategic partner within companies.

According to Gartner, 78% of CFOs plan to maintain or increase enterprise-wide digital investments in the next two years. This is interesting given the looming recession and how that can typically drive companies to cut back on spending. 

But as Alexander Bant, Chief of Research in the Gartner Finance practice explains, companies can see a tremendous ROI from investing in digital transformation. Bant explains, “Companies that drive the right digital investments have 2.7 times higher customer retention, 1.6 times higher customer satisfaction rates and 1.9 times higher average order value.”

Given how big of a priority digital transformation is, you’d think that many finance teams would be heavily involved in shaping and driving transformation and innovation strategies. While that might be the case for the CFO, it’s not usually the case for the broader finance team.

Just imagine the benefits of having the whole finance department involved in your initiatives. There’s the opportunity to:

• Speed up payment collections by having more efficient and reliable processes
• Become more profitable by automating key financial processes to free up the finance team’s time to focus on more strategic initiatives
• Zone in on credit risk data to make more informed decisions

Compared to marketing, sales and IT teams, the finance department has historically been slow to adopt automation and AI. This has a lot to do with the fear of AI replacing their jobs (nearly half of all finance professionals are anxious about this) or too much time being taken to implement new technology.

Adam Dolby, SVP of Partnerships and Alliances at upSWOT, delves deeper into this fear of the robots taking over. “If you look at the jobs across financial services, there are certainly some jobs that are at risk due to technology and automation. But you have to remember, financial services is a relationship-driven industry at its core and relies heavily on trust. So, it’s not so far-fetched that finance professionals worry about tech ‘taking over’ and replacing them.

And while those fears may not hurt business growth when the economy is calm, it’s a completely different situation when you find yourself in a recession. With rising inflation, a cost-of-living crisis, increasing energy prices, rising materials costs, supply chain disruptions and an ongoing labor shortage following the pandemic’s ‘Great Resignation,’ businesses can’t afford to let those fears take over. 

It’s in uncertain times like we’re in today that business leaders will be faced with tough decisions. Nothing will be black and white – there will be nuances to every challenge faced and decision made.”

Labor shortages certainly come into these nuances. 65% of finance leaders were concerned about hiring and retaining talent in 2022, along with the increasing costs of employee salaries. And it doesn’t help that data from Gartner reveals that the only growing demographic in finance is employees who are 60 years of age or older.

Ed Willis, Director of Channel Sales at Quadient, believes the digital skills gap of older workers certainly is making it harder to recruit digitally savvy finance talent. “For companies that want to bring on finance professionals who embrace technology and embed automation into their processes, the available talent pool will shrink considerably. If the demographic in finance that’s growing the most is employees aged 60 years and older and this demographic is more fearful of technology, I’d advise companies and their recruitment teams to show this workforce the power and benefits of using technology. Show them that technology and automation will not only make their own jobs easier to do, but will also help them be seen as innovators and high performers inside the organization.”

The key takeaway here is to educate financial teams on the benefits of new technology and put to rest any fears about robots taking over. You can provide access to training on systems like digital ledger software and credit risk intelligence platforms. Also, encourage your team to bring new ideas to the table and be on the lookout for new technology innovations in blockchain, data visualization and AI, as these resources can make a massive difference.

Does this sound familiar? A member of the sales team reaches out to finance to confirm a deal going through. Finance asks “have you checked their business credit score? What’s their credit risk data like?” The sales rep replies “don’t worry about it. Everything will be fine. Can you put that deal through for me?” 

Put another way, insight from the financial team has been ignored and their sole purpose is to approve deals and budgets. Unfortunately, we’ve seen this happen all too often. According to our study, ‘The Sales vs. Credit Control Battle,’ 42% of sales professionals have little to no understanding of their company’s credit policy. Not knowing if a credit policy is in place is bad enough. But when you add to that the fact that nearly half of the respondents don’t understand the policy well at all, this could increase the likelihood that sales deals are rejected often.

What’s worse is that 44% of the surveyed sales professionals admitted they would still pursue a sales lead even if it was a habitual late payer and had a poor business credit score. These findings highlight a bigger problem – finance is often perceived as a deal approver and nothing more.

A remedy to this situation is for other departments to spend more time understanding the crucial role of finance within the organization. This could involve monthly meetings where staff do knowledge exchanges to help improve each other’s processes. It could be round tables where people’s voices are heard and frustrations are aired in a safe environment. It’s constant education of financial policies and credit decisioning protocols so everyone is on the same page and the business isn’t exposed to unnecessary risks. 

We recently surveyed finance professionals in the US to get a better picture of their credit decisioning process. According to the results, 97% of finance professionals process up to 100 credit applications in a single day. Just think about that for a minute.

That’s a lot of credit applications coming through and it’s not always a straightforward approval for all of them. Many are likely to require more in-depth analysis, including a proper review of their credit risk and financial history.

Now consider this: For 63% of businesses, at least 5 people are typically involved in making credit decisions on new customers. And 60% of finance teams take up to 5 hours to reach each credit decision. That’s a lot of manpower and time being spent processing credit applications manually.

And if it’s all being done manually by several people (with varying skills/expertise), it’s bound to lead to mistakes. So, customers that shouldn’t have been approved could slip through – meaning the business could end up getting stuck with repeated late payments or not seeing a single payment at all if the customer doesn’t have its finances under control or has cash flow problems.

But even when there’s a willingness to do away with manual processes, that enthusiasm can be misplaced. For example, many companies may still be relying on old ERP software to process financial information because they don’t think they need to use anything else. It may be a case that there isn’t enough understanding about the true benefits of automation.

But just think about how much more agile, efficient and reliable the whole credit decisioning process could be when you have clarity on automation.

By automating the credit decisioning process, you will see tremendous benefits, including: 

• Getting more insight into the financial history and payment behaviors of prospects
• Standardizing your credit checking policies to improve your team’s productivity and reduce errors
• Incorporating workflows that take into account your credit policy
• Accelerating the customer onboarding process, leading to greater customer satisfaction and retention
• Making quicker, more efficient business decisions from the start and end of the customer journey
• Closing more profitable deals faster

According to research from FinancialDirector and Workday, 73% of finance professionals see the requirement for timely, comprehensive data as the number one challenge facing their company today. Plus, almost one-third of the respondents said collaboration with non-finance teams is an issue, likely the result of outdated or siloed technological systems.

But it’s not all doom and gloom. Earlier this year, we asked sales professionals how much of an influence they think having a better working relationship with the finance team would have on their ability to close more deals. The answers were enlightening, with 67% saying it would either have a ‘major’ or ‘reasonable’ influence.

Finance teams have a huge opportunity to showcase their strategic vision and ability to drive long-term growth for their companies. But the key to doing that is having the right data (and if they don’t, making sure they integrate with/implement the right platforms to get the full data picture) and keeping the lines of communication open with non-finance teams.

To end this article, let’s return to Warren Buffett once again. He said, “Someone is sitting in the shade today because someone planted a tree a long time ago.” The finance department has the power to plant the seed of that tree, so it grows into something bigger and better for everyone.

But they can’t do it alone. They need the support of other departments, access to new technology and AI and, ultimately, the respect that comes with their positions. When you have that, the tree will grow into something spectacular.