What are Business Finances and how to manage them in this 2022?

The great challenge of modern business finance is largely to strategically accompany business growth. For this, it is necessary to achieve a financial management system for the company that achieves a productive operation. Then, of course, you can always improve: continuous improvement is an intrinsic part of the same management system.

To form an efficient financial planning and analysis system, we can build with the McKinsey 7S always in focus: style (style), staff (personal), systems (systems), strategy (strategy), structure (structure), skills ( skills) and shared values.

Perhaps, at this early point in the post, we have entered into a conflict. It is very likely that by now you have thought something like:

• «Of course, Plika, it’s very easy to say that, but you don’t know the CEO of my company, don’t come and talk to me about modernizing finances with new software», or
• “That of shared values ​​and style may work in other countries, here in Latin America it is not the same, people are individualists and I see it every day in my work that the areas each do what they want and we cannot align one common methodology” or also, a very tragicomic if we think about it,
• «corporative strategy? planning? data-driven decision making? it’s that it’s not part of our culture, it’s not in our DNA yet.»

If you have raised any of those barriers to what we have told you, that is excellent, since it is precisely what we want to talk to you about today 😉 Yes, that’s right, it is our topic for today, which can be simplified with a question: How can we at Plika help you improve the business finances of your organization, taking into account the difficulties that our SMEs face today?

We invite you to accompany us with your reading: we know that your time is precious, so we promise to be expeditious and pragmatic!

What is business finance?

First, let’s align what we mean when we talk about business finance. With this term we refer to all those processes that are linked to decision-making regarding business capital.

The company’s financial area ensures the best use of its resources, including financing, capital restructuring and investments to be made, among several other sub-processes that we will see below.

Why are business finances important in companies?

The financial management of a company is key to achieving economic objectives and must have priority in the allocation of resources.

Among the responsibilities of the CFO and his team we find critical tasks for the success of the business, such as the analysis of the investments made or to be made, the financing of the company, the policy of dividends or compensation of the shareholders, management of the flow of cash, preparation of the budget, construction of a financial model, control of payments and collections, management of financial risk, among many others.

In order for them to be carried out with consistency and at the highest level of quality possible, the organization’s finance team must be surrounded by a context that brings out the best in them. This is what we refer to in the opening paragraph of the post, when we talk about a business finance management “system”.

Now how to achieve this? How to overcome obstacles that do not depend on us? We invite you to join us to see some things we have learned in more than 15 years of assisting the financial areas of small, medium and large companies in Latin America.

How to control business finances?

Your company, at this time, has a financial management system. No, we are not gurus or mentalists, but that is a platitude truth. The question is not really whether or not you have it, but whether it is the best financial management system you can get. And we are not talking about clear software; we are talking about processes, people, cultures. Ways of doing things.

From our experience of accompanying finances in SMEs for more than a decade (almost two), companies’ financial management systems often repeat 4 fundamental pains that hinder growth and performance improvement. Here they go!

1. Limitations in the projection of scenarios

Did you know that 62% of CFOs of Latin American SMEs consider that their company’s Forecasting process is not sufficiently developed? Yes, you read right! 6 out of 10 SMBs are unhappy with their scenario forecasting model.

This process is closely linked to the tool we use. Updating a simple datum, changes in the need to display this or that information, or the same user interface with which we display our presentations, becomes more or less stressful if we do it in agile and simple software, designed for presentations. and for dynamic management of information cubes, that if we do it in a graph reflected in an Excel or Google Sheets spreadsheet.

Again, we don’t want to build “anti-Excel” walls: we also believe that it is an extraordinary, effective and invaluable software. There is no need to leave it behind at all, as @SteveRosvold of CFO University reflects:

“I think it’s more likely that by trying to replace Excel in FP&A, companies will create a disconnect between the operations and planning process. No CFO wants that to happen.» Quote from CFO: Corporate Finance for Executive Leadership

Here we suggest you leverage Excel to go for something superior. We live, trade and plan in Latin America. The IMF estimated average inflation for our region in 2022 of 5.8% month-on-month. It is too much macroeconomic instability to be manually updating cells every time we want to analyze results and estimates. Integrate the use of Excel into an FP&A solution and boost your business finances!

2. Accumulation of manual tasks

According to consulting firm Accenture’s e-book “Seize the Advantage Point”, the technology available on the market today could automate 80% of the tasks of a standard corporate finance team. This data, which arises from the American market, allows us to see that, in general, businesses are onboarding the digital transformation of finance.

In Latin America we are a little further behind. Oracle did a study in 2020 that found that 37% of CFOs spend more time collecting data manually than doing higher value-added tasks, such as analysis and forecasting.

The «2022 Global CPM Trend Report» cites its own survey in which 90% of the finance actors consulted recognized that in the last two years finance and business processes have become much more challenging and complex. This scenario has no image that it will change; your SME must be prepared to surf the restless waters of the modern business world and must do so on the basis of a solid and proven financial management system.

Automating everything that can be done should be a fundamental premise, thus freeing up staff time for creative tasks that require human intelligence and sensitivity.

3. IT area dependency

This is another big problem that we find in the finances of LATAM SMEs: in order to move forward, the finance area needs to receive the report from the Systems area. This can lead to a large number of setbacks, misunderstandings and wasted time. Very common events to which we have unfortunately become accustomed in companies: reports are requested late and you have to run; IT delays because it is a bottleneck; there was no correct requirement or IT misunderstood it and the report must be iterated, among many other very common “unsuccessful cases” 😊.

Our study revealed that 7 out of 10 CFOs believe they are too dependent on IT for their liking. In this sense, implementing a software tool that consolidates the data of the entire business (that is, generated in all areas) in a single place, and that belongs to the finance team, helps to empower it, freeing the team from systems.

Now the CFO and his collaborators will be able to have the information, clean it, cure it, correct it, shape it and project it without the need to involve other teams in the process, saving time and quality of work.

4. Data collection

In Greek mythology, the Danaids were 50 daughters of King Danaus. For a crime they committed, they were punished in Hell and given a curious sentence: they had to fill a barrel with water drawn from a river, but the pitchers that had been provided for that purpose had no bottom.

Have you felt from your role as CFO that you are doing a useless job in data collection? This is the first and big hurdle to move towards healthier business finances: we want to sit down and process information, do analytics and project scenarios, but first we need to recover the data that is everywhere!

If so, keep in mind that you are not alone: ​​58% of CFOs in Latin America, according to a recent study, believe that data collection and integration into a single platform is a serious problem in their organizations.

Some areas work with ERP, others have their own Excel, others use an ad hoc management tool. Putting this data together in a single tool is not only exhausting and stressful for the team: it is also a great risk and decreases the level of reliability of that data (77% of the same sample indicated that they do not trust the quality of the data obtained ).

This deficient part of the organization’s financial management system can be solved with the adoption of FP&A software. A tool like Plika integrates with the different software used in the organization, including Excel, and feeds on them, bringing together everything you need to see in one place.

Hacia un sistema de gestión de finanzas empresariales más eficiente

Plika es un software de FP&A que te permite automatizar tus procesos de Budgeting, Controlling, Forecasting y Analytics. Se opera a través de una plataforma ágil y simple de gestión y analítica, lo que lo vuelve un soporte idóneo para las finanzas empresariales en las pymes de LATAM.

Con Plika ahorrarás tiempo de trabajo en toda tu operación, reducirás el desperdicio que implican las tareas repetitivas y bajarás el coste total de la función financiera en tu empresa. Para el CFO y el equipo financiero, liberará tiempo, lo que les permitirá colocar esfuerzo en tareas de mayor valor agregado.

Anímate a conocer la solución Plika mediante una experiencia demo; ¡es el cambio que tu negocio estaba necesitando!