According to a report from Sage Group, 96% of CFOs predict a shift in their roles over the next three years, with nearly 9 out of 10 CFOs reporting a change in their responsibilities over the past 12 months. And 85% of CFOs note that these changes will involve more strategy and counsel for their companies. In comparison, 60% believe that they’ll be delivering evaluations that will guide the overall direction of the business.
The finance department is shifting to focus more on strategic insights, which can be felt throughout organizations. Data and insights from the accounting team will be crucial in driving strategic business decisions. Continue reading to learn how accounting will be key in shaping organizations.
Key takeaways
- Accounting helps aid decision-making by providing the financial reporting necessary to make critical business decisions. Improvements to accounting processes can help with mitigating risk, improving data accuracy, and providing criticalinsights on-demand.
- The accounting shortage can lead to more human errors and strain internal resources, making it essential for CFOs to focus on retaining talent.
- There are several ways to improve processes in accounting to ensure data is accurate and complete.
What is the role of accounting in strategic decision-making?
Accounting plays an important role in decision-making, as it provides essential business information and gives insight into an organization’s overall health. By leveraging accounting data, finance leaders can identify areas to manage costs, mitigate risks, or expand the business.
How does accounting help in decision-making?
Accounting assists in decision-making in the following ways:
- Provide finance leaders with accurate data
- Provide insights throughout financial models
- Manage risk
- Analyze and control cost
- Showcase snapshot of an organization’s financial position
Let’s take a look in more detail below.
Provide finance leaders with accurate data
According to research, 79% of CFOs identified problem-solving as an important skill to future-proof their finance departments and companies. However, access to accounting data is crucial in solving these challenges. Accountants can provide CFOs, controllers, and other members of the C-suite with this information.
Provide insights through financial models
Accountants can use data to create models to determine the risk factors related to inflation or the economy. These models can also help companies be more efficient or reduce costs. Simple Mills uses MineralTree to uncover insights related to accounts payable. “We look at what could happen if we extend payment terms or ask for early-pay discounts with certain suppliers,” said Maddy McGannon, Simple Mills’ Controller. By leveraging their payment data, they were able to drive business insights that had a positive impact on the bottom line.
Manage risk
Accounting teams manage risk, including fraud, foreign exchange risk, and compliance. They can help analyze cash flow and leverage analytics to determine how to reduce their organization’s liabilities.
Analyze and control costs
Organizations are under increasing pressure to do more with less, while reducing costs. In fact, 35% of CFOs noted that cutting the right costs would be one of their most important obstacles over the next year. To determine how to effectively cut expenses while improving the efficiency of the finance department, leaders need to consult various data points and sources.
Payment data, in particular, is important in determining how to improve costs. For example, AP teams can identify vendors with a high volume of payments and prioritize these vendors for virtual card enrollment to maximize rebates. Quartzy, a life science organization, leveraged SilverPay virtual card and was on track to earn $100,000 in rebates by the end of the year with this simple switch. Finance teams can uncover these opportunities to better manage overall cash flow by analyzing costs.
Showcase a snapshot of an organization’s financial position
KPIs related to financial performance provide an overview of an organization’s overall health and performance over a given period. The organization can use these metrics to drive better decisions in the coming quarter or year.
How to improve accounting processes for better decisions
There are numerous steps teams can take to improve their current processes, allowing teams to have more insight into their current data while reducing risk. These steps include:
- Reduce human error
- Gain more visibility into the process
- Focus on retaining accounting talent
- Invest in analytics
- Embrace the cloud
- Automate the end-to-end accounts payable process
Keep reading for a closer look into each step.
Reduce human error
Human error can drastically impact the data finance leaders use, leading to wrong decisions, challenges with vendors, and an erosion in shareholder trust.
Due to the accounting shortage, finance leaders need to be extra vigilant to ensure information remains accurate. In fact, 720 companies reported errors in their earnings reports, up from 30% in 2019. Accurate data is key to driving strategy, so companies must invest in the right talent and tools to mitigate these.
Gain more visibility into the process
Many companies struggle to get real-time data due to the limitations of their tools, leading to inaccurate cash flow forecasts. With the right accounts payable software solution, your team can leverage real-time invoice data without waiting for it to have been paid and posted to the ERP. This level of transparency allows finance teams to get a more accurate view of their books. In fact, 17% of companies are embracing automation and digital transformation to gain data and insight for the decision-making process.
Focus on retaining accounting talent
Jacqui Cartin, executive vice president and group financial controller at Sage Group, said, “Five years ago, I had people lining up outside my door to do the more manual, A/P and A/R types of jobs. Today, every time we’ve got somebody who leaves my A/P team in Atlanta, for example, it’s really hard to fill those roles.” And noted to CFO Dive, “‘The war for talent’ is what keeps Cartin up at night.” One of every five respondents in the 9th Annual State of AP Report reported that staff turnover was one of the biggest challenges over the past year.
In the US, there are 340,000 unfilled accounting jobs. The number of CPA applicants has decreased by 45%, and fewer college grads are selecting accounting as a career option. For modern CFOs looking to retain and recruit finance talent, it’s important to create compelling career paths, offer flexible work arrangements, and incentivize employees. Finance talent needs to be a priority for CFOs if they want to ensure that their teams stay intact amidst the accounting shortage.
Invest in analytics
Better analytics tools result in better data for decision-makers to leverage. The right tool can go beyond the typical Excel file to automatically pull critical information for the team, including a company’s DPO or the AP aging report.
Embrace the cloud
Cloud-based accounts payable solutions ensure that all team members have access to the same information, no matter where they are located. These solutions help teams collaborate better across departments, in different offices, or from remote environments.
Automate the end-to-end AP process
While most organizations are automating at least part of their accounts payable process, only a fraction are digitizing the entire AP workflow. As a result, fewer than two out of every three survey respondents noted that their needs were being met completely or nearly completely.
AP automation offers numerous advantages, which is why finance teams have noted it’s their highest priority to digitize for the fourth year in a row. With the right AP automation technology, teams can reduce human error and gain access to powerful analytics. The right tool will allow teams to slice the data and quickly sort payment information.
Final thoughts
Accounting is key to driving business value since it can help manage risk and provide valuable data that leaders can leverage to deliver value across the organization. To learn more about how MineralTree can help, schedule a demo today.
FAQs on accounting’s role on decision-making
Tl;dr? If you’re short on time, the frequently asked questions below provide a quick snapshot of what you need to know about accounting’s role on decision-making.
1. What is the role of accounting in formulating strategy?
Accountants provide important data and insights into the financial health of an organization, which can then be leveraged to steer the business in the right direction.
2. How does a balance sheet aid in decision-making?
A balance sheet is one tool accountants can use to determine the overall financial health of their companies. This tool can assist when evaluating investments or expenses.
3. How do companies build an effective AP team during the accounting shortage?
CFOs can help build effective accounts payable teams by offering flexible work schedules, upskilling the current workforce, and creating enticing career paths.
