Imagine that you’ve just received the unthinkable – a call from your accountant realizing that you’re running out of cash. It can cause panic, how will you pay staff? Impress stakeholders? Maintain healthy vendor relationships? Financial excellence is about bringing together parts of your finance function into perfect harmony. By getting it right, the finance department can protect your businesses from risks, and provide a long runway for stable operations.
Trustpair is the ultimate tool to help secure the payment chain through third-party identification. This will help instill confidence throughout the P2P process. Request a demo to learn more!
Understand the finances
Financial Understanding is quite a simple title, but its looks could be deceiving. Rather than just referring to the understanding of financial topics or calculations, we’re talking about financial acumen. This dives deeper into how your employees adopt their knowledge and apply digital transformation platforms to benefit the business.
As well as working in the business, a strong financial understanding enables finance teams to work on it. Not only executing everyday tasks but also making strategic improvements to improve how the business operates. This means stretching budgets, forecasting, and enabling your teams to make their financial decisions with confidence.
Financial understanding therefore requires a mix of both education and experience.
Analyze your financial processes
Like understanding, financial analysis requires your department to have a deep knowledge base and consistently put their skills to work. Financial analysis is often used to assess processes and products internally so that staff can determine what to improve.
Financial analysis can be useful in situations like:
- Measuring the success of recent rollouts
- Attempts to make processes more efficient
- Meeting financial targets
- Identifying problems, such as a missing invoice during the procure-to-pay process
Good financial analysis not only relies on humans but also leverages automation. For example, the US Bank has been employing AI to assess customer loan applications. This program analyzes the risk within the applicant’s profile and makes a decision much quicker than a human can. It means that successful applicants get access to their funds faster, and unsuccessful applicants can move on to pastures anew, without waiting for a decision.
Manage the risks
Risk management is essential for financial excellence, especially if the risks turn into events. Without it, managers are left unprotected as they:
- Make decisions
- Invest
- Hire talent
- Learn new technologies
Risk management begins with an assessment. This sometimes includes financial modeling to determine the severity of the risk and the potential impacts of an event. Then, finance teams must work with the other departments to secure any vulnerabilities and monitor them. A risk response plan should also be implemented.
One company that failed to properly manage its risks is a soldering company from the UK. One of their employees, who worked at the company between 1995 and 2004, developed asthma after being exposed to toxic fumes. The company failed to install a fume extractor or swap out the toxic solder for non-toxic, which was recommended at the time. After investigation, they were fined the US dollar equivalent of over $120,000.
Report your wins (and losses)
The success of the finance function is also dependent on financial reporting. Unlike analysis, this responsibility is required to meet external regulations and inform stakeholders or customers of your current circumstances.
While some publicly traded companies are bound by regulation to report using GAAP metrics, private companies can choose how they report their finances (including non-GAAP metrics). So it’s key that financial teams opt for calculations that not only place their company in the best light but also offer an accurate and transparent analysis.
In 2022, the SEC took aim at some companies when they updated their disclosure requirements around non-GAAP reporting. Some businesses had been excluding “normal” expenses in their adjusted calculations for profit and loss, for example, which the regulator found to be “misleading”.
To promote financial excellence, organizations should aim towards the most transparent metrics. This should help support their integrity, grow credibility, and increase positive brand awareness.
Secure the firm’s finances
In January 2024, five defendants were arrested in New York after targeting an IT company with accounts payables fraud. The group consistently charged the victim organization for work they never completed, and added personal expenses to the invoice, disguising them as business expenses.The IT company lost out on an estimated $7 million in total.
But financial security is not just about protecting your organization from fraudsters, it’s about keeping your business’ money safe in all aspects. This includes the likes of:
- Securing access points to prevent unauthorized payments
- Setting controls based on spending approval
- Preventing fraud through account verification of internal and external parties
- Committing to risk management plans to prevent unwanted financial repercussions
- Ensuring integrity in reporting to foresee financial difficulties
Trustpair is the ultimate tool for finance teams, since it secures the supply chain, prevents payment fraud, and promotes healthy vendor relationships. Help your team towards financial excellence when you partner with Trustpair.
Plan for the future
Financial planning is the final module of financial excellence for accounting and finance teams. While analysis and reporting focus on what your company has previously done, planning is all about creating a strategy for the future.
Financial planning requires setting financial goals and objectives, alongside setting clear expectations for each department and team member. Financial plans are important, but they’re only effective if they’re followed. Therefore, best practices during supplier management and the procure-to-pay process, for example, should be adhered to.
Recap: Financial excellence requires consistency, tools, and diligence
Financial excellence might sound a bit like a Harry Potter wizarding exam, and there’s no doubt that it requires commitment. But reaching financial excellence within your organization brings stability, confidence, and efficiency.
Use technical platforms like Trustpair for support, and ensure your team saves time each week to work on each of these aspects of the finances.
