Cast our minds back to 2021 and ‘growth-at-any-cost’ was considered the optimal model for startups.
For many this approach worked but, in the ensuing months, businesses have been navigating a complex macroeconomic environment fraught with difficulties.
The collapse of multiple US financial institutions, including Silicon Valley Bank and Signature Bank, sent shockwaves through the finance sector, not to mention the tech sector for whom they were important lenders.
This, combined with rising interest rates and ongoing fears of a recession, meant investors saw little option but to shun unpredictability and risky investments.
Over in the UK, the Bank of England’s warning that the cost of borrowing will remain high for the next two years has forced businesses and finance leaders to tighten their belts in preparation for more volatility and scale back on their growth strategies.
To ride out this period of uncertainty, finance leaders are now prioritising sustainable growth to offset inflation and economic challenges, with many focusing on efficiency through automation.
Recent research from Tipalti, which examined the strategies of finance teams across the US, UK and Benelux in the current economic climate, showed more than three-quarters (78%) of leaders believe sustainable growth is more important than growth-at-any-cost.
Rob Israch, President at Tipalti, says: “This type of growth model needs to be strategic and measured, which requires assistance from those closest to the economics of the business and with the insight to know where the business is headed: the finance team.”
Here, Israch offers his five tips on how the finance function can achieve sustainable growth and successfully lead the business through uncertain times.
Double down on the business’ core proposition
When budgets are tight and cutbacks being made, successful businesses will focus on their core proposition, says Israch.
In practice, this means doubling down on the segments of the business with the best productivity, ROI and attractive payback for growth.
“Businesses need to make sure they are making the right investments, at the right time,” adds Israch. “That could mean divesting from longer-term and experimental projects, or only prioritising international expansion in areas where economies allow for sustainable growth. But to do so, areas of inefficiency need to be carefully examined.”
Identify finance inefficiencies
Economic pressures have seen countless companies scale back over the last 12 months, including by delaying international expansion or restructuring the workforce.
However, inefficiencies that still exist within the business can be equally as costly, Israch contends.
“Manually-led financial processes are riddled with inefficiencies,” he says. “This includes manual reconciliations, a need to keep up with changing global regulations and slow data output, impairing the ability to generate real-time data.”
“In reality, a lack of automation means that more than a third (36%) of account payable (AP) time is still being spent on manual processes – time which could be better spent focusing on strategic activities that will drive the business forward.
“With interest rates at their highest level in 14 years, the finance team must use tools such as automation to eliminate inefficiency and ensure management over costs.”
Plan beyond an economic downturn
Tipalti’s research shows businesses are now beginning to plan for growth beyond the economic downturn and, to do so, visibility over finances is crucial.
More than three-quarters (77%) of finance leaders say AP automation can enable them to look beyond the current slump and support growth objectives by freeing up time for strategic activity (82%) and allowing less friction and complexity to ease business expansion (80%).
Israch continues: “Visibility allows organisations to make more accurate financial projections, which is especially important during times of economic uncertainty – and with visibility comes control.
“Automation can provide real-time financial data that will ensure stakeholders are accurately informed about where the business is headed, so that strategic decisions can be made to grow the business and aid economic recovery. Only with access to timely financial data can businesses ensure they are agile and ready to respond to the changing environment.”
Embrace generative AI
The emergence of AI capabilities can be beneficial to various departments of the business, including the finance department.
These benefits are not going unnoticed as finance professionals increasingly gain an understanding of the opportunities that artificial intelligence can bring.
“Businesses can leverage these capabilities to enable faster invoice processing and reduce mistakes by predicting the correct coding on an invoice and purchase order,” Israch explains.
“AI can also provide automated insights that uncover patterns and trends that can help improve productivity and allow leaders to make more informed investment decisions. This, in turn, gives the finance team time to focus on higher-value activities such as financial analysis and strategic decision-making.”
Maintain good relationships with suppliers
Four-fifths (81%) of finance teams surveyed by Tipalti say that now, more than ever, they must ensure supplier relationships are as good as they can be.
However, juggling a significant amount of manual work means there exists an increased risk of error, delay or inaccuracy to payments.
This is evidenced by Tipalti’s research, which shows leaders expect to suffer from numerous issues if AP inefficiencies intensify, such as:
- Damage to supplier relationships (37%)
- Inability to find enough time to contribute to strategic decision-making (30%)
- A weakening negotiating position with suppliers (28%)
“The volatile economic outlook means finance teams are even more conscious of keeping their partners happy,” Israch concludes. “They simply cannot afford to lose revenue, so ensuring suppliers are consistently paid on time is crucial to drive sustainable growth.”
You may also be interested in the Business Chief EMEA website.
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