Budgets are set to decrease while to-do lists are getting longer, forcing companies to turn to new technologies to increase efficiency.
Corporate finance departments are becoming more efficient, and they will have to do more with less this year: Budgets are set to decline at a time when to-do lists are getting longer.
Finance departments cost large companies 0.95% of their annual revenue in 2019, down from 1.11% in 2010, according to a survey by Hackett Group Inc. The finance budget is forecast to decline to about 0.92% of annual revenue in 2020.
An uncertain economic outlook for 2020 is causing companies to cut back across departments. Finance isn’t immune, said Nilly Essaides, a senior research director at Hackett and one of the authors of the survey.
One thing easing the blow: Technology spending as a share of a finance function’s budget is expected to go up. Fifty-seven percent of survey respondents expect the share of technology spending as part of the overall finance budget to go up in 2020, from 10% in 2019, which would be the first increase in a decade, according to Hackett. “The share spent on technology is rising as companies try to enhance efficiency,” Ms. Essaides said.
Finance departments increasingly are required to play a central role helping to optimize business processes and finding areas for growth, said Paul McDonald, a senior executive director at staffing firm Robert Half International Inc.
Companies are expected to focus on robotic process automation (RPA) and advanced analytics to boost efficiency, followed by investments in cloud-based applications and data visualization tools.
Life Link III, a Minneapolis-based air medical transportation company, increased its budget for finance information technology to $275,000, up 50% from 2019. The company last year started automating certain processes within the finance function, including accounts payable, invoicing and employee expense reporting.
Robotic process automation reduced the pressure for Life Link to hire additional finance staff, Chief Financial Officer Robert Sannerud said.
“Automating these processes allowed us to keep the same level of staffing in certain areas. That allows Life Link to hire in other areas, for example data analytics,” Mr. Sannerud said.
Broad-based implementations of new technologies are still limited, as many companies run pilot programs or restrict their implementations to certain parts of their finance organization. That’s expected to change. “Finance departments have finished discussing these new technologies—now, they are adopting them,” Ms. Essaides said.
Originally from Wall Street Journal