Why Every Finance Leader Should Evaluate Their Financial Maturity Now
As we’ve seen over the last few years with a global pandemic, rising inflation and interest rates, economic instability, and geopolitical risks, unpredictability is here to stay. These make-or-break situations display the importance of financial preparedness, and having the agility to make effective decisions.
As many finance leaders become increasingly concerned about revenues, hitting sales forecasts and maintaining a competitive advantage, gaining financial control is crucial to not only brace for potential challenges, but also position your company to improve margins and capitalize on opportunities to scale.
The key to regaining this control is increasing your financial maturity — having a full set of capabilities to help you make decisions accurately and quickly to optimize working capital, invest in growth, or control costs when it’s most urgent. Every company can withstand the changing economic environment and prepare for success by advancing its financial maturity using a holistic Business Spend Management (BSM) approach that equips finance leaders with full visibility and control.
Why BSM for finance?
BSM goes beyond traditional core transactions and captures everything that comes before, during, and after the direct action of spending money, from sourcing events, to negotiating contract terms, creating purchase orders, processing invoices, and a host of other spend, cash, or supplier related activities. BSM succeeds where point solutions and manual processes struggle. Incorporating advanced technology like cloud and AI, a BSM approach prioritizes data and quantitative insights to deliver greater visibility into and control over cash, liquidity, working capital, and risk. It also improves financial performance by harmonizing a wide range of spend- and liquidity-related processes. BSM empowers everyone in finance, AP, procurement, and treasury to collaborate and work smarter together to optimize financial health and make decisions based on data, not assumptions.
Where does your organization fall within the financial maturity model?
Our four-stage financial maturity model outlines a typical BSM transformation, beginning with a “viable” stage in which basic financial management practices are in place but the manual processes aren’t scaling with the organization’s growth. At the other end, “luminary” companies anticipate adversity, identify key opportunities early, and respond quickly in a way that drives performance.
Finance leaders can use the model to:
- Assess their company’s financial health and identify the best path to more secure footing
- Understand how visibility, control, and financial performance affect financial health at every stage
- Unify data to reduce risk, boost operational performance, and optimize spend and liquidity
To view the complete version of the model, please refer to our recently released guide to optimizing financial health.
Benefits of BSM for every stage of financial maturity
The guide also details how BSM-driven improvements in visibility, control, and financial performance optimize financial health across finance, AP, procurement, and treasury.
Viable organizations (known as Stage 1) typically face:
- Expensive manual processes, error-prone payments, and a limited financial picture that prevents making informed decisions
BSM can help viable organizations:
- Digitize and automate manual processes across functions and unite them on a common data platform
- Start to consolidate financial data into a single source of truth
Operationalized organizations (known as Stage 2) typically face:
- Undetected fraudulent expenses and inconsistent risk screening for suppliers
- Legacy manual structures and blind spots in global liquidity needs
BSM can help operationalized organizations:
- Gain control over expenses and automate risk screening of every supplier
- Roll out source-to-settle processes to obtain the full picture of financial health and improve cash management
Orchestrated organizations (known as Stage 3) typically face:
- High FX and borrowing costs along with working capital trapped in several places
- Forecasting processes hampered by manual data entry
BSM can help orchestrated organizations:
- Establish in-house banking, improve rate of return on capital, free up cash flow, and run scenario analyses
Luminary organizations (known as Stage 4) typically need to:
- Maintain momentum through continuous optimization of spend, payments, and liquidity
BSM can help luminary organizations:
- Achieve best-in-class results by continuing to track performance against community-powered KPIs
The notion of economic uncertainty for the foreseeable future is certainly a daunting one. We can’t avoid disruption from now on, and we can’t prevent it. But you can prepare your organization for it — by advancing your financial maturity. “Prosperity is a great teacher,” essayist William Hazlitt reminds us, “but adversity a greater.”
Download the eBook Now