A Sharper Approach to Financial Strategy
Financial management no longer revolves around mere spreadsheets, reporting, and analysis of past outcomes. Companies must now face the reality of doing business in an environment that can see the likes of market conditions, customer preferences, operational costs, and regulations changing on an hourly basis. In this respect, finance managers must learn to convert information into actions rather than simply recording events that have happened. It is for this reason that intelligent financial management has become so important.
From Reporting to Real-Time Decision-Making
Typically, conventional finance teams tend to use most of their time gathering data from various systems, reconciling numbers, reporting, and interpreting past performance. Intelligent financial management provides an alternative by gathering financial data, automating processes and using analytics and artificial intelligence to detect trends and issues.
Data integration will help finance leaders gain more insight into cash management, costs, collections, working capital, and profitability. This means that they will not have to wait until the month-end to determine how things are going. The change is also expected to give finance personnel more time to consider possibilities and risks rather than performing mundane tasks.
Making Cash Flow More Predictive
Cash is still one of the most evident signs of the resilience of businesses. However, the forecasting of cash becomes challenging in cases where businesses operate more than one entity and handle different currencies, banks, suppliers, and payment cycles. Intelligent financial management will make this forecasting easier by using both historical and transactional data and forecasting algorithms.
The software is capable of identifying recurring payments, unusual payments and providing insight on what cash flows are to be expected. Finance departments will no longer need to react when facing cash flow issues but instead anticipate them. The improved forecasting may help in making decisions related to purchasing, investments, etc., as well as maintain liquidity.
Technology That Strengthens Financial Control
The automation of processes will influence the approach companies use to govern financial controls, as digital tools allow for preset rules application, exceptions identification, automatic reconciliation, and improved audit trail maintenance. The automation of the above tasks reduces the need for manual involvement and allows finance departments to concentrate on transactions that need to be reviewed by humans.
Nevertheless, technology alone cannot guarantee good financial governance. Good financial management works much more effectively when there are efficient approval processes, data quality requirements, cyber security, and other controls in place. It is extremely important for the heads of the finance department to understand the rationale behind automatic recommendations.
A Real-World Example
One such case is that of Prysmian Group, which introduced Cash Flow Intelligence by J.P. Morgan Payments to overcome issues of fragmentation in payment information and forecasts in its North American division. According to J.P. Morgan Payments, Prysmian Group expanded its cash flow forecast period from 30 days to 91 days, lowered the margin of error to less than 1%, reduced time needed to answer financial queries by 90%, and saved $100,000 each year. It also cut down on its treasury workload by 10 hours per week.
Turning Finance into a Strategic Function
It is true that the rising significance of fintech doesn’t downplay the role of finance professionals but increases the value of their contribution. As repetitive tasks become automated, financial specialists have the opportunity to focus more on scenario planning, performance, investment, risk assessment, and consultancy.
Another thing intelligent finance management allows for is better cooperation between the finance department and other business units. Thus, procurement can leverage finance data to reduce supplier costs; operations can see the link between expenses and productivity; sales teams can learn about customer profitability; and top management can consider strategic initiatives based on finance data.
Building Sustainable Business Value
The subsequent stage in financial management will be contingent on the ability of companies to link technological capabilities to rational decision making. Tools such as artificial intelligence, predictive analytics, automation, cloud computing, and real-time data can enhance the scope and pace of financial analysis, but only to the extent of the quality of the underlying data and the way it is governed.
By embracing the Intelligent Financial Management approach, companies will be able to develop a financial function that not only measures performance but anticipates the challenges, discovers opportunities, reinforces the controls, and provides insights to the management. As corporate models become more information-driven, finance will be one of the key functions in transforming information into value. Overall, the intelligent financial management will be an example of how a company can view and utilize finance in a different way.