Table of contents
- What is financial visibility?
- How can you improve financial visibility in your organization?
- Why does financial visibility matter for business leaders?
- 5 key strategies that enhance financial visibility
- Unlock enhanced financial visibility with Paystand
Key takeaways
- Enhanced financial visibility is about more than accurate financial reports—it can lead to lower spend, decreased risk, a better cash position, and more informed decisions.
- Real-time data and financial insights are key to improving financial visibility for any organization.
- A combination of processes and technology can eliminate bottlenecks and boost clean data collection.
Finance has insight into the money flowing in and out of the organization at all times. Or, at least, they should. Far too often, finance teams lack the transparency necessary to know how much has been spent at any given time.
A Blackline survey of nearly 1,500 financial professionals found that 62% believed real-time cash flow monitoring to be critical but 98% confessed that they could be more confident in their financial visibility.
Former Teampay VP of Finance and current investor, Peter Nesbitt, recalled his former role, “It was common for my team to essentially ‘fly blind’ for most of the month. We only received the corporate credit card statement in the final days, and that was when we would finally become aware of all the money that had been spent.”
The scenario that Nesbitt described is faced by finance teams across industries. Without the ability to conduct real-time spend analytics, they are unable to be agile and strategic. Understanding financial visibility offers the solution to spending overrun.
What is financial visibility?
Financial visibility, sometimes called financial transparency, refers to how much information you can see regarding your company’s financial health.
Digitization does not equal transparency. When businesses first shifted from paper ledgers to software, the mode of manual data entry changed. But the process for capturing usable financial data did not.
Financial visibility requires more verifiable data than traditionally feasible to provide businesses with accurate insights and forecasts. For accounting teams, this often means manually matching financial documentation and hoping that no information is missing or incorrect.
How can you improve financial visibility in your organization?
Technology, however, is involved. Real-time reporting and analytics have changed the game. But simply having new software isn’t enough. New technologies must be considered in the context of processes and people.
Respond to spend in the moment
Let’s consider the traditional flow of spending in an organization. Finance teams are rarely consulted first. Instead, employees spend willy-nilly on shared corporate cards and personal cards, and finance is left in the dark about all the hodgepodge spending that has occurred. They can only react after money has been spent, rather than optimize spending as it happens.
For example, if multiple employees need the same software, they might each purchase the tool separately. Had finance been able to view these transactions in real time, they could have stepped in and prevented the duplicate purchase or negotiated a better price for a license package.
Visibility into spending allows finance teams to know what transactions are taking place throughout the organization in real time, rather than waiting until the end of the month when people may have forgotten why they made a purchase or may have lost the receipt.
This is especially important when it comes to remote employees because the difficulty of collecting receipts and other missing information at month-end only increases when people work from different locations and time zones. Furthermore, finance can catch out-of-bounds and fraudulent purchases immediately, stopping them in their tracks.
Reforecasting and adjusting
Finance is responsible for managing the organization’s money: what goes in minus what goes out. The former—revenue—does not have any direct levers that you can control. On the other hand, spending can be directly scaled up or down as needed.
This includes things like consolidating software licenses across the organization, canceling unused zombie subscriptions after employees leave the company, or stopping recurring FreshDirect orders when employees move from in-office to remote.
With visibility into spend by vendor, finance can see how much the company is spending with each one, so they can easily organize expenditures and determine whether there is sufficient ROI. From there, finance can cancel services that aren't critical and renegotiate with those that are.
During economic shifts, businesses generally need to reforecast and reprioritize investments. This is difficult to do when finance doesn’t know what is being spent currently, only what was spent last month.
Finance teams are relying on numbers from the past to make assumptions about the future, rather than focusing on data from the present. When outdated data is used, companies can't have productive conversations about what to cut. With real-time visibility, finance can access accurate purchase data at all times, not just at the end of the month. They can pull up-to-date reports at a moment’s notice, conduct real-time spend analytics, and confidently allocate capital.
Why does financial visibility matter for business leaders?
Financial visibility is about more than tracking numbers. If you capture financial data in real-time, you gain control of where your money is going. A granular, clear view of every financial transaction translates into less risk. And it doesn't just mitigate risk for overspending, but also fraud and embezzlement.
At the same time, companies that have transparent financials have a competitive advantage: They can make informed decisions with greater accuracy, improving chances of operational success.
5 key strategies that enhance financial visibility
There are a few steps you can take to improve your financial management in a way that enhances financial visibility, including:
1. Identify cash flow management bottlenecks.
For many organizations, you will find bottlenecks in accounts payable (AP) and accounts receivable (AR). Cash flows out quickly in AP without strong controls and a clear expense policy. At the same time, customers may pay slowly, which tightens cash flow.
Real-time insights can help you find these bottlenecks, allowing you to remedy them. If you don’t have data in these areas, that's the place to start.
2. Review your data collection and hygiene processes.
Next, you’ll want to ensure you’re collecting the right information and that it is quality data. You will want a mechanism in your software to flag incomplete data and duplications. Having more data is only meaningful if it is correct—otherwise, it creates confusion.
3. Automate manual entry.
It’s much easier to reduce mistakes and improve your financial data with automation. Whether you use Robotic Process Automation (RPA) or AI, or a combination of the two, accounting automation reduces your workload and streamlines financial operations. As a result, you can focus on evaluating data, managing suspicious spend, and developing payment strategies that drive revenue.
4. Introduce financial controls.
Financial controls should be in place for both security and practical purposes. Allowing employees to use their personal cards or having a reactive reimbursement process can create chaos. Poor controls increase the risk of fraud, embezzlement, and honest misuse. Fine-tuning your financial controls can eliminate these problems and streamline reporting.
5. Use robust, company-wide software.
The worst thing accounting teams can do is implement software that siloes accounting. Ideally, your organization will invest in a spend management system that taps into all department spend. This approach can make it easier for employees to submit spend reports and approvals without sacrificing visibility.
Unlock enhanced financial visibility with Paystand
Business leaders seeking to improve financial visibility and their organization’s cash position require streamlined technology and processes. Real-time financial data flows are critical to reducing risk and boosting transparency. Combined with in-depth and automated reporting, financial management teams can transform accounting from a necessary expense to a strategic partner.
But these tips are only the first step to optimizing spend management. Discover more strategies in our eGuide on Using AI to Drive Better Financial Decisions.
