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Visibility over cash key to surviving economic storm
Thu, 17th Nov 2022
FYI, this story is more than a year old

A global survey of C-suite executives and finance and accounting professionals commissioned by BlackLine has revealed a significant lack of confidence among C-suite and F&A professionals when it comes to the visibility their company has over its cash flow.

The survey suggests that many Australian organisations could be making decisions without an accurate, up-to-date view of company liquidity. This comes despite findings that suggest that visibility over cash flow and other financial metrics could be the key to businesses weathering the growing global economic storm.

The survey found that Australian businesses are anticipating growing pressure and scrutiny over company financials as a result of ongoing economic uncertainty, with the highest number of C-suite respondents indicating it will take between seven months and a year before they start to feel confident about the economy again.  As a result, optimising working capital and processes is high on the agenda, as companies look to bolster their financial resiliency to combat market instability.

Keeping Track of Cash

With recessionary fears on the rise, four in 10 (43%) of those surveyed are concerned that rising interest rates will result in more of their customers paying late (rising to 47% among CEOs).  Thirty-five percent are worried that prospects or customers will have less income to spend, which could impact sales/revenue, and 36% are worried that their organisation will face higher costs.

Perhaps as a result, 68% agree that understanding cash flow in real time is going to become more important for their company in the face of economic uncertainty. But nearly all respondents (96%) said they could be more confident in the visibility they currently have over cash flow.

This suggests that the majority of businesses could be at a serious disadvantage when it comes to making strategic decisions.  Of those that believe visibility could be improved, 43% are worried their company is making decisions based on inaccurate or out-of-date information and 37% say the lack of visibility over cash flow makes them less confident that their organisation can remain competitive over the next 12 months.

"Economic instability, the management of customer data and regulatory compliance in many industries have increased over the past few months, adding more uncertainty to an already challenging and uncertain global business environment.  Finance & Accounting now finds itself caught in the eye of the storm feeling the pressure to once again step up to provide clear visibility into enterprise performance," says Claudia Pirko, Regional Vice President Account Management Organisation, BlackLine.

"There is widespread acknowledgement that better insight over financial data, processes and working capital is needed if Australian companies can weather the storm," she says. 

"Company management  will need to carefully consider how their organisation can respond and remain competitive, resilient and emerge stronger in the year ahead from many years of recent disruption."

Financial Data Under the Spotlight as Organisations Brace for Recession

With external pressures that are hard to predict, real-time visibility over financial data, processes and working capital will be key to survival, leading to greater pressure on CFOs and those who report into them, according to the research.

Almost two thirds  (62%) of C-suite and F&A professionals predict that their companies financial reporting will come under increased scrutiny over the next year. More than half (57%) believe that financing will be harder to secure, and 63% expect the ability to view their companies financial data in real time will be a must-have for business survival over the next 12 months.

Against this backdrop, two in five (40%) CFOs said that they were responsible for ensuring their company's wellbeing during an economic downturn, compared to just over a quarter (27%) who said that this was the responsibility of their CEO. This indicates that as company finances come under the microscope, pressure to deliver insights to leadership in near-real time could weigh heavily on CFOs and the finance function.

The Biggest Pain Points

When asked about the biggest pain points for the F&A currently, identifying manual/human errors during the month-end close process was a pressing issue for more 34%  of overall respondents. Thirty-one per cent also said they do not have enough automated controls for the volume of data they need to deal with. C-suite and F&A respondents said the three biggest challenges they will face in the coming year include increasing regulation and scrutiny, being able to provide accurate data quickly enough to help the organisation respond to market changes, an reduced budget.

Looking Internally to Optimise Processes and Working Capital

In response to increasing financial pressure, responses suggest that organisations now need to look internally for ways to optimise working capital and processes, with 34% saying they now need to find ways to optimise working capital without looking externally to borrow funds and 49% wanting to implement or scale automation solutions to help optimise and increase working capital within the next year.

"There is no doubt that those who are using robust and comprehensive data to make rapid, intelligent decisions will be in a stronger position to adapt," says Pirko..
"In this environment, its likely that greater emphasis than ever will be placed on the strategic insights that Finance and Accounting can offer the business."