GREENLIGHT

Let’s take a look at how this may impact the financial function at a middle market or smaller business enterprise like yours. To begin with, a recent study from the CFO Leadership Council pegged the unemployment rate in finance and accounting at under 2%. Another data point from Global Finance: “A Robert Half survey of more than 2,200 CFOs in the US found that 36% expected to lose finance staff within the next year, and 45% described themselves as somewhat or very concerned about their ability to retain talent.”

These labor market constraints may mean unwanted or unwelcome turnover in your financial function, including the loss of key employees. Moreover, the problem is likely to be more pronounced at higher skill and experience levels. These people likely have more options than just continuing with company. Of course, there is the companion issue of wage pressure which manifests when the company goes out to hire in a “hot” market for financial and accounting skills.

How important is the effectiveness of your financial function to the success of the enterprise? This is largely a rhetorical question. Finance is key not just at the tactical level of keeping the trains running (e.g. invoicing, payable, inventory and receivables) but also at the strategic level including planning, budgeting, performance analysis, capital raising, financing, to mention a few.

Given the importance of finance to enterprise success, and the tight market for talent, which is only likely to get tighter, we recommend that top management and ownership, along with HR, conduct a Strategic Review (“SR”) of the finance & accounting function at the earliest.

What questions should the SR address?

First and foremost is: What’s the role and what are the goals of the financial function in this enterprise? What are the objectives and targets? How about the KPI? Without clarifying these questions first, in writing, it’s hard to proceed further in the SR.

The next step is assessment of the current personnel in the context of the above. Said another way: Does the company have the right people on board for the journey ahead? Often, personnel are there for historical reasons that may no longer be relevant or appropriate. Consider that having people on board who can’t help the company make the next level is likely a poor investment. In this regard, it is particularly important to assess the leadership of the function. Does the company have the right CFO on board?

For the “keepers” the SR will need to address compensation, benefits, incentives and training. Where is the company on these key people issues, compared to the market and compared to competition? Its’ important to assess where the flight risks are, who is likely to be lured away etc. Better to do this proactively rather than deal with it after a key person gives notice,

The third key area is related to functions performed by the finance department. Do all the activities being performed need to be done internally or can some be outsourced effectively and perhaps at lower cost? In the modern world, technology and the gig economy allow many things to be handled by external resources at much lower cost and with greater flexibility than having full time staff. Obvious examples are accounting, payroll and HR software but there are several other areas that should be explored.

Finally, the company should consider opportunities for digital transformation. For example, there may be opportunities to reduce costs by eliminating paper intensive processes in transactional areas like Accounts Payable and Accounts Receivable. Moreover, there may be larger opportunities in revising the business model to take advantage of technology. This is important because, as the McKinsey study points out “With an aging global population and declining birth rates among every country in the developed world, it is likely the answer (to the shortage of talent) will be in part technological and not entirely human capital replacement.” By now everybody has heard of “fintech” and “blockchain”. In fact, the current push on fintech with large amounts of VC funding is exacerbating the talent squeeze. Are there competitors or disruptors in your space that are moving faster than you in digitally transforming their businesses?

Bottom line: It’s a good time to move proactively to make your finance and accounting function more effective, especially given the ongoing scarcity of quality talent. We can help you think through the issues, organize and conduct a Strategic Review.  Connect with us now to arrange a free no obligation consult.