2020 was a whirlwind of a year, and in addition to learning lessons from the past year, it is important to be thinking ahead to critical success factors for the year to come. To that end, in the fourth quarter of 2020, APQC recommenced its annual survey to understand the key priorities and challenges for financial management professionals in the coming year, as well as their outlook, assessment of effectiveness, anticipated investment areas, and trending topics of interest. The survey responses represented senior-level finance professionals from across industries and geographies. Sixty percent of respondents were at the executive level, and 80 percent work for organizations with greater than $1 billion in annual revenues. Following are some of the survey highlights to help the finance function better prepare for the excitement (and endurance!) of the year ahead, girded by knowledge, and renewed by optimism.
Top areas of Focus and Initiatives
In terms of top areas of focus for the finance function in the coming year, the vast majority of survey respondents are again keenly focusing (investment activities, process improvement, etc.) on planning, budgeting, and forecasting in the coming year. These topics have remained top-ranked in the survey over the last several cycles of data collection. Planning has been challenged over the past year due to business shutdowns and other economic impacts of the global pandemic. Organizations are seeking more agile and accurate ways to effectively plan, budget, and forecast. Finance plays a key role in supporting their business partners with the timely analyses and reporting that they need to make effective business decisions, in good economic times and bad. In the coming year organizations need to work to ensure that they have the skills, processes, and tools in place for effective and impactful planning and forecasting, leveraging the power and promise of emerging tools and technologies.
In terms of the top priority activities for finance in 2021, more than half (59%) of survey respondents indicate that managing and reducing costs was at the top of the list, followed by improving planning and forecasting processes (43%). Finance can play a leadership role in their organizations during times of crises on multiple fronts (in addition to the traditional finance and accounting roles), not only in terms of helping their organizations generate ideas for cost savings, but also facilitating the acceleration of automation and digitization initiatives, spearheading innovation, partnering with other areas of the business (such as supply chain and sales) to help it meet its goals, and contributing to organizational performance improvement.
Key Anticipated Challenges for the Year
Half or more of survey respondents indicate that their finance function will be most challenged in the coming year by manual processes and a lack of enabling technology, non-integrated systems, and a lack of sufficient resources to accomplish needed objectives. Supercharge your finance function this year by leveraging APQC’s benchmarks as part of its Open Standards Benchmarking assessments in financial management to provide a great check point on how your organization compares to others in terms of process automation statistics (as well as cost, productivity, quality, and staffing benchmarks) for key finance processes. For example, within the accounts receivable process, APQC’s Open Standards Benchmarking survey finds that bottom performers receive 25 percent or more of their receipts non-electronically or manually, indicating a sizable opportunity to increase process efficiency and decrease process cost. Similarly, within the accounts payable process, bottom performers from APQC’s database report receiving almost half of their invoices non-electronically, or manually, again representing a significant opportunity for process improvement for those organizations. Where does your organization stand and what do you plan to do about it this year? Not yet an APQC member? Visit our Finance Metrics of the Month collection for access and commentary on key finance function benchmarks, made available to the public as part of our mission to find and disseminate best-practices information.
Risks
Forewarned is forearmed. In terms of anticipated risks in the coming year, survey respondents are most concerned about the continued impacts of the current pandemic as well as the associated economic implications. Over the past year due to COVID APQC has observed an increased focus on business continuity planning, financial contingency planning, and scenario planning as the finance function seeks to model different situations and help the business develop action plans. In addition to analytics, this is where the finance function can make a real impact on their organizations by helping them to mitigate and capitalize on current and emerging risks in the new year.
Trends
Have you enjoyed your home office this last year, or not so much? Top finance function trends anticipated to impact the finance function include big data and analytics (55%), as well as trends related to remote work and virtual collaboration for finance (48%). While APQC has been chronicling best practices and success stories in finance data analytics for at least a decade or more, this topic has seen a resurgence of interest from APQC’s membership as finance continues to seek to advance its maturity in this area and lever data analytics for better insights and decision making.
Remote work is here to stay for the finance function: About two-thirds of survey respondents indicate that finance staff currently work remotely to at least some extent, and almost half anticipate that extensive remote work will be allowed for their finance function in the future. Furthermore, survey respondents felt positively about the impact of remote work on finance function productivity: A little more than half of survey respondents felt that remote work has at least not negatively affected the productivity of finance employees, and more than a quarter felt that remote work has actually increased their productivity. Furthermore, survey respondents reported several key benefits to remote work for the finance function: About three-fourths of survey respondents feel that remote work is supported at their organizations (beyond safety and health considerations as a result of the current pandemic) due to the additional personal and work/life balance that it offers, and almost half feel that finance staff are happier given the opportunity to work remotely. However, the remote work infrastructure and environment for the finance function should be well thought-through, now that we have been doing this a while: Critical success factors to remote work for the finance function include clear and documented policies, frequent communication, enabled collaboration tools, as well as mechanisms to keep remote employees engaged.
Investment, Outlook, and Implications
A little more than a third of survey respondents indicate that their finance function budget is staying the same for 2021, with about a quarter indicating that it will increase slightly, and another quarter reporting it will decrease slightly. This is down from last year’s priority survey, when over half (57 percent) of last year’s priorities and trends survey respondents anticipated the finance budget would increase. This is reflective of the theme from this survey that in 2021, finance function respondents are being relatively conservative and managing expenses. However, from a good news front, while about two-thirds of survey respondents indicated that the COVID-19 mandated shutdowns of business have resulted in decreased revenues, and 59 percent feel that COVID-19 is negatively impacting their business in the short-term, only about a third of survey respondents feel that the pandemic will have a negative impact on their business over the longer term. Many finance functions will help their organizations rise above this crisis. Furthermore, almost three-fourths of survey respondents rated their finance function’s performance in helping the organization to respond to the COVID-19 crisis in a positive light.
Related Research from APQC
The Annual Priorities and Trends survey is an important listening point (one of several listening points) for APQC in helping us to design our research agenda for the year. For example, in response to the keen interest of members and customers in treasury and cash management over the past year, APQC conducted its “Delivering Treasury Success in the Nex t Normal project.” And in response to the continued interest in how FP&A is rising to the challenge of uncertainty, APQC anticipates releasing its newest “Blueprint for Success” on planning, budgeting, and forecasting (2nd edition) in February, and the February financial management webinar will focus on this topic with subject matter expert and guest speaker Philip Peck from member company Peloton.
APQC welcomes your ongoing feedback on financial management research topics, benchmarks, or proposed webinar topics, and stay tuned for more from APQC to help finance practitioners do their jobs smarter, faster, and with greater confidence in 2021!