6 Points to Factor in for Planning 2023 Mid-Market Finance Digital Transformation Strategy to Strengthen Cash Flow, Margins, and Maximize Finance Team Productivity

2023 presents both challenges and opportunities, particularly for mid-market CFOs who face the daunting task of managing accounts receivables, margins and cash flow during a possible volatile global economic climate. Through the year, it is very crucial to address the fluctuating days sales outstanding (DSO) and the high number of accumulating due invoices.

Merely relying on reactive dial-for-money procedures, broken commitments, and scripted follow-ups will not lead to significant progress. These challenges will be compounded by reduced productivity due to the lingering effects of the inconsistent payment cycles and economic turmoil. Consequently, businesses will be vulnerable to suffer from uncollected funds and wasted staff hours spent chasing after outstanding payments.

The impact on top-line metrics should serve as a reminder for CFOs to make adjustments and ensure that the finance function is well-prepared for the uncertain economic landscape of 2023 and beyond. This preparation will enable Finance teams to collaborate effectively and achieve more in less time.

Here are 6 essential points that CFOs should consider while developing a future-ready digital transformation strategy that will remain resilient for the next few years – and help to strengthen cash flow, meet unmet revenue targets, and maximize Finance team productivity.

1. Identify the obstacles in achieving targeted growth during an economic downturn.

• When formulating the 2023 strategy for your finance function, it is essential to enumerate all the challenges that may hinder the efficient management of processes within your organization. Here are several categories to consider:
  
  Analyze the tasks that consume significant man-hours for your team.
• Evaluate whether the current economic conditions compromise the customer experience.
• Assess whether your existing infrastructure is capable of managing the anticipated volume.
• Examine your team’s preparedness for potential overseas expansion, if that is part of your plans.

If collections crunch has been your problem consistently, here is a checklist that can assist you in identifying and addressing the accounts receivable challenges that you should aim to resolve in 2023:

• Are you able to accurately forecast cash flow based on clear information about collections and payment commitments?
• Are you effectively prioritizing the collection of cash from the correct invoices in a timely manner?
• Are there any delays in delivering invoices to customers?
• Can you resolve raised disputes (reporting, categorizing, reasons, time taken to sort, dashboards) in a timely fashion?
• Are you able to collect cash on time without negatively impacting the customer experience?
• Does your process include mechanisms to match payments and close open invoices, reducing redundant efforts?
• Is there a need for improved management of credit extensions?
• Do you have sufficient channels in place for collecting payments?
• Are you regularly assessing the creditworthiness of customers after they have been onboarded?
• Is the time required for customer onboarding increasing gradually as your volumes grow?
• Are invoices reaching customers in a timely manner and through their preferred mode of delivery?
• Are data points regarding customer payment behavior and credit risk available to all relevant team members?
• Does your collections team have additional incentives for timely collections – is your model built that way?

By collaborating with your team, take a comprehensive approach to assess all areas of concern and identify potential improvements, particularly in enhancing the collections strategy for the accounts receivables function. Subsequently, align these challenges with the priorities of your business to safeguard against the adverse effects of unpredictable economic fluctuations and ensure that your growth objectives remain unhampered and unrestricted.

2. Assign priority to challenges based on overarching goals 

Once you have compiled a comprehensive list of challenges, the next step is to prioritize them according to their importance. Your company may have specific areas of focus, such as:

• Strengthening working capital
• Managing business volume growth effectively
• Accelerating customer onboarding
• Enhancing customer service and customer value
• Leveraging automation and AI to boost employee productivity

Let’s explore an example of how these challenges can generally be prioritized in alignment with company goals:

• Strengthening working capital: Consider implementing intelligent automation for dunning processes and efficiently applying cash collected towards outstanding invoices to optimize working capital management.
• Managing volume growth: If managing business volume growth is a key focus, prioritize initiatives like shortening credit evaluation periods during customer onboarding and ensuring timely invoice delivery. Additionally, offering electronic payment options can expedite the payment process.
• Addressing a low Net Promoter Score (NPS) in 2023: To improve the customer experience, prioritize initiatives such as streamlining customer onboarding processes, reducing invoice delivery time, and promptly resolving customer disputes.

By aligning challenges with these prioritized goals, you can effectively allocate resources and efforts to address the most critical areas and maximize the impact of your 2023 strategy.

3. Technology Infrastructure Assessment

Evaluate your current technology infrastructure and identify any gaps or limitations that may hinder financial operations. Consider upgrading or implementing new technologies such as cloud-based financial management systems, advanced analytics tools and process dashboards, or robotic process automation (RPA) to streamline processes, improve data accuracy, and enhance productivity.

4. Process Automation and Efficiency

Identify manual and repetitive finance processes that can be automated to reduce errors, save time, and increase efficiency. Streamline activities like accounts payable/receivable, financial reporting, budgeting, and forecasting through the use of intelligent automation solutions. This will free up your Finance team’s time to focus on more value-added tasks.

5. Data Analytics and Insights across the value chain

Plan to build and deploy comprehensive, futuristic dashboards to gain actionable insights into your financial performance and uncover opportunities for revenue growth. Implement advanced analytics tools to analyze internal financial data, identify trends, forecast cash flows, optimize pricing strategies, and detect anomalies or fraud. This data-driven approach will enable better decision-making and help you meet revenue targets.

6. Collaboration and Integration 

Foster collaboration and integration between Finance and other teams within and outside your organization. Break down silos and encourage cross-functional communication to ensure a holistic approach to financial management. Align Finance with sales, operations, and marketing teams to optimize cash flow, revenue generation, and profitability. Integrated systems and data sharing will enable better decision-making and a more streamlined financial ecosystem.

By considering these 6 points in your planning process, you can create a comprehensive digital transformation strategy that strengthens cash flow, achieves revenue targets, and maximizes the productivity of your Finance team in 2023, and beyond.