By Ian Johnson, SVP Market Development at Soldo
2021 was a record year for fintech investment, with funding numbers across Europe hitting a staggering $31.6 billion in the second half of the year alone. However, with the UK now facing the worst cost-of-living crisis in 60 years, after energy-led inflation reached a 40-year high and triggered a worse than anticipated economic slowdown, investors have faced a reality check and the fintech sector is being hit. In the first half of 2022, fintech investment dropped to $26.5 billion – highlighting that funding isn’t as free-flowing as it once was. High valuations and IPOs that followed the 2021 boom are now declining, and fintech heavyweights like Klarna, for example, saw their valuation drop 85% from $45 billion to just $6.7 billion earlier this year.
It has become clear that, despite a brief golden period of post-pandemic spending, the double blow of tightening budgets and rapidly rising costs from inflation means that UK businesses have to prepare to deal with the aftermath.
The first instinct for companies struggling to adapt to change is to cut costs – and we saw fintechs initiating a wave of layoffs as they struggled to raise their next funding rounds and VCs put a pause on writing checks. By managing spend tightly, finding cost efficiencies and freeing up time by removing manual tasks, companies can become more productive, agile and can remain competitive in an uncertain economic environment. To do this, finance teams need full visibility across all areas of the business, in real time, and can control spending for people and teams. In short, having a complete picture of spend will give teams the confidence and flexibility needed to adapt to this unpredictable climate.
Businesses are held back by manual finance processes
Yet while this seems straightforward, many finance teams are held back by processes that have been built on top of earlier processes – meaning a lot of the work they are doing is manual and laborious.
It may not come as a surprise to learn that, according to Soldo data, two-thirds (64%) of finance teams in technology companies do not use a spend management platform, while a third (36%) state they make purchases on behalf of their company every week. Without the full visibility of spending going on within the business, finance teams simply can’t understand what’s coming in and importantly, what’s going out.
Why automation is the answer to modernising spend management
For businesses to survive, let alone see growth in this current climate, it’s key they turn to automation and modernise their business spend management – revolutionising the way they work. Business spending and expenses can often be an invisible drain on a company’s finances, which if left unchecked is a huge problem for a growing business. In the same research from Soldo, it was revealed that a third (32%) of respondents rely on reimbursements and a quarter (26%) rely on petty cash.
The data also showed in businesses with more than 1000 people, over a third said their department spend is between £1,000 – £10,000 per month. Without some form of automation in place, tracking this large amount of spend involves a lot of manual input and paperwork, including spreadsheets, paper receipts, reams of bank statements, and reimbursement forms. These manual methods of tracking and auditing a constant stream of significant payments will make it harder to control, track and report on company spend and will increase the risk of mistakes or gaps in the data that come from manual data entry.
Time back to spend on strategic tasks
Spend management can be time-consuming, almost a quarter (23.5%) of finance teams spend a full day each month just processing expenses. Instead of wasting days putting together company-wide expenditure and spend data with manual methods of spend management, easy spend management technology will allow teams to spend their time taking action supported by accurate data.
That’s a lot of time and effort that could be saved and put to better use – for example, strategic thinking to help the business save in the current climate.
Work with automation, not against it
Better use of time often means understanding where repetitive, menial tasks are being performed and looking at ways of making them more efficient, hence the role of automation. But for automation to become widely accepted, some narratives need to be addressed. For example, there is a belief that job roles may be replaced with automated software, whereas in reality, the exact opposite is true.
Finance teams should aim to work with automation rather than compete against it. When businesses get the right mix of human and automated work, processes are more efficient, and individuals are freed up to focus on more useful tasks like data analysis or forecasting. The data they are using also becomes more accurate and more reliable – meaning more precise predictions. And because the data is richer, decision-making is better too.
Thanks to the deep insights, high-quality data, and informed forecasting that technology unlocks, finance teams can be strategic advisors to businesses. A great example of this is Marie Myers – HP’s CFO who has also taken on the role of Chief Transformation Officer – adopting automation to transform many business functions. As Marie points out “data analytics is increasingly important to provide insights that help us be more strategic partners to the business and to help HP make data-driven strategic decisions.” It’s a great example of what many CFOs and finance leaders are looking for – being better prepared to guide their business into the future rather than being fearful of what it presents.
Whether it’s the cost-of-living crisis, a recession or an unforeseen hurdle not yet on the horizon, finance teams must ensure they are devising and implementing strategies that provide the adaptability needed to overcome any challenge. With the adoption of technology, businesses can modernise finance teams and empower them to play a strategic role – guiding the business to success whatever the scenario.
