Modern-day financial managers have a lot on their minds. The field of information technology (IT) is constantly changing, and companies have to be able to adapt—a tall order that is throwing business models for a loop, yet also creating new opportunities.
Financial managers and their employees have to process greater volumes of data every day. That data can end up costing companies dearly if it isn’t managed properly. According to IBM statistics from 2016, poor-quality data costs companies more than $3 trillion a year in the United States alone. In fact, based on another study‘s findings, a mere three percent of company data passes as acceptable. Data governance is essentially a framework for how data is used within a company. The goal is to turn that data into value by using it properly. For example, after analyzing customer data, you might develop new products and services to better meet your customers’ needs. You could also opt for predictive maintenance, which involves gathering information about your equipment, for instance, so that you can more effectively plan maintenance work and predict failures or breakdowns. The possibilities are endless. You won’t see measurable results, however, unless your data use is directed toward specific goals. That means putting in place a strategy designed to turn information into value.
Assessing the need for artificial intelligence
Artificial intelligence (AI) is on everyone’s lips these days. According to the 2017 Accenture report “How AI Boosts Industry Profits and Innovation,” AI has the potential to increase businesses’ profitability by 38 percent by 2035. In many sectors, it’s already possible to create AI software that predicts customers’ orders and behaviour. By helping companies make wiser, smarter, and faster decisions, AI drives growth and makes it easier to anticipate roadblocks. Getting the most out of this technology, however, requires collecting data and organizing it effectively. AI needs a steady diet of information in order to work. All around the world, billions of dollars are being invested in AI development, including in the financial sector. “We’re seeing the rise of a whole series of financial technologies, or fintechs, that use AI to determine needs and risks,” says Jean-François Gagné, CEO of Element AI. “Robo-advisors, for example, identify clients’ profiles and assign an investment strategy.” The challenge now is making sure that the structures within the financial industry are prepared to face the seismic shifts still to come.
Strategic IT alignment
According to PwC (article in French), technology accounts for one of the biggest areas of companies’ spending. The field is also drawing more and more interest from governments looking to stay competitive on the world stage. Statistics Canada reports that in 2017–2018, for example, the federal government invested a record $12.1 billion in science and technology. To benefit from IT tools, however, businesses must first align them with their broader objectives. Strategic alignment means ensuring that a company’s technology development strategy reflects its overall strategic direction. When done right, this technique offers companies a more cost-effective way to stay competitive.
Cost management: the bottom line
Managing costs is not a new concern. In the world of SMBs, financial managers have always aimed to limit spending while maximizing profits. Nevertheless, even today, few companies appear to have mastered cost management. In a Wolters Kluwer survey of SMBs, 61 percent of respondents cited an inability to manage costs as the main reason small businesses fail. Closer to home, a Canadian study (text in French) identifies weak management as one of the top four reasons for failure. Regardless of the project, it is crucial to set concrete goals. Having a clear vision will translate into better decision making and allow you to gauge the strength of your capital return. In other words, impulsivity doesn’t lead to profits.
Training employees on new technologies
With so many technological changes taking place in SMBs, you need to surround yourself with flexible employees who are motivated to learn how to use new tools. Employees who perform poorly can become a real burden on their company. According to a Robert Half survey of CFOs, financial managers waste more than a quarter of their weekly hours on coaching and/or supervising poorly performing workers. Imagine everything you could do with that extra time! If you want to lower your costs, aim to hire motivated, versatile, and resourceful employees. That means making sure you have an effective hiring process. Feel free to incorporate methods such as assessing candidates’ skills through a variety of tests.
Exciting challenges for financial managers
SMB financial managers will face plenty of challenges over the next few years. On top of juggling an ever-growing volume of data, they will need to become connoisseurs of artificial intelligence and train their employees on new technologies. What about you? What are your biggest concerns?