2021 Finance Priorities and Challenges
After an unpredictable 2020, many organizations are focused on finding ways to execute more effective planning, budgeting and forecasting processes in 2021, according to the annual APQC Financial Management Priorities and Challenges survey.
The survey, which was conducted in late 2020, represents responses from finance professionals in various industries. While the finance function had to adjust its processes, practices and work environments in response to the challenges of 2020, it also played a key role in helping organizations combat the impact of COVID-19. The top trends and priorities found by the APQC survey broadly reflect the effects of COVID-19 and how organizations had to adjust in response.
2021 Top Focus Areas
According to survey results, in 2021, the finance function plans to focus its efforts on:
- Planning, budgeting and forecasting
- Treasury and cash management
- Cost accounting and management
- Internal controls
- General accounting and financial reporting
Planning, budgeting and forecasting
Planning, budgeting and forecasting processes that support strategic decision making are increasingly important as 2020 proved difficult for those finance functions. Past indicators are no longer reliable predictors for the future for many organizations. Additionally, value drivers might need to be revised, and stakeholders need reliable, frequent data updates for agile decision making.
To adjust to these needs, many organizations are leveraging data, reporting and analytics to move toward continuous planning. According to Brown Smith Wallace business performance advisor Sarah Hardage, COVID-19 has challenged historic corporate spending patterns. Companies will have increasing needs for data, tools and talent to assess the right balance of investment in physical space, travel, trade shows, showrooms and other in-person experiences that may be reduced in the post-COVID world.
Treasury and cash management
Unlike in the previous two years, responses from this year’s survey show that finance executives were heavily focused on issues related to cash management, liquidity and cash flow during 2020. The expression “cash is king” becomes especially true during an economic downturn. APQC found that top-performing organizations have 100 days or more cash on hand, and bottom performers have 70 days or less. Click here to learn how cash management can be a competitive advantage.
Brown Smith Wallace cash flow experts Amy Julian, Bryan Graiff and Dave Contrera discussed how to manage cash flow through uncertainty in an April 2020 webinar. Click here to watch a recording of the webinar.
The disruption of 2020 also drove a greater focus on internal controls and risk, including topics like business continuity, scenario planning and mitigating fraud in a remote work environment. Learn how a strong disaster preparedness plan can positively impact an organization in emergency situations. The COVID-19 pandemic also posed new fraud threats to vulnerable businesses and individuals, and CIOs had to maintain cybersecurity amidst a remote workforce.
2021 Top Priorities
Aside from the top focus areas, finance executives identified their priority activities for 2021 as managing or reducing costs and improving planning and forecasting processes.
Managing or reducing costs
The extended economic impacts of the COVID-19 pandemic will require innovative cost-management efforts. Implementing zero-based budgeting (ZBB), for instance, can generate quick reductions. Pursuing process improvement opportunities and organizational realignment require a greater amount of time and investment, but these strategies can have greater impact as far as cost reduction.
Brown Smith Wallace business performance advisors Jenna Beckmann and Dave Contrera discussed how to approach cost management, zero-based budgeting and process improvements to reduce costs, and sustainability and routine in a November 2020 webinar; click here to access a recording.
Improving planning and forecasting processes
According to APQC, the first step to improve planning and forecasting processes, especially during uncertainty, is to benchmark your organization’s performance to know where it stands. As part of a holistic process improvement approach, benchmarking reveals performance gaps and helps identify improvement opportunities.
2021 Top Challenges
With focus areas and priorities come risks and challenges. The top three anticipated challenges identified by finance executives for 2021 are:
- Manual processes and lack of technology
- Non-integrated systems
- Lack of sufficient resources
Manual processes proved especially challenging in 2020 when organizations shifted to working remotely. Although organizations are making strides, there is still room for improvement.
Organizations are also seeing the need to integrate and consolidate their systems as part of a larger push toward finance transformation this year. Integrated systems create better data and insights and are critical for automation and digitization.
Importance of a Strong Finance Function
Many APQC survey respondents found that the finance function played a key role in helping organizations respond to the impacts of COVID-19. The finance function was seen as providing additional support to their organizations in ways such as:
- Generating cost-saving ideas
- Managing cash flow
- Contributing to risk management
- Forecasting and modeling to provide decision support
- Contributing to organizational performance improvement
- Facilitating business continuity plans
If you would like to discuss how to elevate your finance function in 2021 and tackle your top priorities and challenges, contact Jenna Beckmann, Director, Advisory Services, at firstname.lastname@example.org or 314.687.2328.