Article credit: Sage 

When you first started your business, you probably didn’t anticipate how much time it would take to balance your books and manage your cash flow – a major stumbling block for most small businesses.

‘Accountant’ is one of the many hats you wear as a small business owner, even if you’ve had no formal training and don’t enjoy number crunching. But your business’s survival depends on a solid financial strategy, which involves efficient record-keeping, financial analysis and ensuring there’s always more money coming in than there is going out.

Article credit: Sage 

COVID-19 has catalysed the single biggest shift in the role of financial decision-making in the past decade. It accelerated digital transformation and amplified the associated challenges for senior financial decision-makers – especially challenges around governance, remote working, and cybersecurity.

Despite this, Sage’s annual research into the challenges and opportunities facing CFOs –CFO 3.0 – Digital transformation beyond financial management – revealed promising findings, especially when considering South Africa’s current economic climate.

As the first Sage region to conduct the CFO 3.0 research after the pandemic outbreak, it was encouraging to note that, although senior financial decision-makers are dealing with the biggest shift in their roles in the past decade, South African businesses have shown resilience in a time of massive disruption.

Why is this? Because most (87%) of the senior financial decision-makers we surveyed said that, thanks to their increasing use of advanced and emerging financial management technology, they have more time and freedom to focus on digitisation and to help shape business strategy and drive growth – a role that more CFOs are taking on – and driving

The biggest shift

Our research found that CFOs face new complexities due to COVID-19, including managing a remote workforce and expanding security and compliance mandates. This is the most fundamental change in their job responsibilities in the past decade. It has even overtaken business strategy, which, until recently, was considered the most significant shift.

Today, nearly a third (27%) of senior financial decision-makers have taken on the responsibility of remote worker management since lockdown began.

But it’s not only CFOs that are playing a bigger role in digital strategy. The entire C-Suite is getting involved. Our research found that, in 75% of businesses, it’s the CEO who drives the overall strategy, with vital input, insight, and direction from the CFO and CIO. This suggests that digital transformation is no longer the sole responsibility of the CIO and is central to business strategy.

And, since budgetary approval is a key element of digital strategy, the finance function, too, has moved to the core of business strategy.

COVID challenges

Before COVID-19, complying with ever-evolving finance legislation was a top concern for CFOs. Now, they have the added challenge of ensuring compliance across a decentralised network, a scattered workforce, and a larger attack surface.

All the trends that were at play before the pandemic have been accelerated, with compliance, cybersecurity, and data protection rising to the top of the challenge pile.

As the gatekeepers of data, CFOs are increasingly looking to emerging technology to decrease risk, enable real-time decision-making, and help them to build a finance function that can withstand future challenges.

The shift to remote working also shifted senior financial decision-makers’ priorities. It’s no longer only about managing new data, technologies, and stakeholder expectations. They must also maximise their technology investments by enabling their teams to work remotely while retaining accountability, transparency, and productivity.

Biggest challenges facing finance professionals in South Africa

Our research revealed a broad range of challenges facing finance professionals in the country. These were the top five concerns:

1. Changing stakeholder needs – cited by 57% of respondents.
2. Managing fraud and cybersecurity risk – cited by 50%.
3. Modernising business processes with tech – also cited by 50%.
4. Managing team productivity remotely – cited by 47%.
5. Staying informed on changing regulatory requirements – cited by 43%.

Only 12% of CFOs think adapting to these changing job role requirements is challenging.

Secret to success

Organisations that were already using financial management solutions have had an easier time of managing this new landscape.

In fact, 44% have seen moderate to strong growth in organisational performance over the past year, despite – or in spite of – the COVID-induced recession. What’s more, 78% of these businesses expect even further growth – a key indicator that, in a time of recession and economic stress, revenue growth is the most significant contributor to a positive outlook.

CFOs are nearly unanimous in agreeing that next-generation financial management solutions that incorporate emerging technology has been critical to their success. Nine out of 10 businesses have adopted emerging technologies in some form, and over half of these businesses are implementing advanced or cutting-edge techniques.

In not being bogged down by numbers, budgets, data integration, and reporting, CFOs can turn their focus to changing stakeholder needs and modernising business processes.

That’s because technology is taking finance in a new direction and our research shows that senior financial decision-makers are going along for the ride – and enjoying it.

Article credit: Sage 

Sage’s CFO 3.0: Digital transformation beyond financial management research revealed that nine out of 10 senior financial decision-makers in South African businesses play a vital role in their organisation’s digital transformation.

Like businesses all over the world, South African companies face significant challenges. But those that are advancing digital transformation to improve their financial reporting and business processes have been able to free up time and resources to drive innovation, improve reporting accuracy, and better serve their customers. Businesses with a progressive, open-minded leadership team are already identifying possibilities for digital transformation to improve financial reporting and they’re putting these initiatives into practice.

The finance department as a digital trailblazer

All CFOs find themselves having to do more with less. You’ll almost certainly find yourself helping the board make the right decisions, rather than solely reporting on what has happened. In our survey of 311 senior financial decision-makers, almost all are actively involved in digital transformation in their businesses. The result? A multifaceted role is emerging for finance leaders; one that combines skills like accounting, analytics, business management, and strategic thinking. They’re also taking on responsibilities that have never before been part of their remit.

Beyond the balance sheet, senior financial decision-makers now play a growing role in managing a remote workforce. This is the most fundamental change to their duties in the past 10 years. It has even overtaken business strategy, which, until recently, was considered the most significant shift. In fact, 27% are now also managing remote workers since lockdown began, while 21% are involved in driving business strategy and objectives.

Conquering the data mountain

The need to act fast to meet changing customer needs and drive down costs to handle the uncertainties of a rapidly evolving market are matched by the challenges of stringent reporting and compliance requirements and frequent amendments to financial regulations. However, finance departments are often overwhelmed by the amount of data they receive. That said, in South Africa, 64% of CFOs spend more time analysing data than they do gathering and processing it, compared to 50% of financial managers in the UK.

This is where artificial intelligence (AI) and its application of machine learning (ML) play an important role. By identifying patterns and reducing the time spent on simple, repetitive tasks, the finance team can be freed-up to analyse the data in a more nuanced, creative way. What’s more, robotic process automation (RPA) can drive efficiencies and supports real-time financial reporting – and therefore real-time compliance.

With their focus no longer consumed with balancing the books, CFOs and other senior financial decision-makers can step up to help drive the business’ digital agenda and, therefore, its competitiveness.

Evolving from a traditional management style, which relied on intuition and gut decisions, to a data-driven, real-time organisation can be culturally disruptive. But this doesn’t appear to be a concern for South African CFOs, according to our findings: 73% say their organisations are ready for more automation.

The role of automation in compliance and reporting

The trends we saw prior to the Coronavirus pandemic – overseeing a remote workforce, and keeping abreast of compliance regulations – have gained momentum.

Managing these changes is an onerous task. Automation can make a huge difference here, as evidenced by companies that were already using digital and emerging technologies to drive efficiencies. These businesses are finding it much easier to navigate this unchartered territory, with 49% having seen moderate to strong increase in performance and 78% predicting even further growth during this time of economic stress.

CFOs are almost in complete agreement that a union of next-generation and emerging technology has been a deciding factor in their success. In fact, nine out of 10 businesses surveyed have adopted some form of emerging tech.

At the same time, 90% of CFOs and other senior financial decision-makers welcome automation carrying out more of their routine accounting duties, so that they can direct their attention towards further digital transformation in their organisations.

Senior financial decision-makers are, undoubtedly, becoming increasingly confident in new and emerging technology, with most citing direct productivity benefits, like automated compliance reporting and the ability to make real-time decisions around risks and opportunities.

Two-thirds of large businesses say their company’s investment in digital transformation is ‘good’ and even ‘excellent’, with more than 80% using financial management tech to automate and expedite their compliance reporting. In addition, more than 50% say automation has had a positive effect on the efficiency of their businesses

Managing financial reporting through tech

Even if some aspects of digital transformation sound complex or ambitious, you can still use a financial management system to oversee and govern many of your day-to-day transactions.

There are a growing number of modern business management solutions. The simple business of producing invoices for customers and then handling payments can be faster, more streamlined and more accurate with the right financial management systems and accounting software.

Providing accurate and effective financial reporting is a constant challenge. Added to this is the emergence of new, disruptive entrants to the market that work on a tech-first basis.

However, as a dynamic CFO, you have a growing suite of tech products at your disposal that can improve the experience of your customers and your employees, as well as your financial reporting.

Finding the right technology partner and working closely with them to choose the right products is key to driving the kind of digital transformation that can give your business a competitive advantage and secure its future.

Article credit: Sage 

South African CFOs and senior finance decision-makers recognise that the world is changing, with a perfect storm of technological and social forces changing the rules of business in this digital era.

COVID-19 adds more complexity to the mix, putting companies under financial pressure and simultaneously serving as an accelerator for digital transformation.

So how do you adapt to this new world? It starts by looking at the three broader trends driving the corporate finance function:

1. The digitalisation of the finance industry
2. More demand for strategic decision-making
3. A younger workforce with new priorities

Digitising finance

During these times, CFOs understand that technology has an important role to play in elevating efficiency. In PwC’s Pulse Research, nearly two-thirds of CFOs (Africa: 63%; Global: 62%) expect their technology-related spend in the next 12 months to be focused on growth, cost reduction and compliance.

As a CFO or senior finance decision-maker, you’re always looking for ways to improve your department’s efficiency so that you can serve the business better; data-driven insights and automation are valuable ways to achieve this. Automation is a reliable way of obtaining predictive financial analytics, which can enhance the productivity of your financial/accounting team members.

The benefits of automation include:

• The minimisation of manual intervention in financial operations and other accounting-related tasks, such as ledger entry and reconciliations
• Auto-population, using data from ERP and other systems
• Reducing the potential for human error
• Faster turnaround times
• The improvement in the use of staff time, thanks to a reduction in manual processes

With automation, it is now possible to aggregate a vast amount of data to unlock insights.  With data-driven insights, CFOs and senior finance professionals are better equipped to be a strategic advisor for their business, focusing on generating value for their organisations. It’s also a good idea to identify which metrics you could track in real-time, as this improves the data quality and gives greater visibility into the business.

Building a culture of automation can increase your productivity thanks to fewer manual processes, fewer errors and faster processing times. Automation encourages quicker enterprise-wide decision-making while improving regulatory compliance and ensuring accurate financial statements. 

More demand for strategic decision-making

Finance decision-makers are seeing their role evolving from number cruncher to business strategist. As a finance leader, you now have a new mandate – to move beyond the traditional role where you measure past performance to leading your business as a gatekeeper of data and analytics.

The insights this provides will help create a vision for the future of the business, which you can then start to plan and forecast for. The CEO may expect you to guide the business through an uncertain future, to provide strategic direction on digital spending, managing risk, imposing governance and responding to regulatory change.

It is your opportunity to take the lead in digital transformation, redefining the finance function to play a more significant role in data governance, data flow, cybersecurity and other business priorities.

A younger workforce with new priorities

According to Stats SA, the youth (aged 18–34) constitute almost a third of the population (18 million) in South Africa. With millennials taking up more senior roles in enterprises and more members of Generation Z moving into the workforce, new technology priorities are starting to emerge.

There is a divide between senior accountants and new breed accountants who use technology to automate basic number crunching and admin tasks. 
Finance is becoming increasingly technical and strategic. To strengthen your position as a strategic business leader, take a look at a few ways to make sure your organisation manages and analyses data thoroughly, optimising information flow to ensure KPIs are being hit. You could do this by harnessing the value of a young tech-savvy workforce, that will naturally accept what you’re trying to do.

Your team may well start to take on responsibilities around IT and regulations, and learn to be masters of actionable business intelligence. Harness this wave of millennial creativity and embrace innovation across the business. Still, it’s sensible to have seasoned finance professionals on the team whose experience will be invaluable, especially in a function which carries so much influence.

 The future of finance

To lead finance in a digital world, creating a diverse team with a mix of backgrounds and experience is essential. Alongside newer technological and analytical skillsets, financial fundamentals, and corporate stewardship are still relevant, and experienced people are well-equipped to take a long-term view when it comes to the business.

Article credit: Sage 

COVID-19 is having a devastating impact on the economy, forcing thousands of businesses to close and leaving millions of people out of work. But even before the coronavirus first arrived in South Africa, the country’s economy was in a recession – with high unemployment, low growth, rising delinquencies (on a corporate and consumer level), and the falling state of government debt.

“We went into this crisis already on our knees,” says entrepreneur and venture capitalist Vusi Thembekwayo. “We were not ready for a fight. We were on our last breath and now we’ve had the wind taken out us.”

The SME sector employs 47% of South Africa’s workforce. How can these vital businesses sustain themselves through the pandemic, and what resources are available for them to do so? Here are Vusi’s five practical tips for small businesses and entrepreneurs to help them survive COVID-19 and even thrive in what comes next.

1. Forget about the old rules

COVID-19 has had a devastating impact on the global markets, with capital drying up and it now being impossible to predict what the stock market will do from one day to the next. And even though Vusi has been in business for over fifteen years, he admits that he’s had to change his thinking in a way that he’s never had to before, and that this is new territory for all of us.

“We’re living in a different time to anything we’ve experienced in the past, and I think there’s almost a lack of the appreciation of the moment we’re in,” Vusi says. “The presumption that the previous methodology of how we did things needs to apply now is precisely what needs a rethink. So, if your business structure was built for a particular economy with a series of assumptions, that economy is no longer the case and those assumptions no longer hold. The only thing we can be sure of is that this is the new normal.”

2. Be essential to your customers

When deciding how best to adapt your business during COVID-19, it helps to think about how crucial your offering is. For example, it was interesting to note that the companies that could continue operating during the initial phases of the lockdown were those that provided essential services. And even though everyone would like to believe that the work they do is essential, this clearly isn’t the case (at least as far as the government is concerned). That’s why Vusi recommends that SMEs reconsider whether they are critical to their clients or if they’re just, to put it bluntly, optional ‘frills’.

“The way we advise businesses that we’re either invested in or that we put through our accelerator programs is to ask where they are on their client’s income statement,” Vusi explains. “If you’re in the ‘cost of goods sold’, then you’re critical because without you they have no goods to sell. But if you’re in the SGA [sales, general, and admin expenses] portion of the income statement, then you’re not critical because that’s what they’ll cut first. So, the opportunity for the pivot is to ask yourself: are you an essential service to your customer? If the answer is no, then you need to start rethinking your business model.”

3. Keep your best relationships

According to entrepreneur and speaker Simon Sinek, a small business owner is someone who owns a small business while an entrepreneur is someone who solves problems. Indeed, with COVID-19 putting balance sheets under strain, now is also a good time to get creative with solutions. It also means being flexible before you cut the relationship off.

“When we’ve had creditors call us, I’ve had to teach them a little bit about the value of time,” Vusi says. “If you’re not selling a simple product or service, you’re talking about a complex sales cycle of six to twelve months. Ask yourself: are you willing to forgo a relationship that you took a year to create because you’re going through a short-term crisis?”

4. Do the hard work

As we move beyond the short-term uncertainty of COVID-19, SMEs can start thinking about strengthening their operations for the long-term. This means moving beyond the immediate money concerns.

“I started this firm with a great tutelage and support of Dr Richard Maponya, who was our chairman until he passed away this year,” Vusi says. “One of the key bits of insight from him was that money is usually only 20% of the problem; the other 80% comes from issues like technology, infrastructure, and so on. That’s why we began to build a support system to help the businesses we’re invested in. And almost every single one of the businesses that has either graduated from our accelerator programs or is still in our investment portfolio has said that the things we made them do – the things that they hated doing – is what’s kept them alive.”

5. Build systems for the future

An example of the previous point concerns a transport and logistics business that Vusi’s company got involved with a year and a half ago. It’s was run by a man in his late 60s, who co-managed it with his three sons. But even though they were generating over R60m a year, they had no pricing system at all. The owner would do all the costing manually, one client at a time.

“It took us twelve months to convince him to create what we call ‘the second brain’ in the business so that it could do the accounting, independent of him,” Vusi says. “But when I was on the phone with him recently he expressed how incredible it’s been to be able to click a button on the system and have everything done.”

Conclusion

Ultimately, the only way to be ready for the next crisis (and there will be another one, pandemic or otherwise) is to make sure this one makes you stronger.

“This moment is calling on all of us to look at ourselves – the way we think, the way we act, the way we buy, the way we add value – and think about how we bring that to the world,” Vusi says. “The question is: who will you be after this moment? You should be a better version of yourself.”

Article credit: Sage 

“I’ll never forget the day I lost my first client to COVID-19. She couldn’t afford my services anymore and when I did her final report that month, I understood why. Her revenue had dropped 62% and her margins were so low that she could not pay salaries that month.”

“The effects of COVID-19 were hitting businesses hard. And now it was hitting us, too.”

TJ Ledwaba, the founder of accounting firm Bright Path Business Consultants, says his initial reaction to losing business was disappointment and concern for the future. But a few hours later, the phone rang. It was a new client, wanting to sign up for the same services the business just lost.

“That’s when I came to terms with the situation. COVID-19 is going to be around for a long time. I can either cry about my losses, or I can remind myself about why I started this business in the first place: to help SMEs to navigate their growth journey. Our clients need us now more than ever. With our new client, we had an opportunity to deliver our best service.”

COVID confusion

Bright Path’s customers were confused by the many COVID-19 funding schemes and business relief options.

“They didn’t know which option was right for them. Everything was happening so quickly with some funds already drying up, new ones becoming available – often with short application windows,” says Ledwaba.

“We did a lot of consulting work during this time, advising clients on the right option for them, helping with compliance and applications, and getting their books in order. Some of our clients didn’t think they qualified for relief or didn’t have faith in the system, so it took some convincing to get them to apply. Our mission was to future-proof our clients’ businesses because their success is our success.”

In clearly communicating changes in legislation, tax considerations, and funding options, Bright Path added massive value.

“Our clients were receptive to our advice, on everything from HR and payroll matters, to the best business management solutions and applications. If we identified a synergy between two clients, we’d connect them, so they could explore collaboration opportunities. Nobody knew what to do and I think having us as a sounding board added immense value to our clients in a difficult time.”

“Ironically, this has been the best season for our business, and I believe it’s because we stayed true to our values and our level of service. It was clear that the only way to stay relevant in this time was to build trust and add value.”

Advice on staying relevant in challenging times

So, what advice does Ledwaba gives his clients?

• Be open to change: “The world has changed, people are changing. Allow your business model to change, too. Do you really need an office? Or can you maintain – or improve – your service levels by making everything and everyone easily accessible? We’ve never seen a need for an office because Sage 200 Evolution empowers us to work from anywhere, on any device.”
• Review your pricing and services: “Before COVID-19, we’d charge separately for services like business registration, tax clearance, and B-BBEE certification. Now, we’ve bundled those services into a more affordable package that will helps SMEs to hit the ground running. What products or services can you combine to create more value, for less, for your customers?
• Remember this cash flow secret: “Yes, we lost business, but we also attracted new business because clients are willing to pay for value – often upfront and in full. Focus on helping your customers with their biggest challenges and the cash flow will sort itself out.”
• Interrogate your systems and processes: “Whenever we consult with clients, we ask: ‘Is this your best, or is there a new and better way of doing things?’ Then we ask deeper questions, like: ‘How do you realise your vision? How can you grow your revenue? How do you build and engage a team?’ We often find these answers in the data.”
• Invest in your brand: “If business is slow, use the time to market yourself. We hired a designer to refresh our brand. We also engaged with the media and our partners to position ourselves as champions of small business.”
• Help each other out: “COVID-19 impacted all businesses in different ways, but we can support each other through this. Learn from others in the industry, attend webinars, listen to your people and customers. The lockdown made us stronger as a business and we can share our learning with clients, especially on topics like remote working and using the right tools to enhance business efficiency.”

In any season, there will always be challenges and opportunities, says Ledwaba, but it’s in how you approach the challenges and the smart decisions you make about the opportunities that will keep you relevant.

“Remember, tough times don’t last, but tough people do. Stay true to yourself and stay authentic. If you’re a leader, be present and visible to your teams and customers. Connect often, show empathy, and help them to build resilience,” Ledwaba concludes.