The State of Mid-Market Finance in 2022

From financial consolidation to reporting, finance has to sort out some supply chain issues of its own

Fluence recently conducted an independent survey of mid-market finance leaders on the needs and challenges they face stemming from their financial consolidation, close and reporting processes, as well as their aspirations for these processes looking forward.

Everything from attracting and retaining top talent to playing a more influential role in shaping the future of their businesses.

In certain cases, we learned some new lessons. In others, we heard that the more things change, the more they stay the same.

Here's my take on the results and implications of the study, but if you want to jump straight to the report, download The Roadmap to Modern, Mid-Market Finance today.

Supply chain issues for the finance and accounting function

There are all kinds of reasons an accounting team might have for being late with the financial close. Maybe some of the numbers just didn’t make sense. Perhaps a substantial amount of data had to be double-checked. The team might simply have run out of hours in the day.

There’s one more reason you could add to the list, though.

Supply chain issues.

It sounds like a joke, but it’s not.

People outside of finance might assume it’s a joke because, lately, it’s been hard to ship and receive almost anything.

Pre-pandemic, most people outside of the logistics sector might have struggled to even define the term supply chain. Now we’ve all come to realize how dependent we are on the myriad processes that get products from A to B.

This has made “supply chain issues” a sort of sarcastic shorthand for “stuff happens” in some circles. In finance, however, supply chain problems have been there for some time.

The difference is that you're not shipping products but critical data - whether for financial reporting purposes or to drive business decisions. And the supply chain issues come in forms you'll likely find familiar - and typically manually intensive - including:

• collecting data from different sources in different formats
• reconciling accounts, consolidating financials and closing your books
• providing trusted reporting for management, auditors, regulators and more

The missing links in financial reporting today

When the finance supply chain breaks down, companies wind up getting financial data long after they truly need it.

Much like making do without a product you ordered online when it gets delayed, though, companies move on. They make the best decisions they can with older information, or simply gut instinct. Which, of course, is never the best move.

Some areas of your business might complain to the accounting team as though they were demanding answers from customer service. It can be difficult for the accountants to provide a good explanation of where the supply chain cracks are, however. There’s no time to investigate because you have to move on to prepare for the next close.

This is one of the reasons Fluence recently published The Roadmap to Modern, Mid-Market Finance, an in-depth study of financial close, consolidation and reporting challenges - and why mid-market finance leaders need to overcome them.

The results may leave you feeling in great company.

A big number you usually don’t see in the average executive survey

What we found was something almost unheard of in a lot of market research: complete unanimity. Among the finance leaders we surveyed, 100% said they want software that ensures an automated close.

True, it’s hard to imagine someone putting up their hand to say, “Let’s keep it all manual!” But the stat is significant, because it speaks to how hard the journey to an automated close has been. In fact, only 20% have actually done it.

It’s difficult to make a significant change of any kind across a business, even mid-market firms. But automating the close involves not only technology. It also means recognizing differences in process and a greater attention to how the data will be reported and acted upon.

This — along with governance, controls and audits — is what makes up the financial reporting supply chain.

Financial close, consolidation and reporting are critical links here, because they are where data capture and controls affect everything else.

More than a dozen years ago, the accounting profession may not have realized how badly automation would be needed. In 2008, for example, the International Federation of Accountants (IFA) released a study of its own.

Financial Reporting Supply Chain: Current Perspectives and Directions had a lot to say about auditing standards and regulation. Software applications, not so much. “Lack of forward-looking information” was one of the areas of concern, though. So was the need to “include business-driven information in financial reports.”

Excel and ERPs: The more things change...

Today, a group like the IFA would probably discover the same challenges we did about legacy software - that the vast majority prefer more flexible, modern tools.  

But this doesn’t just include large, complex enterprise resource planning (ERP) systems, but also the one software tool that every finance professional knows (and many love) - Excel spreadsheets.

As popular as they’ve become over time, 66% of finance leaders admitted that standalone Excel spreadsheets hinder informed business decisions.

Of course, that doesn’t mean getting rid of them is all that easy - or that you should. With the right controls, governance and data connectivity, Excel can still be the powerhouse it has been for four decades (watch some of our demo videos to see how).

While "Excel Hell" and the usability, accuracy and flexibility challenges of today's ERP systems are well recognized, our research highlighted another, arguably more important cost of the status quo - your employees.

After the time they've invested in a college degree, CPA accreditation and professional development, how much do you think accountants enjoy spending a week or more every month copying and pasting numbers from spreadsheet to spreadsheet? Or having to put a ticket into IT to add a single field to a financial report?

More to the point, what's the human capital cost of using legacy systems and spreadsheets in your financial close and reporting processes?

From our research, the answer is clearly a lot. A full 88% of finance executives told us modern software and tools are critical to attracting, retaining and rewarding employees.

What's driving today's supply chain issues?

Finance leaders know that maintaining the status quo is no longer an option.

In fact, 95% said an increasingly volatile business environment and the speed of technological change calls for something better. Instead of being held back by legacy solutions, they want something lightweight and agile.

The pandemic is increasing the sense of urgency here, too. Like many other business functions, finance teams are increasingly working remotely at least part of the time.

That’s good from an employee experience standpoint, but poses potential risks around the accuracy and security of financial data. That’s why 70% said they are reevaluating what their consolidation, close and reporting processes should look like in a post-COVID era.

Using research to find common ground — and a common path forward

Our hope is that this research will serve as a way of helping other finance leaders to feel less alone. Wrestling with these challenges is common across the profession.

There are consistencies in the difficulties today's accounting teams face in consolidation and reporting - with the process, the people and the technologies involved.

There's also a lot of hope that a shift to more advanced ways of working is under way.

Beyond what I've touched on in this article, here’s a rundown of what you can expect to find when you download the full report:

• A self-assessment among finance leaders about the state of their close and consolidation processes today
• The top 3 challenges they encounter when they turn to technology for help
• The functions that are most often poorly handled in today's consolidation and reporting solutions
• The value finance leaders put on agile and lightweight solutions
• How actively firms are improving the quality of data for analysis

We have numbers for all of these areas, plus plenty of analysis on what the numbers mean. We also offer some recommendations on how to use this data to move your own financial close, consolidation and reporting forward.

Without giving away too many spoilers, what you’ll find is that the opportunities to improve aren’t limited to large enterprises.

There are more mid-market offerings available than ever. And they offer far more than efficiency gains or faster close times.

Indeed, how you modernize your consolidation and reporting today can lead to a better performing business tomorrow.