The finance department remains the heart of every organization, as it plays a vital role in the overall operation and success of the business. Beyond the administrative role of the finance department, it has become the key player that all other operational departments turn to for guidance, support, and insights on financial matters.
For example, the sales department may turn to the finance department for insights into the financial implications of a new sales strategy or to get a better idea of the company’s sales-related budget. Also, the marketing department may turn to the financial department to get assistance with developing a financial plan for a new marketing initiative.
Mark Pierce, CEO at Cloud Peak Law Group“The finance department plays a vital role in an organization. It is a great resource for other departments, and they often rely on the expertise and knowledge of the financial department to make informed financial decisions.”
Every business that prioritizes its profitability and growth must give adequate attention to its financial team and department.
According to a study, about 60% of business owners are not convinced about their accounting and finance knowledge. And without a top-notch financial department, such businesses are likely to make uninformed financial decisions that may cripple the company.
In today’s globalized world, the demands on the financial department continue to increase. And in 2023, finance departments worldwide need to brace up for the coming challenges. From shifts in the global economy to regulatory changes, there are many issues that finance departments must address to keep the organization’s operations running smoothly.
In this article, we’ll explore the core functions of the finance department and the top four challenges likely to face the finance department in 2023.
Roles of The Finance Department
The finance department plays a key role in every company. For context, the financial department manages the company’s financial resources, including its cash flow, revenue, and expenses. It is also responsible for analyzing financial data, creating and implementing financial strategies, and helping to make informed financial decisions that align with the company’s goals and objectives.
In addition to the responsibilities listed above, the finance department also has several other important functions, such as:
Developing and Managing Budgets
As a financially savvy business owner, creating a budget should be one of your priorities. That is because a budget allows you to anticipate expenses, accurately set goals, determine spending caps, and plan strategically for the long-term success of your business. A good finance department must be able to handle budget creation effortlessly.
Jesse Hanson, Content Manager at Online Solitaire, “Every forward-thinking business must give importance to carefully constructing their budget, as it allows them to continuously track their financial progress. And the finance department shoulders this great responsibility of creating and managing the company’s budget, which will help forecast future financial needs and allocate resources according.”
Managing Financial Risk
Every business, regardless of its size, is exposed to financial risks. They are impossible to avoid but can be managed effectively with the right financial risk management software and a solid finance department. The finance department strives to quickly identify and manage financial risks that may negatively impact the company.
Tracking Financial Performance
Monitoring your financial performance to build a healthy business and track growth is important. Closely checking the company’s financial key performance indicators creates more certainty and confidence to make better short and long-term decisions.
The finance department is responsible for keeping a close eye on the company’s financial health and identifying improvement areas.
Maintaining Financial Records
Many companies fall into the trap of failing to keep accurate and up-to-date financial records. The finance department of every company must work diligently to keep proper financial records, as it makes budgeting easier and is vital for tax purposes.
Top 4 Finance Department Challenges in 2023
Finance departments have faced various challenges for years, and 2023 will not be much different. Listed below are the biggest challenges that finance departments worldwide will likely face in 2023.
Keeping up with new regulations and compliance requirements
Undoubtedly, this will be one of the most significant challenges that finance departments will face in 2023. Around the world, governments are constantly reviewing and updating laws and regulations that impact businesses, and it is easy for finance professionals to lose track of these changes.
According to Stephan Baldwin, Founder of Assisted Living, “Finance departments have a difficult responsibilty of staying up-to-date on regulatory changes to ensure that their organizations are compliants, while also monitoring the impact that these changes may have on the business.”
Managing and analyzing large data
Finance departments often face challenges managing and analyzing large data sets, and it won’t get easier in 2023. Some of the main challenges include the following:
- Data quality: Finance departments may find it difficult to ensure that financial data is accurate and up-to-date because it is usually scattered across various systems and sources. And this can lead to inconsistencies in data analysis and decision-making.
- Data volume: Without a doubt, generated data will grow exponentially in 2023. And large data sets can be overwhelming and difficult to manage and analyze. Therefore, finance departments may require additional resources to process data efficiently.
Implementing new technology
The business landscape is changing rapidly, and finance departments must evolve to stay competitive. This means finding ways to drive growth, improve efficiency, and reduce costs. One way is by implementing new technology.
According to Greg Heilers, CEO of Jolly SEO, “One of the best ways finance departments can stay competitive is by leveraging technology to automate processes and improve decision-making.”
New technology can be difficult to purchase and implement, especially those requiring significant infrastructure and training, creating a barrier for smaller finance departments or those with a limited budget.
Also, implementing new technology often requires that the finance department makes changes to its processes and workflows, which can present a major challenge. It may take a lot of time and effort to get buy-in from employees and ensure they are properly trained on the new technology.
Attracting and Retaining talent
The finance industry is constantly changing, and it will become increasingly difficult for finance departments to find candidates with the right mix of skills and experience. This is especially true for specialized roles or those that require advanced technical skills.
Jake Hill, Founder of DebtHammer “Finance departments rely completely on the knowledge and expertise of its staff to provide valuable insights and make informed decisions. And this shows why employee retention is crucial. Losing top talent will decrease productivity levels and reduce the number of skilled and experienced employees that can meet the department’s demands.”
In 2023, the competition within the finance industry is expected to increase. And this may make it even more difficult for finance departments to attract and retain top talent due to competition from other companies and industries.
In 2023, finance departments will have to be proactive to face the challenges that will arise and keep their organizations on track. Finance departments can overcome these challenges by staying up-to-date on the latest industry standards, leveraging technology, and focusing on attracting and retaining top talent.