The finance department is the most crucial to resource management, regulatory compliance, and strategic support. The right structure increases business competitiveness and sustainability.
We’ll discuss in detail how it works, main functions, and eight biggest pain points for the finance department in this article.
What is a Finance Department and how does it work?
Managing financial management is the responsibility of the finance department, which also controls cash flow, accounts payable and receivable, financial reporting, and tax requirements.
Furthermore, because it offers projections and analyses that inform corporate choices, the finance department is crucial to the creation of strategic planning.
What is the structure of the Finance Department?
The structure will always vary depending on the size of the company, but in summary:
Large companies have a robust structure with CFO, accounting, treasury, controller and internal audit.
- Medium-sized companies have a financial manager, accounting, treasury and controller.
- Small companies have a leaner structure.
Main Functions of the Finance Department
In general, the finance department is responsible for:
- Treasury management;
- Accounts payable and receivable;
- Accounting;
- Financial and budgetary planning;
- Tax management;
- Risk assessment;
- Preparation of financial statements.
The 8 Biggest Pains of the Finance Department
Let us first remember what the Finance Department is and its general structure and main functions in the light of today’s needs, so that then we could understand what every finance professional faces daily nowadays.
Many of these troubles are related to excessive applications of manual spreadsheets as well as outdated BI tools that cannot meet today’s security and accuracy standards required in the market.
If you are a finance professional, then surely you can relate to some of the pain points mentioned below.
Let’s go through the eight major issues professionals face in this field and learn how to deal with each of them.
1. Too Many Manual and Repetitive Tasks
The routine of manual tasks is one of the main obstacles to efficiency in the financial sector. Preparing financial reports and constantly updating data requires hours of work and tends to generate a high margin of error.
Investing in such operations takes away time from more strategic productive activity.
Implementation of automating such practices using Accounting Software and other Robotic Process Automation applications help correct some of those mistakes in time while optimizing more effective operations.
2. Lack of Reliability and Security
Excel spreadsheets, although widely used, do not offer the security and reliability required for today’s financial operations.
The risk of human error, combined with the vulnerability to unauthorized access, makes the environment susceptible to fraud and the loss of critical data.
An efficient solution is to invest in financial management platforms with security controls, automatic backups and activity records.
ERP tools with advanced financial modules enable tight data control and meet compliance and security requirements.
3. Lack of Governance in Processes
Financial governance is essential to ensure regulatory compliance and data integrity.
In many cases, the lack of centralized control over access and financial processes results in fraud risks, lack of transparency and audit challenges.
Implementing systems that allow segregation of duties, internal auditing, and approval flows with access restrictions significantly reduces the risk of errors and fraud.
Adoption of governance frameworks like COSO and SOX controls further strengthens governance, leading to increased confidence in the reliability of financial information.
4. Failure to Consolidate Financial Statements in Time
Companies operating in various geographies, often have subsidiaries or cost centers and are usually faced with a challenge of consolidating their financial information in time.
Consolidating accounting data becomes complex, especially with the use of manual systems. This can delay financial closing and negatively impact decision making.
Accounting software with automatic consolidation features, which allow the import and integration of data from multiple sources, is an effective solution, allowing accounting closing to be carried out quickly and accurately.
5. Difficulty in Data Consolidation
With budgets distributed across different departments, centralizing and cross-referencing financial information is challenging and often results in data inconsistencies.
Manual processes to centralize information slow down work and increase the likelihood of error.
FP&A (Financial Planning & Analysis) solutions, such as Vena or Adaptive Insights, enable real-time data integration and offer a unified view of finances, facilitating consolidation and budget control.
6. Problems for Insight Generation and Scenario Simulations
Generating strategic insights and carrying out simulations are essential activities for financial planning.
The finance department would not be able to come up with relevant insights regarding the strategy of the company because proper tools for data analysis were lacking.
BI software used together with FP&A systems allows for advanced analysis and simulations of scenarios in real-time, which makes the process of decision-making more assertive and aligned with the needs of strategy.
7. Dependence on IT for Using Programs
Reliance on the IT sector to configure, update and manage financial systems creates a bottleneck in processes and reduces the autonomy of the financial sector.
This is especially problematic in times of urgency or when there is a need for quick adjustments to financial reports and analysis.
Choosing financial software with a user-friendly interface and autonomous configurations allows financial sector professionals to make adjustments themselves, reducing dependence on IT and increasing agility in data processing.
8. High Risk of Investment Loss
The lack of specialized professionals in the financial sector can lead to risky investment decisions and compromise the company’s financial health.
The absence of a qualified team makes it difficult to analyze risks and opportunities, leaving the company more exposed to unprofitable or even harmful investments.
Investing in training and hiring qualified professionals, such as financial analysts and controllers, is essential to guarantee security and return on investments, in addition to strengthening the company’s strategic planning.
How to Overcome These Challenges
The way to solve these problems involves automating financial processes, investing in modern financial management solutions, and training professionals in the sector to use technological tools efficiently.
Furthermore, implementing robust governance systems and centralizing financial data are fundamental steps to ensure greater agility and security.