5 Ways Finance Teams Can Achieve Sustainable Growth

Matt Harris

12/10/2023 09:55 AM

By Rob Israch, President, Tipalti

Two years ago, ‘growth-at-any-cost’ was considered the optimal model for startups looking to reach hefty valuations quickly, and it worked for many. But recently, businesses have faced a very different reality and a complex macroeconomic environment.

The collapse of several regional US banks, such as Silicon Valley Bank and Signature Bank, sent shockwaves through the finance sector, impacting liquidity in the tech industry. This, on top of rising interest rates and ongoing fears of a recession breeding fear in the market, meant foreign investors began turning away from unpredictability and risky investments – and tech funding saw a steep decline across Europe.

Compounding this, is the Bank of England's warning that the cost of borrowing will remain high for the next two years – forcing businesses, and finance leaders, to tighten their belts for more volatility and scale back on their growth strategies.

To ride out the uncertainty, finance leaders are prioritising sustainable growth to offset inflation and economic challenges – and many are looking to focus on efficiency through automation to support this. According to our recent research, which examined the strategies of finance teams in the current economic climate, nearly eight in 10 (78%) UK finance leaders now believe that sustainable growth is more important than growth-at-any-cost.

This type of growth model needs to be strategic and measured which requires assistance from those closest to the economics of the business and with the insight to know where the business is headed – the finance team. Below, I explore my five tips on how the finance team can achieve sustainable growth and successfully lead the business through uncertain times.

Double down on the business’ core proposition

When budgets are tight and cut-backs being made, successful businesses will be focusing on their core proposition - doubling down on the segments of the business with the best productivity, ROI and attractive payback for growth.

Businesses need to make sure they are making the right investments, at the right time; that could mean divesting from longer term and experimental projects, or only prioritising international expansion in areas where economies allow for sustainable growth. But to do so, areas of inefficiency need to be carefully examined.

Identify finance inefficiencies to ensure the finance team is agile enough to withstand change

Economic pressures have seen many businesses scale back in the last year – whether that be delaying international expansion or restructuring the workforce. But inefficiencies that still exist within the business can be equally as costly.

Manually-led financial processes are riddled with inefficiencies. This includes manual reconciliations, a need to keep up with changing global regulations, and slow data output, impairing the ability to generate real-time data.

In reality, a lack of automation means that over a third (36%) of account payable (AP) time is still being spent on manual processes – time which could be better spent focussing on strategic activities that will drive the business forward.

With interest rates at their highest level in 14 years, the finance team must be using tools such as automation to eliminate inefficiency and ensure management over costs. In fact, over three-quarters (76%) of finance leaders agree that their accounts payable (AP) function can play a key role in offsetting higher costs related to inflation.

Stop being reactive and begin planning beyond an economic downturn

Businesses are now beginning to plan for growth beyond the economic downturn, and to do so, visibility over finances is crucial. On average, 77% say that AP automation can enable them to plan beyond the current slump and support growth objectives by freeing up time for strategic activity (82%) and allowing less friction and complexity to ease business expansion (80%).

Visibility allows organisations to make more accurate financial projections – especially important during times of economic uncertainty. And with visibility comes control. Automation can provide real-time financial data that will ensure stakeholders are accurately informed about where the business is headed so that strategic decisions can be made to grow the business and aid economic recovery. Only with access to timely financial data can businesses ensure they are agile and ready to respond to the changing environment.

Embrace Generative AI to save valuable time and improve accuracy

The emergence of AI capabilities can be beneficial when applied to the finance office. And the potential benefits are not going unnoticed - 77% of UK finance professionals say they are excited about the opportunities that AI can bring to finance.

Businesses can leverage these capabilities to enable faster invoice processing and reduce mistakes by predicting the correct coding on an invoice and purchase order. It can also provide automated insights that uncover patterns and trends that can help improve productivity and allow leaders to make more informed investment decisions. This, in turn, gives the finance team time to focus on higher-value activities such as financial analysis and strategic decision making.

Maintain good relationship with suppliers

The majority (80%) of finance teams say that now, more than ever, they need to ensure that supplier relationships are as good as they can be. But for the finance team, juggling a lot of manual work means there is an increased risk of error, delay or inaccuracy to payments.

Indeed, finance leaders expect to suffer from issues like damage to supplier relationships (37%), an inability to find enough time to contribute to strategic decision-making (30%) and a weakening negotiating position with suppliers (28%) if AP inefficiencies intensify. And the volatile economic outlooks means finance teams are even more conscious of keeping their partners happy. They simply cannot afford to lose revenue, so ensuring suppliers are consistently paid on time is crucial to drive sustainable growth.