A leaner finance function for professional services firms

For many professional services firms in Australia, the next twelve months may bring financial challenges. Rosie Cairnes from BlackLine outlines how injecting intelligent automation into the finance function could help professional services firms become leaner and more agile.

Consumers and businesses alike are reining in their spending in response to interest rate hikes and rising costs, seeking out savings wherever they are to be found. In its latest Statement on Monetary Policy, the Reserve Bank of Australia warned of slowing economic growth, with high inflation and tightened monetary policy expected to weigh on demand.

Against that backdrop, many of the country’s 270,000 odd professional services companies will be focused on maintaining their revenue and margins, rather than pursuing ambitious expansion plans.

Seeking savings

Identifying ways to cut costs, boost efficiency and maximise cash flow, without sacrificing service quality and customer experience in the process, is likely to be an imperative. Automating the finance function by implementing a cloud based, continuous accounting platform is an opportunity to achieve the first and second of those objectives.

The term ‘continuous accounting’ refers to a methodology for managing the accounting process by spreading workloads evenly across the accounting cycle, rather than seeing it concentrated at the end of the month or accounting period. It centres around three core principles: automating repetitive processes; eliminating bottlenecks at period end; and creating a culture of continuous improvement.

A continuous accounting platform allows a firm to process transactions and update accounts in real time. In so doing, its leadership team is able to get an accurate, up-to-the-minute picture of how the organisation is tracking.

In addition to being able to access those valuable insights, professional services firms that go down this path can expect to reduce their manual processing time and finance department overheads.  Those ongoing savings can have a material impact on the bottom line.

Boosting cash flow

Automating accounts receivable (AR) activities, meanwhile, can help companies accelerate the flow of payments by streamlining the debt collection and recovery processes.

At present, many professional services firms are still operating in cumbersome manual mode. Legacy processes and programs are being used to monitor invoices and payments and chase clients whose accounts are overdue.

Implementing an automated AR platform can result in instant efficiency gains. Firms that do so can expect to reduce their manual processing and their AR overhead.

Perhaps most importantly, automation can reduce payment times. Getting funds flowing into the bank faster can head off cash flow crunches and reduce reliance on overdrafts and other finance facilities, at a time when the cost of credit is steadily increasing.

Data driven credit decisions

Automating accounts receivable also makes it possible for firms to make data driven decisions about the individuals and organisations to whom they extend credit. Because they’re able to enjoy up-to-the-minute visibility into clients’ payment status, partners and executive teams can see which account holders are regularly in arrears.

Armed with that intelligence, they can tailor payment terms accordingly; reducing or revoking credit for regularly recalcitrant payers, and extending it for clients who settle their accounts on time.

It’s a smart way to reduce the risk of bad debts and the damage they can inflict on cash flow and profitability.

Weathering lean times

The upcoming financial year may not be an easy one, as spending slows and the spectre of recession looms large. Reducing overheads and protecting cash flow are prudent measures that will help professional services firms of all stripes stay the course until conditions improve.

Automating the finance and accounts receivable functions are proven ways to achieve these ends. Firms that fail to capitalise on the opportunity in 2023/24 may find themselves counting the cost.

About the author: Rosie Cairnes is Regional Vice President of the Account Management Organisation for Asia Pacific at BlackLine.