The health risks hiding in traditional finance operations 

Traditionally, finance has worked around a “if it’s not broken, don’t fix it,” mentality, leaving heavily manual ways of working in place long after the business has outgrown them. The problem? This way of working hides a lot of financial health risks.

Identifying high risk habits

It’s easy to think that the unhealthy habits in finance start with sending or receiving an invoice.

The problem is that approach is a bit like treating the symptoms of a cold instead of taking steps to prevent getting sick in the first place. A lot of major decisions have already taken place. Marketing, sales, and procurement frequently use software systems that rarely communicate, leading to siloed information, duplicate efforts, and frequently conflicting data.

A shipping address entered wrong in the CRM, a discount that doesn’t get logged, a change in a customer risk profile or a shipment that doesn’t get scanned can all create problems downstream. It is now up to you to reactively reconcile issues that occurred several steps ago. In other words, you’re inheriting the consequences of decisions you could not influence.

Disconnected systems also lead to reliance on manual data entry and transfer between systems, leading to potential errors. These can be as simple as transposed numbers or even a typo, which can lead to a dispute or exception.

The error rate for manual data entry, under best case conditions, is generally accepted to be around 1%. While that might not sound like much on the surface. Just imagine the ripple effect it could have on your organization if one out of every one hundred transactions your company makes contained errors.

The cost of unhealthy finance practices

The impact of those issues is more than just theoretical. Payment delays result in an average cost of $39,406 per company annually. Then there are the long-term problems that bottlenecks in the collect and pay process can create. More than 50% of companies report having to delay or cancel investment, expansion, or hiring plans because of delays related to payments.

The challenges aren’t unidirectional. If a customer’s payment behavior changes, and systems don’t communicate, sales will likely not be aware of the issue. They may continue to offer aggressive terms to a customer who has become a large payment risk. Similarly, if a vendor has become unreliable, prone to mistakes in delivery or violation of SLAs, the data may not be visible to purchasing, leading them to continue to make purchases from an unreliable source.

Manual, disconnected processes across collect and pay also leave organizations susceptible to fraud.

Without connected systems, it becomes difficult to maintain your security. Each system, such as a CRM or ERP, may have its own native security protocols, but a lack of consistency between them leads to vulnerabilities. Fraudulent invoices or chargeback abuse may go undetected. Red flags or signals seen in one system or by one department may not be visible to the next.

Taking a step towards better finance begins with comprehensive financial automation and putting a stop to fragmented processes.