For many professional services firms in Australia, the next twelve months could bring financial challenges. BlackLine’s Rosie Cairnes outlines how introducing intelligent automation to the finance function could help professional services firms become leaner and more agile.
Consumers and businesses alike are cutting back on spending in response to rising interest rates and rising costs, looking for savings wherever they can be found. The Reserve Bank of Australia warned of a slowdown in economic growth in its latest Monetary Policy Statement, with high inflation and monetary tightening expected to weigh on demand.
In this context, many of the country’s 270,000-odd professional services companies will focus on maintaining their revenues and margins, rather than ambitious expansion plans.
Finding savings
Identifying ways to reduce costs, increase efficiency and maximize cash flow without sacrificing service quality and customer experience is likely to be imperative. Automating the finance function by implementing a cloud-based continuous accounting platform is an opportunity to achieve the first and second of these goals.
The term “run-of-the-mill accounting” refers to a methodology for managing the accounting process by spreading the workload evenly across the accounting cycle, rather than concentrating it at the end of a month or accounting period. It focuses on three basic principles: automation of repetitive processes; elimination of bottlenecks at the end of the period; and creating a culture of continuous improvement.
A continuous accounting platform allows a business to process transactions and update accounts in real time. This enables his leadership team to get an accurate and up-to-date picture of how the organization is doing.
In addition to accessing these valuable insights, professional services firms that go this route can expect to reduce manual processing time and finance department overhead. These ongoing savings can have a significant impact on the bottom line.
Strengthening cash flow
Automating accounts receivable (AR) activities, meanwhile, can help companies accelerate the flow of payments by streamlining the collection and collection processes.
Currently, many professional services firms still operate in cumbersome manual mode. Legacy processes and programs are used to track invoices and payments and chase clients whose accounts are overdue.
Implementing an automated AR platform can lead to immediate efficiency gains. Businesses that do so can expect to see a reduction in their manual processing and AR overhead.
Perhaps most importantly, automation can reduce payment deadlines. A faster flow of funds into the bank can prevent cash flow shocks and reduce reliance on overdrafts and other financial instruments at a time when the cost of credit continues to rise.
Data-driven credit decisions
Receivables automation also allows businesses to make data-driven decisions about the individuals and organizations to whom they will extend credit. Because they can have an up-to-date overview of client payment status, partners and executive teams can see which account holders are regularly in arrears.
Armed with this intelligence, they can adjust payment terms accordingly; reduction or cancellation of credit for regularly defaulting payers and its extension 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 do to cash flow and profitability.
Weathering lean times
The coming financial year may not be easy as spending slows and the specter of recession looms. Reducing overhead costs and protecting cash flow are prudent measures that will help professional services firms of all categories stay the course until conditions improve.
Automating finance and accounts receivable functions are proven ways to achieve these goals. Businesses that do not take advantage of the opportunity in 2023/24 may find themselves counting the costs.
About the author: Rosie Cairnes is Regional Vice President of Account Management for Asia Pacific at BlackLine.