“I’m about to hire someone to take over managing expenses.”
This statement, made by the controller of a rapidly growing tech company, wasn’t surprising. The company had more than doubled in size over the last year, it had recently completed another round of financing, and it projected additional headcount growth in the months ahead.
The controller wanted to focus on other projects like financial reporting, but every month before closing the books, he spent days tracking down receipts, itemizing transactions made on the company procurement card, and auditing the sales’ teams reports to identify non-reimbursable expenses.
What was surprising to us was realizing how often we hear that statement from controllers and CFOs, particularly in companies experiencing rapid growth. Many finance departments struggle to keep up: with more employees, there are more transactions to manage. There are ever-increasing revenue numbers to hit each quarter, and operational processes that once worked fall apart.
Are your operations on overload?
If your team experiences some of the following issues, then you may need to look for ways to make your transactional processing more efficient, either through additional staff, streamlined processes and technology, or a combination of the two:
- The monthly close takes 10 days or longer
- Each month requires a large number of accruals
- Monthly accruals vary significantly and are often inaccurate
- Employees pay for travel, goods, and licenses with personal cards
- Your company pays for duplicate and/or unused software subscriptions
- You’re not sure how to determine how much you’re actually spending on software licenses
- You spend too much time chasing down receipts, expense reports, and invoices
- The number of policy violations and culture issues has escalated
- You rely on complex Excel hacks to analyze and report on data
Hiring someone to help can make sense, especially if the finance team has been growing more slowly than the rest of the company. But hiring takes time, and at a certain point, just throwing more bodies at a problem has diminishing returns.
Will a new hire solve the problem?
When you’re buried under metaphoric piles of receipts and invoices, and when month-end close becomes a regular series of late-night marathons, it’s natural to want to just hire someone to take over.
But before you draft a job description, take some time to determine the root causes behind the operational overload. They will help you identify potential solutions, whether that means hiring, new technology, or a combination of the two.
Problems often fall into four key categories: process, volume, policy, and culture. Here are some questions to consider:
- Are all of your expenses and invoices digital, or do you still track some paper?
- Do you have a dedicated system to track all elements of the spend cycle (such as requests, approvals, and comments, as well as actual documentation, or do you rely on email or other messaging?
- How many people are involved in requests, reviews, and approvals?
- How many different accounts do you have to reconcile? Do employees pay for expenses with personal cards and need reimbursement?
- How often do expenses have to be manually recoded before importing them to the general ledger?
Problem: Inefficient processes are common, especially in companies experiencing rapid growth. What worked for 20 or 100 employees doesn’t work for 250 or more.
Solution: Automation can solve many of these problems, but you should look for tools that streamline the process from the point of purchase all the way to posting to the GL. Some tools only digitize the old paper-based expense report, which results in the same amount of back-end operational work for finance.
- How many expense reports and invoices are processed each month? How has that changed over time?
- What are your company’s projections for growth, both in terms of number of employees and expected spend?
- Who is responsible for auditing expenses? Do you check every one manually, spot check some, or use technology to help?
Problem: The sheer number of transactions, invoices, and reports—all coming from different sources in a variety of formats—can grow unmanageable, resulting in rubber-stamp approvals and inadequate auditing.
Solution: Technology to the rescue here: real-time data ensures immediate visibility and access to information, while AI and ML make quick work of reviewing and auditing, ensuring that every transaction is checked and surfacing only those items that need staff attention.
- How many expense reports or invoices are out of policy? What types of policy infractions are most common?
- Do you have an official expense policy accessible to all employees? If so, when was it last reviewed and updated?
- Do employees sign up for software subscriptions independently and expense them? Who is responsible for managing subscriptions, cancelling unused licenses, and negotiating fees?
- Do you occasionally need to implement a travel freeze to hit short-term expense targets?
Problem: Policy touches on everything from IRS compliance to spend management. Companies need to find the right balance between controls and flexibility, and that inflection point will shift depending on the needs of the business at any given moment in time.
Solution: Policies should be dynamic, informed by spending insights, behavior patterns, business strategy and goals, and fiscal culture. Technology can help surface insights, recommend policy changes, and communicate information to employees.
- Have you had a large influx of new employees used to working at companies with more liberal expense policies?
- Has finance become less personally connected to other teams in the company, whether through growth or physical distance?
- Is there alignment between your company’s strategic goals, budget, and expenses? Do all employees understand how their actions impact the company’s ability to hit its goals?
Problem: Each company has its own fiscal culture, shaped by its goals, values, and leadership. Growth puts pressure on culture, especially as employees from other companies, each with their own fiscal culture, join the ranks.
Solution: When freed from the burden of operational tasks, the finance team can take a more active role in shaping fiscal culture through coaching, collaboration, and strong communication.
Understanding the root issues causing operational overload is the first step. In many situations, the right technology can alleviate much of the transactional burden.
However, hiring additional staff at some point will make sense. Finance often runs leaner than the rest of the organization because of the tendency toward hiring in revenue or product-related functions. (If you’re curious about how your team stacks up to other companies your size, the Workforce Planning Tool from Robert Half Company is a helpful resource.)
So what should you look for when you’re building your finance team? Check out our follow-up post next week: Why Your Next Finance Hire Should Be For SpendOps