DataRails, the Excel-based financial planning and reporting software company, commissioned a report about the economic cost of largely manually-prepared financial reports in business. The study was undertaken with economist Roberto Cavazos, professor at the University of Baltimore Business School, and Mikhail B. Pevzner, Ph.D, Professor of Accounting, University of Baltimore.
The report finds that financial planning and analysis (FP&A) teams spend at least two hours on manual work each week, such as budgets, month-end closes, and forecasts, with annual company budgets taking up to six months to prepare.
The economic analysis, based on composites of 839,8000 small to large companies in the US, finds that these burdensome manual processes are costing US companies $6.1 billion annually.
The study also finds that a further $1.7 billion of economic uplift could be released if FP&A departments hit a conservative 0.1% revenue uplift for their businesses through projects directly linked to top line growth. In total, the study finds that FP&A teams failing to capitalise on automation and insufficiently driving revenues will cost US businesses $7.8 billion in 2022.
The study notes that 0.1% growth in revenues is a conservative return on investment for inventive FP&A teams. For instance, Amazon’s high performing FP&A units were responsible for the birth of Amazon Prime, which today counts 200 million members. Other revenue-driven FP&A initiatives include manufacturing company Chemours whose FP&A team improved margins for industrial plants at the $6 billion company, while other companies including Lego and HP used real-time data to drive revenue during COVID-19.
The report notes that detrimental costs of poor manual financial processes could go beyond direct costs. Indirect economic costs include negative impact on retention and recruitment, inability to act on real-time economic data, and incorrect numbers hurting share prices and investor relations.
Professor Mikhail B. Pevzner says: “Since COVID-19, the role of financial planning and analysis (FP&A) has gained even greater momentum as businesses seek better understanding of their numbers. However, despite more than a decade of efforts, the daily life of an FP&A professional still involves strategy-sapping manual processes, including identifying and correcting errors, updating reports, and collecting data. This is essentially depriving both companies and the wider US economy of billions of dollars of economic opportunity.”
Didi Gurfinkel, co-founder and CEO of DataRails adds: “We hear on a daily basis from FP&A professionals wanting to contribute strategic direction to their business. Despite being uniquely placed to deliver economic growth through measures such as scenario planning and responding to real-time data, FP&A professionals spend the vast majority of their time manually producing staple reports. This cycle leaves huge sums of money on the table by failing to capitalise on FP&A’s insights, skills and ability to deliver top-line economic growth.”