Financial Operational Improvements at Mid-Market Companies: Moving Beyond Manual Processes
by Dave O’Brien, CPA MFin, Sapling Financial Consultants Inc.
With the proliferation of new tech-enabled finance tools, including software-as-a-service (SaaS), automation/workflow tools and artificial intelligence (AI), many mid-market companies are at a critical juncture to improve their finance functions. Often, these firms rely on manual processes for reporting, financial consolidation and financing planning and analysis (FP&A). While smaller businesses can get by with Excel-based solutions and ad hoc reporting, mid-sized companies face increasing challenges as their operations grow in size and complexity. Understanding the latest technologies and implementing them can enhance accuracy, reduce risk and free finance teams to focus on strategic decision-making.
The Challenges of Manual Financial Processes
Many mid-sized firms continue to depend heavily on manual financial reporting processes. These often rely on a single employee (e.g., an Excel expert) who maintains complex spreadsheets that combine various data sources only they understand. While this approach may work in the short term, it introduces key person risk. If the individual responsible for these processes were to become inaccessible to others within the company (e.g., due to leaving or being sick), the company could face delays, inaccuracies and operational disruptions in their finance function.
In addition to key person risk, manual processes are inherently inefficient. Finance teams frequently encounter situations that require last-minute revisions, resulting in substantial overtime. Most finance teams can recall time spent scrambling to cobble together data the night before a big board meeting. Handling these tasks at the last-minute strains resources and increases the risk of mistakes.
As mid-market companies expand, these inefficiencies become more pronounced. Higher transaction volumes, additional subsidiaries or business units and more regulatory requirements all heighten the risks and constraints of manual financial processes. What was feasible for a smaller firm can become unsustainable, inhibiting growth and strategic decision-making.
The Role of Financial Automation
Financial automation helps mid-market firms address manual, repetitive tasks that burden firm resources as companies scale. Automating tasks such as data consolidation, reconciliation and reporting can free up firm capacity for more value-added work, improve accuracy and reduce the firm’s exposure to key person risk.
While automation may require using new tools and processes, this does not mean that all tools must be abandoned. Excel remains a fundamental tool for finance operations to this day. This is because it is ubiquitous, with nearly all finance professionals possessing some degree of proficiency. Leveraging Excel in a more structured and controlled manner can deliver quick wins while preparing the organization for more advanced tools and automation.
Making Excel Work for You
Excel-based solutions can be made more robust to reduce errors and streamline processes. There are various methods to make Excel tools more efficient and reliable:
● Comprehensive Error Checks: Building checks into spreadsheets ensures that all checks and balances in an Excel file are reconciled. For example, Sapling has worked with clients through a number of various projects, ranging from Carve-Out PnLs (Profit and Loss statements) to Reporting Packs, where we audited Excel formulas and reported on errors found. These kinds of mistakes are missed without proper error checks established. Such mistakes can be costly when a business’s strategic and financial decisions are predicated on this same analysis.
● Power Query for File Merges: Rather than relying on direct links between files, organizations can leverage Power Query to automate the merging of multiple data sources into an Excel file. This approach reduces manual processes and mitigates the risk of broken links or misaligned data.
● Turning Spreadsheets into Full Financial Models: A well-structured Excel model can go beyond simple reporting. Through adding assumptions, scenario analysis and dynamic outputs, a spreadsheet can become a full-service financial tool serving the FP&A function.
Through implementing these processes, companies can refine their existing financial practices without the upfront cost of adopting new tools. This approach lays the structure for broader organizational automation goals.
Finding the Right Tools for Automation
Access to financial tools has grown significantly in recent years. A variety of software solutions now support finance functions, from accounts payable (AP) and accounts receivable (AR) to FP&A and budgeting. While these tools offer compelling functionality, selecting the appropriate solution for a company requires an in-depth review of its core issues with legacy processes and the best way to address those pain points.
The processes that are either most error-prone or most time-consuming are ideal places to start, as they offer the greatest benefit from automation. For example, if AP is delayed due to manual invoices, an AP invoice processing tool using artificial intelligence/optical character recognition can dramatically reduce time and improve accuracy. Similarly, if financial consolidation requires an outsized effort from the finance team, a consolidation tool could simplify multi-entity reporting and reduce reliance on Excel.
Change Management is Critical
Effective management changes when implementing new systems are critical to ensure the investment creates value for the company. Even the best systems are prone to failure if employees are not adequately trained, processes are left untouched or management fails to promote their adoption. To successfully implement new financial tools, mid-market companies should follow a structured approach:
● Start Early: Engage stakeholders early in the transition to identify processes that are addressable with automation, gather requirements necessary to facilitate the transition and ensure alignment within the organization. Early involvement increases the likelihood of successful adoption.
● Build a Plan: Develop an implementation plan that defines timelines, responsibilities and desired outcomes. A clear plan helps manage expectations and align organizational resources.
● Focus on Training: Comprehensive training is essential to ensure employees understand how to use new tools and follow updated processes. Training should be ongoing rather than a one-time event.
● Management Emphasis: Company management must spearhead the practice of the new processes. Buy-in from the organization’s leaders will drive compliance at the employee level, encouraging long-term adoption.
The Payoff of Operational Improvements
By addressing manual inefficiencies and adopting targeted automation, mid-market companies can achieve several benefits:
● Reduced Key Person Risk: Processes become standardized, ensuring finance team continuity even if employees leave the organization.
● Improved Accuracy and Timeliness: Automated checks and streamlined workflows reduce errors and accelerate reporting cycles.
● Enhanced Strategic Focus: Finance teams can spend less time on routine tasks and more time on analysis, planning and decision support.
● Scalable Operations: As the company grows, automated and standardized processes can accommodate increased volume while maintaining headcount.
For mid-market firms, operational improvements in finance are not just about efficiency; they focus on building structures that enable firms to scale sustainably with lower risk and spend more time on tasks with the highest value-add to the business. By adopting the latest and greatest tech to modernize existing processes and leveraging automation tools within Excel, such as Power Query effectively, companies can turn finance from a back-office task into a source of insight and value.
Dave O’Brien is a Chartered Professional Accountant and Senior Engagement Manager at Sapling. He specializes in financial due diligence for mid-market transactions, overseeing the preparation of Quality of Earnings reports across a range of industries. His work focuses on analyzing and interpreting company earnings beyond traditional financial statements, drawing on his experience in operational and budget modelling, valuations and data analytics. Contact: Dave O’Brien, CPA MFin, senior engagement manager, Sapling Financial Consultants Inc.
www.saplingfinancial.com | 416-890-6105
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