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7 Deadly Sins of Financial Management and 1 Big Solution

The seven deadly sins need little introduction. They are an ancient collection of vices - covering everything from sloth to wrath - still used by many Christian denominations to teach members of the faith about the perceived potential risks of certain behaviors. What do they have to do with everyday accounting and financial management, though?

Seven deadly sins reimagined: The things that keep SMBs from success
It is actually common for the seven deadly sins to be reimagined for these sorts of secular contexts. For example, there is a famous book called the "The 7 Deadly Sins of Leadership" that talks about how so many organizations fall into seemingly obvious and avoidable traps such as micromanagement and refusal to delegate ("gluttony") as well as perfectionism and irrational comparisons ("envy").

Similar issues, of course, confront small and midsize businesses all the time and could reasonably be cited as the root causes of their struggles to grow, adapt and ultimately hit their respective targets for revenue and profit. Anyone looking hard enough could even find a unique set of seven vices within financial management that prevent accountants and their colleagues from being able to do the best jobs possible.

Indeed, the most pressing issues here are often hiding in plain sight. They could be the Microsoft Excel sheets that have been used redundantly for years to budgeting, planning and forecasting. Or maybe they take the form of strict organizational silos that prevent sophisticated performance data from being shared and utilized by different teams around the company.

There are too many such obstacles out there for us to cover them all in depth, but luckily the classic seven deadly sins framework provides a way to focus on just a handful of the most important ones. Let's look into what might constitute the seven deadly sins of accounting and financial management.

Number 1: Inefficient expense tracking
Revenue leaks often spring up because of overly long closing times and deep-seated reliance on slow, manual processes. Some organizations may take more than a month to close their books due to the sheer amount of redundant data entry and inability to quickly update their documents as project changes become evident. 

In this context, almost 70 percent of medium to large businesses already realize that cloud accounting software could possibly reduce their tracking expenses by one-fifth. The option to input expenses and times into the cloud and then access these numbers from any device can greatly streamline billing and revenue recognition, while reducing closing times.

Number 2: Expecting too much from outdated tech
Stereotypical portrayals of accounting may involve someone at a desk with a big, dedicated calculator, lots of handwritten notes and a years-old PC running an outdated version of Excel. This conception is exaggerated, but it does speak to some of the issues with processes and technology that still beset finance departments everywhere. Two-thirds of respondents to a recent Ernst & Young survey stated that "CFO" was not even an appropriate title for their job responsibilities anymore, in part because outdated tech was complicating their activities.

Antiquated IT systems are definitely a burden. They often require extensive maintenance and complex workarounds that do not scale. In contrast, a cloud-based solution is updated automatically by the service provider with relevant security patches and new features, plus it is easily accessible from virtually any IP-enabled device.

Number 3: Too many silos
In the days of cubicle-based offices, it was predictable that different departments of an organization would be siloed - after all, they were literally separated by walls and doors. However, many businesses have now moved to open floor plans and branch offices, a trend which has coincided with renewed focus on getting rid of these traditional barriers to financial teams working with the rest of the organization.

Organizational silos.Silos can impede financial performance across an organization.

The stakes are high for increasing collaboration across teams that were once seldom in contact with each other. Employees can spend up to 14 percent of their workweeks on email alone, showing the need for more effective social technologies and collaborative tools that are built into financial solutions and capable of getting rid of silos.

Number 4: Lack of compliance
If silos are abundant, then compliance by contrast is often in short supply. The potent combination of complex, ever-evolving regulatory legislation and increasingly complex business operations can greatly complicate a finance team's workload as they try to stay on the right side of the line.

Restatements are often necessary because of revenue recognition. To avoid costly penalties and other consequences from these adjustments, SMBs can take up cloud-based enterprise resource planning tools. Cloud ERP software simplifies and automates the revenue recognition, consolidation and other processes that would otherwise be pitfalls.

Number 5: Inadequate financial data
A cook will always want to use the freshest ingredients available and not stale commodities. Similarly, financial teams want to plan for the future of the business using only accurate and relevant numbers, but legacy tools, silos and the other obstacles we've already discussed can prevent them from doing so.

"A financial solution should provide up-to-date, real-time data."

A financial solution should provide up-to-date, real-time data that can be assessed to make informed decisions. With this information at their disposal, CFOs can get away from the rote work that distracts from strategic planning, while accountants et al can avoid error and create more accurate reports.

Number 6: Spreadsheet nightmares
Spreadsheets have been mainstays of office life for decades. For many tasks - e.g. simple budgets - they are just fine. But they cannot scale to handle the many complex, concurrent tasks that rapidly growing SMBs have to deal with.

Most spreadsheets have at least a few errors that, while likely harmless for a small-time or one-off operation, would be a significant drag on the finance team at scale. Cloud ERP takes the manual data entry and error-proneness of spreadsheets out of the picture, replacing it with streamlined automation.

Number 7: Applications on their own islands
When a business works with a lot of data on a daily basis, staying on top of where it goes and who see it can quickly become complicated. Moreover, the sheer range of business applications in play - e.g., customer relationship management, business intelligence, etc. - means that lots of financial information can be bouncing around the organization without any rhyme or reason.

Cloud software really helps with centralization of data storage and access, so that applications are no longer their own islands but integrated into the overall company financial system. Out-of-box integrations as well as support for a variety of third-party add-ons make cloud ERP a natural choice for bringing all business applications together.

 

>>Check out these blog posts below for more information about Forecasting Software:
5 Benefits of Switching to a Rolling Forecast
Rolling Forecast Software: Ditch your Annual Budget for a Rolling Forecast

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