Digital Transformation » The biggest challenges facing financial directors in 2021

One could not have anticipated the repercussions surrounding Brexit and the pandemic, with both creating new obstacles for businesses to overcome and forcing financial directors to adapt and process their daily tasks in different ways.

From increases in automation to demands for greater access to data, industry leaders outline the biggest challenges facing financial directors in 2021.

  1. The drive towards digitalisation and automation

“The growth in digital means that finance directors need to understand digital strategy and transformation just as much as controlling their company’s accounts,” says David Beard, founder of Lending Expert.

“Part of the Making Tax Digital initiative means that accounting systems are required to be more automated, integrated and software-driven. This might involve using software such as Xero, Salesforce, Sage or other inventory and analytics systems –this is something that financial directors have to adopt and understand quickly.”

“There is a challenge for some people who have been doing accountancy for 30 or 40 years and now they have to get to grips with new software but also the nature of global business, with multi-currency accounting, expense management, inter-company account and credit control which today could be on a global scale and far more difficult to control.”

Ben Lawrence, the CFO of MT Finance agrees: “A key challenge that many CFOs are currently facing is how to embrace technology effectively. There’s an ever-increasing demand for data and insights to help drive a company’s strategy, therefore the importance of getting in place a fully connected, automated system that can provide real-time information to help support decision-making has never been greater.”

  1. The need for more risk and compliance data

With ongoing compliance and the increased exposure to risk, this too is presenting another challenge for financial directors.

Board members today require directors to have access to risk and compliance data. To capture this in real-time across an entire company is a challenge – whether it is through financial management systems or multi-dimensional analysis.

The implications of the pandemic are still reverberating, putting financial directors under a lot more pressure to be accountable and aware of any potential external risks or compliance investigations.

“Firstly, there are implications if one of the main directors or key people are off sick for a certain period of time due to contracting Covid-19. Not to mention if they have been in contact with a number of other staff and everyone has to isolate,” says Dan Kettle, founder of Pheabs.

“This can impact margins, deals, growth, deadlines – it can put the entire business out of sorts,” he says. “Beyond this, there is additional work for financial directors to manage overheads, expenses and payroll – when taking into consideration hybrid and remote working, furlough schemes and multiple software that people are using whilst working remotely too.”

  1. Rising insurance premiums

The availability and cost of directors’ and officers’ (D&O) insurance is causing a headache for finance directors, says Simon Taylor, managing director of Get Indemnity.

The market has seen insurers withdrawing since the start of the pandemic because of the financial instability of their client’s balance sheets and, as s the furlough scheme wind down, insurers are hoping their clients can jump start their businesses. This is because the largest driver for claims made under D&O insurance policies arise from insolvencies, according to Taylor.

“Finance directors across the board have seen their insurance premiums increase significantly, sometimes by a multiple of times,” he says. “It has become increasingly common that companies have been unable to identify D&O insurance from the market or the cover becomes cost prohibitive. Discussions then need to be had with directors and non-executive directors about their increased personal exposure. With many non-execs stepping down from their positions until suitable insurance protection can be found.”

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