Manufacturing Finance Survey: four ways finance teams can survive the post-pandemic shift

Posted on 9 Nov 2022 by Joe Bush
Partner Content

The aim is for finance to become a fully-fledged business service centre: the go-to source of insight for the wider enterprise; connected, agile and data-driven. A recent survey examines the extent to which this ambitious goal is translating into action.

Conducted by Wolters Kluwer in partnership with Generation CFO, the Manufacturing Finance Compass Report draws on the responses of 120 senior finance professionals across the UK&I manufacturing sector; finance leaders in large and complex manufacturing organisations. The report focuses on four critical areas for the Office of Finance: Agility, Resilience, Culture & Skills and Technology Adoption. The results, summarised below, make for very interesting reading. See for yourself by downloading the full report for free here – including finance benchmarking guidance applicable to all manufacturing businesses.

Manufacturing Finance Survey

Insight 1: Finance transformation budgets remain intact

Seventy-eight percent of respondents agreed that digital finance transformation budgets have not been negatively impacted by the pandemic. What’s more, there is a strong consensus that budgets will increase by mid-2024.

An uncertain economic climate inevitably gives rise to caution. The hunt is on to find cost savings. Non-essential projects are frozen. Ambitious – but perhaps, speculative – initiatives tend to be kicked into the long grass. So where might this leave your nascent finance transformation efforts?

There are some projects that are just too important to cut; and the vast majority of manufacturers view digital finance transformation as one such project. Faced with a volatile environment and extreme cost pressures, this is precisely when you need more efficient and effective financial management processes, full visibility and quicker decision making. Far from slowing down digital transformation, this is the time to double down on it.

Insight 2: Full Year planning is yesterday’s news

CFOs want more than just the ability to explain how and where actual results differ from the original plan. Ideally, they want to be able to interpret the impact of the actuals to-date on the remainder of the period and to identify possible options for taking remedial action.

This is certainly true of manufacturing. 80% of finance leaders across the sector say that in the next two years, they will have either moved away from Full Year planning completely, or will have supplemented it significantly with rolling forecasts and/ or scenario based planning.

Will the finance department ultimately be seen as just a reporter of historical variances? Alternatively, will it be recognised as a source of forward-looking guidance on future performance? If it’s to be the latter, then the demise of the Full Year plan may be inevitable.

Insight 3: Don’t let size become a threat to agility

Just 23% of finance leaders in manufacturing businesses with a turnover of £1bn+ are confident in their ability to make ‘big bet’ decisions quickly, compared to 47% of their peers in smaller enterprises.

Fifty-two percent of finance leaders in £1bn+ businesses are implementing next-gen predictive intelligence or machine learning for complex tasks. This compares to 76% of finance leaders in the £500m-999m turnover range.

The quicker you can react – e.g. through resource reallocation, cost cutting and pricing changes – the stronger your chances of mitigating the effects of an unforeseen event, or taking advantage of a fresh opportunity.

The largest manufacturers seem least able to make decisions quickly. One might have expected these businesses to be keener than most to implement new technologies to bridge the decision-making gap. However, it is CFOs in smaller companies who are significantly more likely to be implementing predictive intelligence and similar next-gen technologies.

So, are the largest manufacturers at risk of falling behind more agile, up-and-coming competitors? The report considers some of the technical and cultural barriers that all finance leaders in this sector need to be aware of.

Insight 4: Act now to prevent future ESG ‘jitters’

Six percent of manufacturing CFOs were less confident in their ability to deliver ESG calculations, scenario building and reporting commitments in mid-2024 compared to now.

Most finance leaders across the sector seem to be ‘just about managing’ their current ESG commitments. However, they can see the direction of travel: further, and more detailed disclosures, tougher scrutiny from regulators, customers and investors alike; and of course, harsher reputational and financial consequences for getting it wrong.

Manufacturers should prioritise futureproofing their ESG reporting capabilities, including the ability to monitor and report on all relevant KPIs, and see the impact of ESG activities across all financial and operational activities.

Download the Manufacturing Finance Survey

The Manufacturing Finance Compass Report explores the state of play on finance transformation across the UK&I manufacturing sector, examining the best ways to transform ambition into reality. Download your copy here.

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