accounting and finance

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Will 2023 be a promising year for accounting and finance teams?

The accounting and finance industry continues to see innovation evolve how the industry operates today. As workloads have increased and become more complicated, technology has enabled most of the processes not only to be automated but also eliminated if they were no longer necessary.

Financial data continues to grow as regulatory bodies look to ensure best practices when it comes to embracing technology. Apart from that, ESG is now becoming a key focus point when making investments in technology. Teams in this industry are now having to make the most of the tools available to them. In fact, with uncertainties in the global economy, it will be interesting to see how businesses plan their expansions for 2023.

To understand more about the outlook for the accounting and financial teams in 2023, Mike Polaha, Senior Vice President, Finance Solutions and Technology, BlackLine shares five key points for the industry in Asia Pacific.

Outlook 1 – Cash flow will be in the spotlight in 2023 for Finance & Accounting (F&A), given ongoing inflation, rising interest rates and a potential recession

Economic growth in Asia-Pacific is expected to slow down amid tightening global conditions, inflationary pressures, and recession fears. In Singapore, the Monetary Authority of Singapore predicts that economic growth will slow ‘below trend’ in 2023, weighed down by key external-facing sectors. The uncertainty surrounding this possibility elevates the need for Finance & Accounting (F&A) to focus on cash flow and working capital management priorities.

CFOs can be expected to ask their organizations in 2023 to optimize and maximize cash across the enterprise. In turn, this demand requires F&A professionals to obtain clearer visibility into where cash is originating and exiting the business. A recent global survey of almost 1,500 Finance & Accounting professionals by BlackLine suggests a lack of significant confidence in cash flow visibility. In Singapore, less than 4% of C-suite and F&A professionals surveyed are completely confident over their visibility over cash.

This is despite nearly two-thirds (61%) of survey respondents in Singapore saying that understanding cash flow in real time has become more important for their company in 2023. In fact, one of the biggest challenges they face is being able to provide accurate data quickly enough to help the organization respond to market changes.

The survey also found that more than half (57%) are concerned that customers will have less income to spend, which will affect sales and revenue; while about half (51%) are worried that their organizations will face higher costs.

To mitigate these concerns, F&A professionals will need to seek a better understanding of the timing of accounts receivable to make speedier and more productive interventions and invest in automated processes and software assisting these strategic working capital aims. Close to half of Singapore respondents (49%) in the BlackLine survey plan to implement or scale working capital automation solutions in 2023.

accounting and finance

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Outlook 2 – The ability to analyze and interpret financial data will be crucial in helping companies navigate through another possibly bleak economic outlook

While businesses may not always have foresight over external disruptions, they can optimize some areas of their operations to minimize its impact. This starts with having visibility over financial data, processes, and working capital. 55% of C-suite and F&A professionals in Singapore agreed that the ability to view companies’ financial data in real-time will be a “must-have” for business survival over the next 12 months. A vast majority also mentioned wanting to be more confident in the real-time visibility their companies have over its cash flow. Having accurate, real-time data to inform decision-making allows organizations to respond to unpredictable market conditions with agility and resilience.

That said, constant training on how to analyze and interpret financial data is pertinent and should be implemented if not already done. Data analytics is critical in business operations and financial data is no exception. Moreover, stakeholders want accountability and confidence in the companies they have a stake in. It’s through knowing how to draw insights from financial data that organizations would have a better understanding of business’ health and outlook. From there, they’d be better positioned to advise their stakeholders on what’s to come.

It seems that more organizations are leveraging data analytics to strengthen their F&A competency and business recovery as well. BlackLine’s survey found that close to 48% of C-suites and F&A professionals in Singapore are looking to invest in data analytics capabilities to make more informed business decisions with data within the next 6 months to a year. The same study also saw that slightly more than half (52%) would like to increase their headcount within the same period to focus more on valuable activities such as data analysis and forecasting.

Outlook 3 – CFOs are taking charge too, not just CEOs

If CEOs are typically seen as those who bring the company’s vision to life, map out its growth, drive profitability and for publicly listed firms, increase share prices, CFOs are the bridge to make this vision work considering the ebbs and flows in the market and the organization’s capabilities. They are responsible for financial planning and stability, all of which contribute to business health and employee well-being.

While many respondents saw that both CEOs and CFOs have equal responsibility to help navigate a business through winds of change, CFOs have a greater tendency to believe this burden is theirs alone to bear. BlackLine’s survey saw that 68% of CFOs in Singapore said they were responsible for ensuring their company’s well-being during an economic downturn, compared to 30% who said that this was the responsibility of their CEO. CFOs in Singapore also saw that it was their responsibility to help steer the business successfully through a geo-political conflict (54%), war for talent (54%) and inflation (65%) compared to CEOs.

An unpredictable and tough economic climate could put greater pressure on CFOs to co-lead the business. But their knowledge on finance, and marketplace movements will be critical in helping businesses go through what might possibly be another challenging economic year.

Outlook 4 – With ESG at the top of business and societal agendas, accountability will be critical in the form of sustainability reporting

Consumers and businesses alike want to engage with organizations that put the environment at the core of their business operations. For businesses, there is a case to be made for F&A teams taking the driver’s seat in ensuring accountability, in the form of sustainability reporting.

With their background in risk assessment and mitigation, data analytics and reporting, F&A teams possess unique skill sets that can be translated into ESG strategy, measurement, and reporting. Moreover, they have access to data in areas which can be affected by ESG practices, such as sales, supply chain and pricing, which helps with sustainability reporting.

However, many F&A teams are still in the process of ironing out the kinks involved, especially as regulations keep evolving. The reality on the ground? Multiple sustainability reporting frameworks and guidelines across jurisdictions – many with their own method for collecting, verifying and reporting data – can create significant disclosure challenges and result in poor ESG data comparability. According to BlackLine’s study, 46% of CFOs in Singapore called out that the biggest pain point for their finance function currently is complying with new and evolving ESG regulations.

It is thus imperative that organizations will need to begin streamlining and automating existing processes, to help F&A teams more effectively report and ensure accountability in ESG management practices.

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Outlook 5 – M&A dealmakers in 2023 will focus on the impact of entity management, antitrust regulations and ESG factors

In the first nine months of 2022, Singapore-targeted merger and acquisition activity fell precipitously, with deal value falling about 57% on a year-over-year basis, according to a Refinitiv report. Domestic M&A value, at $16.9b (US$11.8b) fell close to 39% in the first nine months from the same period last year, while inbound M&A value, at $28b (US$20.1b) was down 63.5% in value correspondingly. Given the current macroeconomic climate, it is expected for dealmakers to brace for a challenging business environment ahead.

In this concerning environment, accounting and finance professionals assisting their colleagues in plotting and executing M&A transactions in 2023 will focus on a target company’s ESG factors, regulatory considerations, and global entity management practices.

As global regulations rapidly evolve to ensure tax jurisdictions get their fair share of the revenue from intercompany transactions, the onus is on F&A to ensure more strategic entity management. More than one-third (36%) of Singapore C-suite and F&A professionals in BlackLine’s study said that in this era of challenging regulatory scrutiny, they lack sufficient automated controls to address growing data volumes. This creates significant compliance risks that emerge during the M&A due diligence and suggest substandard governance, according to a Deloitte global study in 2022.

The expectation is that more companies will invest in intercompany financial management automation solutions next year. This enables more assured entity data management, regulatory compliance, and M&A due diligence.