The past year has seen a dramatic shift across CPG (Consumer Packaged Goods) finance functions. The CPG industry was largely unprepared to deal with the unexpected supply-and-demand shock resulting from the arrival of coronavirus. In response, CPG businesses have rapidly turned to the finance function for efficiencies, supported by technology, to keep themselves stable during a period of extended uncertainty.
With such a rapid change in behaviours, the lingering question across the industry has been to identify which trends will persist past the crisis. Here, we outline some key CPG digital trends that emerged in response to the recent disruption and why they’re here to stay.
We’ll explore some of the key strategies that companies have deployed in P2P invoicing (Procure-to-pay) to ensure they remain more agile in future. We’ll also explain why the transformation of CPG finance functions is an essential component of success.
In this article you’ll learn about:
- Touchless interactions and fully digitised systems
- Why cost optimisation is overtaking cost cutting
- What to bear in mind when selecting your finance portal
- How leaders can accelerate CPG finance transformation
What are the main areas of focus for CPG and retail companies?
Almost two-thirds of CIOs in the CPG industry believed that their relationships with the CEO were stronger in 2021 than before the crisis, as a result of increased reliance on technology to strengthen their businesses and uncover operational efficiencies.
With improved resilience, faster payment of suppliers and streamlined compliance, it’s clear that finance functions have benefitted substantially from the drive to digitise their departments.
So how has technology empowered CPG finance departments?
With finance teams all over the world suddenly required to operate remotely, there was an immediate recognition of the value of touchless interactions for invoice processing. PDFs appeared to offer a temporary solution. However, it quickly became evident that emails were as easy to misplace as physical copies.
By contrast, CPG finance teams with fully digitised systems were able to use data and analytics. In moments, finance departments were able to gain oversight not just of current invoices but long term goals.
Do you need to deploy OCR technology before going fully digital?
It’s important to note that CPG finance teams don’t need to first migrate to OCR (Optical Character Recognition) before embracing touchless systems. The focus for transformational leaders should be on future-proofing their organisations, so whilst OCR has its place for some finance teams, leaders should consider more ambitious tools on the market which have already proven their resilience in unpredictable circumstances.
Furthermore, technologically transformed finance departments were able to pass the benefits of internal efficiencies on to smaller suppliers that were desperately in need of prompt payment. Rapid payment of invoices helped to support the supply chain, ensuring that finance operations weren’t broken during a critical period.
Cost optimisation over cost cutting
Cost-cutting is often an unfortunate result of financial uncertainty, as businesses are forced to protect their bottom lines. However, modern technology has enabled finance leaders to extract more value from the systems in their departments, reducing the need to find additional savings.
Optimising cost will only become more critical in the near future, as additional tax authorities issue mandates for e-invoicing after the success of the Italian government in increasing its share of tax receipts. The French government is set to follow shortly, with other jurisdictions preparing to roll out similar mandates. Technology enables rapid compliance with cascading updates to ensure that human error is kept to an absolute minimum during a complex, international period of change.
The recent growth and strength of purchasing platforms have resulted largely from internal ‘No Paper’ mandates. Beyond an environmental benefit, finance leaders have found processing times for paperwork (including invoices) can be condensed, with errors and exceptions handled more dynamically and with greater flexibility. As a consequence, the CPG industry experienced a massive increase in financial portal use.
Unfortunately, the diverse number of portals in use led to a proliferation of systems, each with individual requirements and procedures. Hundreds of platforms needed to be able to communicate with one another, sometimes across the same company, and most were unable to do so. Success continues to depend on the capabilities of the systems in use by CPG companies, with some better suited to supporting collaborative ecosystems than others.
For CPG finance teams looking to streamline their operations, it helps to consider the types of goods and services required across each individual supply chain. From there, technological solutions such as Tungsten Network’s Total AR and AP can be set up to account for a deeply comprehensive range of eventualities, drastically driving down rejected invoices and providing additional savings to the business.
What can retail and CPG finance teams do to make this journey easier?
Finance leaders can help advance their digital transformation ahead of partnering with an e-invoicing provider by:
- Securing budget beyond technology: The budget should also cover the anticipated cost of organisational change and process improvement.
- Engaging collaborative solutions: Encourage collaborative P2P (Procure to Pay) ecosystems that can support your journey to full STP (Straight Through Processing).
- Collaborating with internal stakeholders and partners: Establish a clear view of upcoming tax and fiscal compliance challenges for the years ahead.
Transformed CPG finance, for good
The CPG industry has managed to survive a challenging time, but there is no sign that the move to digital systems will abate in the future. The opportunities afforded by a detailed transformation of the finance function are simply too great to ignore, especially as compliance becomes increasingly difficult to manage on an international scale.
CPG companies that embrace the functionality of highly automated finance systems will find themselves better positioned to cope with increasingly fractured international regulations. Selecting an experienced partner, with experience of servicing complex multinational companies, will make all the difference.
Consolidate agility: Optimise CPG finance functions with Total AR and AP
Empower your AR and AP teams to quickly and simply process financial transactions with a global tool that ensures compliance across complex tax jurisdictions.
Interested in learning more? Get in touch today to discover how you could transform your finance function.