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The Future of Financial Management in Engineering Firms

    

7 min read

Outsourced accounting for engineering firms

In industries like engineering, technology has taken over - from the early days of computer-aided design and computer-aided manufacturing that helped engineers and clients conceptualize design to the implementation of augmented reality and virtual reality modules that enable engineers and clients to be immersed in design concepts in addition to revolutionary concepts within Industry 4.0 like artificial intelligence and the Internet of Things (IoT) that will supercharge automation.

Key Takeaways

  • Back-Office Automation: Tools and technology for back-office automation are becoming increasingly powerful. While the goals of automation have always been to save time, improve efficiency, and increase accuracy through the elimination of…

  • Data Analysis Driving Leadership Decisions: Data analysis has always been a powerful tool in business management, and with the implementation of artificial intelligence, data analysis is becoming increasingly powerful and increasingly important…

  • The Power and Necessity of Embracing New Technologies: With inflation driving up costs, firms struggle to keep their budgets in check, cut costs, and spend money in smart ways that drive ROI…

While there's no shortage of technology designed specifically for the engineering industry, new tech is also transforming the financial management industry, and this new tech impacts all businesses, including engineering firms.

Engineering firms need industry-specific reporting to make data-driven decisions Make 2024 your most profitable year yet Speak to a Growth Specialist today

Top 5 Future Financial Management Trends in Engineering Firms

1. Back-Office Automation

Tools and technology for back-office automation are becoming increasingly powerful. While the goals of automation have always been to save time, improve efficiency, and increase accuracy through the elimination of repetitive manual processes, automation now also aims to improve business management. As the capabilities and capacity of back-office automation expand, accounting software suites that once only enabled up-to-date reporting at each period's close are now equipped to provide real-time reporting at the click of a button whenever needed.

Additionally, with the right software tools (such as those provided with Sage Intacct's Marketplace), these automated data collection tools can expand beyond the back office, turning your accounting software into organization-wide enterprise resource planning tools.

With powerful automation of their financial management and data collection strategy, engineering firm leaders can access essential, accurate, and up-to-date metrics to make data-driven, leadership decisions at a glance.

Read More: The Pros and Cons of Outsourced Accounting Services for Businesses

2. Artificial Intelligence (AI) and Its Growing Place in Financial Management

Launched just over one year ago, ChatGPT and other AI platforms have evolved and infiltrated several industries rapidly. Upon its launch, AI was only verbal and could only answer simple questions based on its training data. Now, we're seeing the results of a year's worth of learning, and AI technology and machine learning models are being incorporated into a variety of tools such as customer response management chatbots, virtual meeting summaries, and search engines in addition to being implemented in industries like transportation, marketing, surveillance, education, military, healthcare, design, and, of course, finance.

In the financial sector, AI is incredibly powerful when it comes to analyzing large sets of data in seconds to detect anomalies and patterns. As a result, its most relevant applications so far have primarily been in fraud detection, error reduction, risk management, and investment recommendations.

For engineering firms, AI is becoming increasingly relevant to their financial management strategies for rapidly analyzing large sets of financial and ERP data. Additionally, AIs that have been trained to recognize the signs can help reduce the risk of internal fraud in SMBs with smart, automated data monitoring. AI can also help busy engineering firm CEOs to better interpret and understand what their financial data means so that they can put their metrics to work, set SMART goals, and make data-driven decisions to drive profitability and growth.


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3. Data Analysis Driving Leadership Decisions

Data analysis has always been a powerful tool in business management, and with the implementation of artificial intelligence, data analysis is becoming increasingly powerful and increasingly important.

If you are basing decisions on a corrupted or inaccurate data set and your competition is using better data, then their leadership decisions will be better than yours. To keep an edge on the competition, industry leaders need to stay abreast of the latest advancements in data analysis capabilities to ensure decisions are always based on the most accurate and complete data possible.

Modern financial management strategies, such as those that implement back-office automation and AI-powered analysis tools, will help to put your engineering firm in the lead. Of course, if have the best data at your fingertips, you must also understand how to read, interpret, and use that data to your firm's advantage.

Read More: The Most Powerful Financial Insights for Engineering Firms

4. Cloud-Based Technology and Increased Outsourcing

Cloud-based technology is improving every year. It has become increasingly efficient and much more secure. The advent and improvement of cloud-based tech has simplified the process of outsourcing - especially outsourcing financial management. Since cloud-based accounting software and complementary tools are now easy for the average person to use and secure enough to hold sensitive information, outsourced bookkeeping, accounting, and chief financial officer services are growing at a rapid rate.

In addition to outsourcing the daily, nuts-and-bolts bookkeeping processes and procedures such as data collection, categorization, and reporting that bookkeepers and accountants are responsible for, businesses are increasingly outsourcing their financial leadership to outsourced CFOs. Filled in-house, CFOs cost hundreds of thousands of dollars each year, and an outsourced, fractional, or virtual CFO can be obtained on a regular basis or as needed (for handling financial projects, challenges, or transitions) at a small fraction of the cost. Thanks to the cost savings, agility, and value of outsourced CFOs, the demand for outsourced CFO services increased more than 100% between 2022 and 2023.


"We were profitable the first month and I knew it because my accounts and books were clean and I could understand where the money was coming from and going to."

Joe Aikens, CEO of JTAM Engineering

Engineering Case Study: The ability to focus on growth instead of managing an accounting department fueled rapid increase in revenue and profits.


 

5. Growing Importance of Data Protection and Cybersecurity

With more data and sensitive information moving onto digital and cloud-based platforms, the need for advanced data protection and cybersecurity will continue to increase. Although cybersecurity might seem like a matter for your IT people to sort out, it is highly relevant to your financial strategy and security. 

This means that your financial management and IT departments need to work together to find security solutions designed to protect the entire engineering firm, its data, its employees, and its clients from potential breaches.

The Power and Necessity of Embracing New Technologies

New technology emerges in much the same way that new businesses emerge, to solve problems. Today, engineering firms face no shortage of challenges:

  • While inflation has slowed, businesses and consumers continue to feel the pressure of the diminished value of the dollar.
  • With inflation driving up costs, firms struggle to keep their budgets in check, cut costs, and spend money in smart ways that drive ROI.
  • The cost of capital is high with rising interest rates that aren't likely to be lowered anytime soon.
  • Cash flow forecasting becomes increasingly difficult and essential in a lean economic climate.
  • Firms are still experiencing the impact of The Great Resignation, struggling to remain fully staffed, maintain low turnover rates, and attract top talent.

In the same way that firms must adopt new engineering-specific technologies or risk falling behind the pack and offering outdated services, firms must also adopt advanced financial management technology and strategies. These advancements are designed to revolutionize financial management and enable firms to overcome challenges, minimize costs, improve efficiency, maximize productivity, and drive growth.

Failing to stay ahead of the curve, in terms of your firm's financial management strategy, will result in your firm missing out on opportunities, facing problems your competitors have already solved, and ultimately being less successful overall. By leveraging new financial management tech, you can take your business to the next level by powering and leading your business from the back office.

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