How To Re-imagine Finance Operations For Hyper-growth E-commerce Businesses?

Raghavendra Reddy
linkedln icon
Discover strategies to re-imagine the finance function within e-commerce. Learn how centralization of financial data and workflow automation offer continued success and uninterrupted growth.
November 21, 2022

The world has gone online, and so have our marketplaces. Large online e-commerce platforms are replacing offline stores as the preferred way to shop, offering a digital and connected experience. This changing customer behavior has forced large e-commerce and hybrid businesses to put data at the heart of their growth strategies.

In today's world, competitive advantage is increasingly correlated with data intelligence and how efficiently a business can use the data it generates. Business-critical decisions need to be made faster than ever before (sometimes even daily), making monthly reports obsolete. Faster decision-making requires faster data-to-decision cycles, which can be achieved by leveraging new-age technologies.

The hypergrowth of these businesses often requires them to use a variety of disparate bolt-on tools that only provide analytical capabilities in a piecemeal fashion. This can make it difficult to get a complete view of the data and to make informed decisions.

The million-dollar question for CFOs of all e-commerce businesses today is how to create the agility needed to support business growth while ensuring compliance. This blog post explores why challenges pertaining e-commerce are different and also suggest approaches to tackling them. Read on.

What are the challenges of e-commerce and why are they different?

Challenges of growing e-commerce businesses

The challenges of e-commerce are different because they operate in a digital environment. This means that they have to deal with:

- Heterogeneous data landscape. E-commerce businesses collect data from a variety of sources, including websites, mobile apps, social media, and payment processors. This data can be stored in a variety of formats and in a variety of locations. This makes it difficult to integrate and analyze the data.

- Complex compliance. E-commerce businesses have to comply with a variety of regulations, including laws governing data privacy, payments, and taxes. These regulations can be complex and time-consuming to implement.

- Sophisticated business models. E-commerce businesses often use sophisticated business models, such as subscription services, pay-per-use models, and marketplace models. These models can be difficult to manage and can require a lot of data to track and analyze.

- Huge data volumes. E-commerce businesses generate huge volumes of data, from website traffic to customer transactions. This data can be difficult to store, manage, and analyze.

- Innovative contracts. E-commerce businesses often use innovative contracts, such as clickwrap agreements and shrinkwrap agreements. These contracts can be difficult to enforce and can lead to legal disputes.

Reimagining the e-commerce finance function

Based on our frequent interactions with CFOs of hypergrowth e-commerce companies from different parts of the world, we have found that they all adopt a simple motto - focus on value creation. This mindset requires CFOs to generate departmental bandwidth and deliver higher-quality outcomes. A four-pronged approach can help CFOs to think along these lines.

The four prongs of the approach include:

#1 Centralization - Focus on shorter data to decision cycles and continuous planning

E-commerce companies need to make decisions quickly and continuously in order to stay ahead of the competition. By consolidating their finance operations in a hub and spoke model, e-commerce companies can achieve greater economies of scale and improve their decision-making speed.

Large e-commerce companies like Amazon and eBay have been at the forefront of this trend, moving their finance operations to offshore delivery centers. This has allowed them to reduce costs and improve efficiency.

As e-commerce companies grow, they often accumulate legacy systems and processes that can slow down their finance operations. By rationalizing these systems and processes, e-commerce companies can free up resources and improve their efficiency.

💡Pro tip: External benchmarking and simple time and motion studies can help you quickly identify areas of non-productivity and wastage in your finance operations.

#2 Standardization – Make the company process dependent, rather than person dependent

Blitz growth often leads to start-ups relying on various systems and bolt-on tools, creating data disparity and non-fungibility across systems for analysis. For instance, when they experience rapid growth, they often find themselves using a variety of different systems to manage their finances.

This can lead to data disparity, which is when the same data is stored in different systems in different formats. This can make it difficult to analyze the data and make informed decisions.

To address this challenge, start-ups need to standardize their systems and processes. This means defining standard operating procedures (SOPs) for how data is collected, stored, and analyzed. This will help to ensure that the data is consistent and that it can be easily analyzed.

Here are two themes to be understood.

- Consistent systems for transaction recording, reporting, and analytics ensure higher organization productivity. When everyone in the organization is using the same systems and processes, it can save time and reduce errors. This can free up employees to focus on more strategic tasks.

- Standardized processes can also help to create growth opportunities for employees. When employees are trained on standardized processes, they can be easily transferred to different roles within the organization. This can help the organization to grow and scale more quickly.

💡Pro tip: A fast way to kickstart your data standardization could be by implementing a data standardization layer, which provides easy integration with all other systems, standardizing and consolidating data seamlessly, creating a single source of truth.

#3 Automation – Automate workflows for rule-based day-to-day activities

Workflow automation can free up your workforce to focus on higher-value activities and away from mundane tasks. It can also improve the accuracy of your finance operations, ensuring consistent results even with increasing workload.

A good rule of thumb to identify areas of automation in your organization is to ask yourself, "Can this activity be written down as a step-by-step flowchart?" If the answer is yes, then it is a good candidate for automation.

Here are some specific benefits of automating workflows for rule-based day-to-day activities:

- Increased productivity. Automation can free up your workforce to focus on higher-value activities, such as strategic planning and analysis.

- Improved accuracy. Automation can help to improve the accuracy of your finance operations by eliminating human error.

- Reduced costs. Automation can help to reduce costs by eliminating the need for manual data entry and processing.

- Improved compliance. Automation can help to improve compliance with regulations by ensuring that processes are followed consistently.

💡Pro tip: Giant e-commerce businesses like Amazon and hybrid stores like Walmart are increasingly adopting workflow automation to perform transactional activities like procure-to-pay cycles and management reporting.

#4 Outsourcing – Focus only on what is core to the business growth and outsource the rest

CFOs in e-commerce businesses need to focus their energies on high-value activities, such as product development, marketing, and customer service. They should outsource non-core activities, such as payroll processing and big data mining, to specialist third-party partners.

Outsourcing non-core activities can yield a number of benefits, including:

- Increased productivity. Outsourcing can free up CFOs and their teams to focus on high-value activities.

- Improved efficiency. Outsourcing partners can often provide services more efficiently than in-house teams.

- Reduced costs. Outsourcing can help to reduce costs by eliminating the need to invest in infrastructure and staff.

- Improved compliance. Outsourcing partners can help to ensure that businesses are compliant with regulations.

💡Pro tip: When deciding whether to outsource a non-core activity, CFOs should conduct a cost-benefit analysis to determine the best course of action for their organization.

Final thoughts

Reimagining the finance function for e-commerce is about focusing on value-adding activities. That means, you start:

- Using cutting-edge technology to make data analysis and consolidation easier

- Standardizing systems across the organization

- Automating the routine

- Outsourcing wherever possible

The latest technologies can help businesses to harness the power of data by churning out vital information and reports in ready-to-use formats. This will enable business leaders to make better and more informed decisions, which can help businesses to reach new heights.

So, what's for the wait? Try Bluecopa and see how it can help you reimagine your finance function and gain a competitive advantage. Request a demo.