Financial Operations (FinOps): Overview, Importance, Challenges

As we know, systematically managing the finances can assist in driving the growth of the company, creating compliance, and being able to make more quick decisions using available data.

According to a 2023 Sage report, approx. 60% of Canadian finance leaders believed that manual processes do not allow them to devote themselves to strategic work. Similarly, a survey by Float Financial in 2024 found that almost two out of three small enterprises provide too much time to the manual data entry.

These stats highlight a decisive problem that is finance departments are overworked and do not develop strategy, but manual operations. The solution is to adopt improved tools that can ease and automate financial processes and assist businesses in financial management with more accuracy and less labour.

If you want to take your financial operations to the next level and transform your finance team from a reactive team to a proactive one, this blog will help you with everything you need to know about financial management operations.

First, let’s understand what financial operations really are.

What are Financial Operations?

Financial operations are the set of processes, systems, and functions through which the financial activities in an organization are conducted. It includes the process of recording transactions in ledgers, accounts receivable/payable, payroll, reconciliations, and cash management. It also involves the integration of those activities into a unified structure to facilitate easy management and decision-making.

In addition, for businesses in Canada, successful financial operations imply connecting financial management to meeting the requirements of the Canadian standards (e.g., IFRS, tax regulations) and making sure that your finance system is responsive enough to adapt to the changing regulatory and business requirements.

Next, let’s step through the key components that make up a robust financial order of operations, so you know what to look for or improve.

Components of Financial Operations

General Ledger and Sub-Ledgers: These are the origin of your financial information and where all the transactions are processed to the GL and sub-ledgers to AR/AP, fixed assets, etc.

Accounts Receivable (AR) and Accounts Payable (AP): The processes of taking cash in and cash out, collection, payment of vendors, etc.

Cash and Liquidity Management: The process of monitoring and predicting cash flows and making sure that the working capital is adequate.

Budgeting, Forecasting, and Planning: Projecting revenue and cost in the future, committing budgets as strategy, and supporting decisions.

Financial Reporting & Analytics: Preparing income statements, balance sheets, and cash-flow statements and using analytics to gain insight.

Compliance & Controls: Studies whether the processes fit in the regulatory, tax, and audit requirements (essential in Canada with its multi-jurisdictional tax/regime environment).

Integration & Automation: Systems that bridge between these elements, minimize manual work, and offer single-source data.

Note: During your evaluation of your own operations, map these components and see which one is efficient, integrated, and aligned with your business goals.

Now, having identified the components, it is time to know how organizations apply financial management operations in practice.

Role and Responsibilities of Financial Operations

• Workflows and automation are used to help fasten close cycles by finance teams. This includes matching sub-ledgers, clearing exceptions, and reconciling accounts with software.
  For example, Microsoft sets Dynamics 365 Finance as one that can automate matching of sub-ledger and closing of books more quickly.
• The unified intelligent dashboards help the decision makers to make timely strategic decisions; analysis embedded in the system can bring together finance and operations data.
• Businesses that are in Canada utilize ERP-based systems in the cloud, which are adjusted to local laws and multi-currency/multi-jurisdictional business frameworks (this is essential when the Canadian companies have US or international connections).
• Modern finance operations such as leveraging AI, predictive analytics, embedded workflow, minimizing manual journal entries, and liberating finance teams to concentrate on high-value work are being implemented.
• In the case of ERP system such as D365 Business Central or D365 Finance and Operations, financial operations management is an inseparable component of the overall business system, i.e., procurement, supply chain, projects, and HR.

Note: In the Canadian market, the capabilities are not only used by organizations to keep the books but also to facilitate growth, regulations, and operations across borders.

Now let’s understand why investing in strong financial operations matters, especially in Canada.

Why It is Important

Understanding the significance of the financial order of operations Canada assists you in comprehending the reason why companies focus on upgrading their systems and processes.

Here’s why sound financial operations matter:

Operational Efficiency: The streamlined finance processes minimize the amount of manual effort and errors, shorten close cycles, and release the resources to work on strategic activities.

Cost Control & Profitability: There is improved transparency on cash flows, budgets, payments to vendors, and collection of AR that helps in controlling costs and enhancing margins.

Compliance & Risk Reduction: In Canada, regulatory and tax compliance is complicated (federal and provincial). Strong controls minimize the threat of penalties or audit results.

Strategic decisions: It can be based on the information on financial activities and will be used to forecast, plan, make investments, and grow the business.

Scalability and Growth: As the companies in Canada expand (nationally or internationally), a robust backbone in finance operations allows scaling without a corresponding increase in the cost and risk.

Competitive Advantage: Firms leveraging digital finance operations (automation, analytics) can react faster to changes in the market and price adjustments and integrate finance with operations and supply chain.

Although these advantages are clear, businesses have several issues in developing or improving their financial activities in the Canadian market.

Challenges 

Here are some of the major challenges:

Legacy Systems and Manual Processes: Most finance departments are still using spreadsheets or disintegrated systems, which contribute to more errors, redundancy, and delays.

Integration and Data Silos: Finance can be separated out of operations, supply chain, and other functions, which hinders cohesive visibility.

Complicated Regulatory Environment in Canada: It is a compound of taxation jurisdictions, dissimilar standards of reporting, and local demands and adds complexity to operations and software regulation.

Change Management and Skill Gaps: The shift to the new modern finance operation implies that transitioning to new technologies and workflows and, very often, a more intense emphasis on analytics and less on the transactional work will be required.

Finance and ROI Considerations: ERPs like D365 Finance and Operations can be expensive and require resources; that’s why companies might not be able to afford the initial investment without an understanding of beneficial results.

Data Quality & Governance: No analytics can be trusted without data quality; bad governance will lead to false conclusions because of automation.

Note: For Canadian businesses, these challenges are likely to be resolved by engaging the services of a qualified ERP vendor, who will be aware of the local regulations, industry standards, and best practices to conduct the finance order of operations.

Conclusion

Any Canadian business that wants to be stable, grow, and gain a competitive advantage is built based on strong and effective financial operations. Managing cash and reporting to make insights and compliance possible are financial activities that are directly connected to what your company can do. It is possible to invest in a modern platform like D365 Finance or D365 Finance and Operations, which bridges the gap between finance and operations, automates more, provides data-driven insights, and sets you up for the future.

If you need some professional advice on how to implement or streamline your finance business in the Canadian market, consider partnering with Dynamics Square. Our certified team assists you in evaluating your current state, choosing the most appropriate solution, and applying best practices, as well as ensuring that you achieve measurable outcomes.

Contact us by calling +1 778 381 5388, or you can also email us at info@dynamicssquare.ca, and let's build financial operations that work smarter, not harder.

People Also Ask: 

What is an example of operational finance?

Operational finance (also known as ops finance) is an application that involves the use of financial principles for business operations.

For example, a manufacturing firm predicts its cash flow, monitors the payment to vendors and the collection from customers, and uses this information to determine whether to purchase new equipment or not.

What is the difference between finance and financial operations?

Strategic areas that are usually dealt with in finance. It includes capital investment, funding structure, and long-term planning. In contrast, financial operations are concerned with day-to-day implementation of financial and accounting processes. It involves transaction processing, accounts receivable/payable, ledger maintenance, reporting, and controls.

What comes under financial operations?

Financial operations include:

• Managing transaction flows
• Accounts Receivable (A/R) and Accounts Payable (A/P) processing
• Cash and liquidity management
• Financial reporting and reconciliation
• Compliance and controls