The Role of Accounting in Strategic Decision-Making

Accounting plays an important role in helping organizations understand their financial performance and make informed business decisions. Accounting for decision-making gives finance leaders access to the financial data and insights they need to evaluate costs, manage risk, identify opportunities, and guide business strategy.

As finance teams take on a more strategic role within their organizations, accurate and timely accounting information becomes even more important. Continue reading to learn how organizations can improve their accounting processes to generate more useful financial insights.

Key takeaways

• Accounting helps aid decision-making by providing the financial reporting necessary to make critical business decisions.
• Improving accounting processes can help mitigate risk, improve data accuracy, and provide critical insights on-demand.
• The accounting shortage can lead to more human errors and strain internal resources, making it essential for CFOs to focus on retaining talent.
• Greater visibility, analytics, cloud-based technology, and automation can help finance teams access more accurate and timely data for decision-making.

How does accounting support strategic decision-making?

Accounting plays an important role in decision-making, as it provides essential business information and gives insight into an organization’s overall health. By leveraging accounting data, finance leaders can identify areas to manage costs, mitigate risks, or expand the business.

Accounting can support strategic decision making by:

• Providing accurate financial data
• Supporting financial planning and forecasting
• Identifying and managing financial risk
• Analyzing and controlling costs
• Measuring financial performance

Provide accurate financial data

Accurate financial data gives finance leaders a reliable foundation for evaluating business performance and making informed decisions. Accountants can provide CFOs, controllers, and other members of the C-suite with key accounting data. According to MineralTree’s 9th Annual State of AP Report, 17% of finance organizations are using automation specifically to gain data and insights for better decision-making.  

With complete and up-to-date information, leaders can better understand the organization’s current financial position, identify trends, and evaluate potential next steps.

Support financial planning and forecasting

Accountants can use current and historical data to create models to determine the risk factors related to inflation or the economy. These models can also help companies plan for changing business conditions, anticipate cash flow needs, improve efficiency, and compare the financial impact of business outcomes.

For example, Simple Mills uses MineralTree to uncover insights related to accounts payable. “We look at what could happen if we extend payment terms or ask for early-pay discounts with certain suppliers,” said Maddy McGannon, Simple Mills’ Controller. By leveraging their payment data, the company was able to drive business insights that had a positive impact on the bottom line.

Identify and manage financial risk

Accounting information can help finance teams identify and evaluate financial risks before they impact the business. By monitoring areas such as cash flow, liabilities, expenses, and payment activity, teams can identify potential issues and determine where additional controls may be necessary.

Accounting teams can also help organizations manage risks related fraud, foreign exchange risk, and compliance. Greater visibility into financial data gives leaders more information to consider when determining how to mitigate these risks.

Analyze and control costs

Accounting data can help finance leaders understand where money is being spent and identify opportunities to better manage costs. By analyzing expenses over time, teams can evaluate spending patterns, identify areas of unnecessary or increasing costs, and determine where changes could improve efficiency or profitability.

Payment data can provide additional insights into how to improve costs. For example, AP teams can analyze payment data to identify opportunities to optimize payment methods, including suppliers that may be good candidates for virtual card. Quartzy, a life science organization, leveraged MineralTree’s Virtual Card and was on track to earn $100,000 in rebates by the end of the year with this simple switch. By analyzing payment data and costs, finance teams can uncover opportunities to improve payment efficiency and generate greater financial value.

Measure financial performance

Accounting data allows organizations to track financial performance over time and evaluate whether the business is meeting its goals. KPIs related to revenue, expenses, cash flow, and profitability can provide a clearer view of the organization’s financial health and help leaders identify trends that may require attention.

Finance leaders can also compare results against budgets, forecasts, and previous periods to understand where performance differs from expectations. These insights can then inform decision-making regarding spending, resource allocation, growth opportunities, and other priorities in the coming quarter or year.

How to improve accounting processes for better decision-making

There are numerous steps teams can take to improve their current accounting processes. Improving these processes can help finance teams reduce errors, increase visibility into financial activity, and access the insights they need to make more informed business decisions.

• Reduce human error
• Improve visibility into financial data
• Retain and develop accounting talent
• Invest in accounting analytics
• Adopt cloud-based accounting technology
• Automate the end-to-end accounts payable process

Keep reading for a closer look into each step.

Reduce human error

Human error can drastically impact the data finance leaders use, leading to wrong decisions, challenges with vendors, and an erosion in shareholder trust. Manual processes such as data entry, invoice processing, and reconciliation can increase the risk of errors, particularly when finance teams are managing high volumes of financial information. For example, MineralTree’s State of AP Report found that automated invoice capture technology can code invoice data with up to 99% accuracy, significantly reducing errors associated with manual data entry.

Due to the accounting shortage, finance leaders need to be extra vigilant to ensure information remains accurate. Standardizing accounting processes and using technology to automate repetitive tasks can help reduce manual errors and improve data accuracy. Accurate data is key to driving strategy, so companies must invest in the right talent and tools to mitigate these.

Improve visibility into financial data

Many companies struggle to get real-time data due to the limitations of their tools, leading to inaccurate cash flow forecasts. Improving visibility into financial data gives finance teams a more current view of the organization’s financial position. 

With the right accounts payable software solution, your team can leverage real-time invoice data without waiting for it to have been paid and posted to the ERP. This level of transparency allows finance teams to get a more accurate view of their books. In fact, 64% of respondents in the 9th Annual State of AP Report cited increased visibility and transparency as a benefit of AP automation.

Retain and develop accounting talent

Skilled accounting professionals play an important role in maintaining accurate financial information and turning that data into insights that support business decisions. In 2024, 83% of senior leaders reported an accounting talent shortage, up from 70% just two years prior. As organizations look for accounting talent, finance leaders should focus on retaining experienced employees while creating opportunities for professional development.

Reducing time spent on repetitive, manual accounting tasks can allow employees to focus more of their attention on higher-value activities. For modern CFOs looking to retain and recruit finance talent, it’s important to create compelling career paths, offer flexible work arrangements, and incentivize employees.

Invest in accounting analytics

Better analytics tools result in better data for decision-makers to leverage. Rather than relying on manual spreadsheets to analyze information, AP analytics tools can help teams identify trends, monitor key metrics, and access important financial information.

For example, finance teams can use analytics to monitor metrics such as days payable outstanding (DPO) and AP aging to better understand payment activity and outstanding obligations. Greater access to these insights can help leaders evaluate their cash flow and identify potential issues.

Adopt cloud-based accounting technology

Cloud-based accounting technology can give finance teams centralized access to financial information, helping ensure team members are working from the same, up-to-date data. This visibility can make it easier to monitor financial activity and access the information needed to support timely decision-making.

Cloud-based accounts payable solutions also help ensure that all team members have access to the same information, no matter where they are located. These solutions help teams collaborate better across departments, in different offices, or from remote environments.

Automate the end-to-end AP process

End-to-end AP automation can help finance teams reduce manual work and improve visibility throughout the invoice and payment process. By automating tasks such as invoice capture, approvals, payment processing, and payment reconciliation, organizations can reduce the risk of human error while giving finance teams more consistent access to AP data.  The 9th Annual State of AP Report notes that four in five finance professionals believe their organizations need automation to operate more effectively.

With greater knowledge of invoices and payments, finance leaders can analyze payment activity, monitor outstanding obligations, and understand upcoming cash requirements. These insights can support more informed decisions around cash flow, working capital, and vendor payments.

Improve accounting and decision-making with AP automation

Accounting is key to driving business value since it can help manage risk and provide valuable data that leaders can leverage to deliver value across the organization. By reducing manual processes and improving visibility into invoice and payment data, AP and payment automation can give finance teams easier access to the financial insights they need to support decision-making.

MineralTree helps organizations automate accounts payable processes while improving visibility into invoices, payments, and AP data. Contact MineralTree to learn how AP and payment automation solutions can streamline your AP process. 

FAQs on accounting’s role for decision-making

1. What is the role of accounting in formulating strategy?

Accounting provides important data and insights into the financial health of an organization that leaders can use to guide business strategy. Financial information can help organizations evaluate performance, identify risks and opportunities, and assess the potential impact of strategic decisions.

2. How does a balance sheet aid in decision-making?

A balance sheet provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time. Accountants can use a balance sheet to determine the overall financial health of their companies and allows them to evaluate investments or expenses.

3. How do companies build an effective AP team during the accounting shortage?

CFOs can help build effective accounts payable teams by offering flexible work schedules, upskilling the current workforce, and creating enticing career paths. Organizations can leverage automation to reduce repetitive manual tasks, allowing AP professionals to focus more of their time on analysis and problem-solving.

4. What accounting information is used in decision-making?

Finance leaders can use information from income statements, balance sheets, and cash flow statements to support decision-making. This information provides insight into areas such as profitability, costs, assets and liabilities, and overall financial performance.

5. What is the difference between financial accounting and managerial accounting in decision-making?

Financial accounting focuses on reporting an organization’s financial performance and position through financial statements such as the income statement, balance sheet, and cash flow statement. Managerial accounting uses financial and operational information internally to support activities such as budgeting, forecasting, cost analysis, and strategic decision-making.