Medium-sized European companies have the ambition to grow, but many of these companies are being limited by financial processes incapable of accompanying that growth, according to a new study by Pleo on the evolution of companies in Europe.
According to Pleo’s latest Pulse Report, 91% of European companies are growing or plan to expand their business in the coming years. In Spain, this figure reaches 94%, the highest percentage of the markets analyzed among companies. However, this growth also generates concern, since 83% of these companies admit to being concerned about their ability to manage this expansion effectively, a concern that in Spain amounts to 89% of companies.
The data reveal an increasingly present tension in the European business fabric, especially between companies, and that while organizations maintain a strong ambition for growth, many companies find it difficult to manage the growing operational complexity that this entails.
Growth is generating a “control tax”
As companies grow, finance teams at these companies increasingly face what Pleo calls a “control tax,” which translates into greater operational complexity resulting from international expansion, more manual oversight processes, data scattered across multiple systems, and less time available to dedicate to high-value strategic tasks across businesses.
Complexity intensifies especially in the international expansion processes of companies. According to the study, 64% of growing companies consider that operating in several markets is essential to continue expanding. However, 72% of these companies point out that managing activity in different European countries involves dealing with complex regulations, processes and requirements, while 65% say that entering a new market can be as demanding as starting a company from the beginning. Among financial managers of Spanish companies, this perception is even more pronounced, since 71% affirm that expanding internationally is like launching a new company from scratch, compared to 53% in Germany.
It is precisely the financial teams who are bearing most of this pressure within companies. More than two-thirds of expanding companies (69%) recognize that growth requires them to find an increasingly difficult balance between driving business and maintaining control over operations. This tension is especially intense in Spain, where 82% of expanding companies consider that there is a dilemma between growing and maintaining control of the business, compared to 54% registered in Germany.
Additionally, 72% say scaling increases companies’ financial complexity, while 65% say maintaining visibility and control of finances becomes more complicated as companies grow.
Financial systems are not prepared to accompany growth
At the same time, many companies are trying to face a new phase of growth with financial systems that were not designed to accompany these companies in that process. More than half of expanding companies (52%) say that their business is growing faster than their financial tools can manage and, in Spain, this percentage reaches 49% among companies. Furthermore, almost one in two companies (48%) acknowledge having experienced failures or limitations in their financial systems as a result of the pressure generated by business growth.
Manual supervision continues to be another of the major obstacles for companies, as half of the financial managers consulted assure that their current ecosystem of tools requires too much manual intervention to function correctly in companies, while 38% consider that their financial technology will not be able to sustain the next phase of the company’s growth. In Spain, 34% of company financial managers consider that their current technological ecosystem will not be able to support the next phase of growth. Despite this, 21% of companies continue to manage corporate expenses primarily through traditional spreadsheets.
The results of the study point to an increasingly widespread problem among expanding companies, which translates into increasingly reactive, fragmented and difficult to control financial operations in companies. The lack of integration between systems seems to be one of the factors that most contribute to this situation in companies. In fact, 38% of Spanish financial managers say that the disconnection between tools generates an excessive administrative burden for their teams within companies.
The strategy is buried under administrative tasks
The results show that increasing operational complexity is displacing the strategic work of financial teams in companies. On average, finance professionals spend 19% of their time on administrative tasks within companies, such as manually cleaning data, processing information or preparing reports. On the other hand, only 16% of their day is allocated to strategic activities aimed at business growth and decision making.
The data suggests that companies’ financial managers are getting caught up in the day-to-day management of the business. More than half (56%) say they have not had a single full day without interruptions in the last month to dedicate themselves to strategic tasks in their companies. In Spain, this situation is even more serious: 60% of companies claim to have not had a single day free of interruptions for this type of work.
There is a growing problem among expanding companies: more reactive, fragmented and difficult to control financial operations
At the same time, 53% consider that their role in companies requires greater contribution in areas such as planning, growth or decision making, but acknowledge that they do not have the necessary time to do so. This situation has a direct impact on the use of talent in companies: only three in ten financial professionals (29%) feel that their knowledge and experience are fully used within the company. In Spain, this perception is even lower, since only 27% consider that their capabilities are fully used in companies.
Ultimately, in many companies, a number of important strategic tasks are being relegated to the background, including financial scenario development, innovation initiatives, market analysis and strategic modelling.
Companies need financial operations designed to grow
The study suggests that the answer is not simply to add more tools. On the contrary, companies need financial operations designed to grow at the same rate as the company itself and adapted to the real needs of companies.
Nearly half of growing businesses (48%) believe their current financial tools lack sufficient automation and artificial intelligence capabilities. Furthermore, 42% of these companies identify automated workflows as one of the most necessary and least present functionalities in their technological ecosystem.
Søren Lonning, CFO of Pleo, said: “European companies have the ambition to grow, but too many companies are still limited by financial operations that do not evolve at the same pace as the business.”
«To grow with confidence, companies need to have financial operations prepared from the beginning to accompany their expansion. This means having real-time visibility, smarter processes and better integration between tools in companies.
“Pleo is the expense management platform designed specifically for the way European companies close their accounts. While other companies continue to adapt to European finance, Pleo is already native, as we integrate with more financial tools than anyone else, supporting all types of companies.”
