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Sep 3, 2021

HR and Finance: Finding Common Ground for Your Business Success

In most companies, HR and Finance are typically viewed as two opposite ends of the world. They seem to speak different languages: while HR understands the language of people, finance operates the language of numbers. They also focus on different aspects: HR values human capital, while finance cares about assets. The idea that the finance department is exclusively concerned with money and the HR department with people shapes the relationship between them.

As a result, it’s often challenging to maintain a healthy working relationship between the two departments. Across many organisations, conflicts related to the roles and objectives of HR and finance are quite common.

However, HR and finance can’t exist without each other. They need to closely collaborate for a business to be successful as they both have common or overlapping objectives. What is more, HR and finance heavily depend upon one another when it comes to implementing major organizational strategies.

How Far Apart Are HR and Finance?

For some historical reasons, HR and finance disagree on most budget decisions. Let’s take payroll. It looks obvious that it’s the responsibility of the financial department. Still, although payroll is a numbers game, any complications that might occur with it, call for the HR assistance. Plus, payroll is actually an employee-facing function. Not to mention, HR managers constantly deal with a range of key functions related to payroll, such as changes to salary, benefits administration, employee working hours, bonuses etc. 

Now, imagine that a mistake made by finance triggers a payroll problem. Who is going to get the angry calls and texts? Certainly, HR. So it would be fair that as the majority of payroll data is related to HR, human resources should assume some control over it. On the contrary, since payroll is a numbers game, finance seems to be better in handling payrolls, including strong internal controls and policies to eliminate financial risks and ensure the most efficient performance of audits of payroll financial data.

What about benefits? At present, finance and HR strongly disagree on who should manage employee benefits. However, the key goal remains the same: to provide the best possible benefits without interfering with the company’s income. It’s actually a complex task, and with their conflicting interests, it’s hard for HR and finance to achieve fruitful collaboration to attain this goal.

Collaboration Between HR and Finance

Basically, the human resources and finance departments strive for the same major goal: increasing the level of performance and profitability. Although both functions are different, there is overlap. Realizing where it occurs can be enormously helpful in making a finance and HR collaboration effective.

Today, HR managers are often assigned with responsibilities that were previously considered to belong to the financial departments. Likewise, HR managers have to estimate the cost and benefits of hiring new employees. Plus, they need to analyse how their approach to HR management affects the profitability of the business. It goes without saying that all of this requires data analysis and financial calculations.

On the other side, while looking for ways of increasing the company's profitability, finance managers need to go beyond viewing employees as costs. They have to evaluate how the profitability of the business can be affected by salary increments and bonuses.

As you see, the overlap is that a bad hire costs an organization time, energy and money. Therefore, developing workforce analytics that can be applied to estimate how key employee performance indicators can influence certain outcomes (for instance, increased or decreased turnover) enables businesses to make smarter decisions.In addition, an HR and finance collaboration can be used to obtain more remarkable workforce insights in identifying top performers, human capital forecasting, and minimizing turnover risk.

Benefits of Strong Relationship between HR and Finance

Without any doubt, a good relationship between the two teams can produce a beneficial effect on the overall performance of the company. For this, it’s imperative to establish open communication between departments to ensure that the ultimate objectives are met. In other words, businesses need to provide an environment for a smooth flow of data across departments, performance data in particular.

Also, in order to achieve best results by working together, HR and finance need to adjust their strategies so that they don’t interfere with each other. It’s crucial that each department accepts the contribution of the other one to the long-term success of the business. The professionals in HR need to recognise the value of sound financial decisions, while the finance department should admit that business greatly depends on employees.

How To Build a Strong Relationship Between HR and Finance for Your Business Success

So how to achieve a smooth workflow between the finance and human resources teams in this complicated world of benefits and expenses reconciliation?

Clearly define the roles of each department 

If finance and HR don’t have a clear picture of their roles and objectives, it might result in miscommunication and arising issues. HR's main roles include recruiting and retaining talent, benefits administration and employee compensation. Finance is responsible for controlling the financial resources of the business, calculating production and earnings data.

Assign representatives to meet on a regular basis

Although it might sound too straightforward, it really works. For a stronger relationship between the two teams, appoint a person from both finance and human resources to have regular meetings to discuss changes and needs. If the departments keep their finger on what is going on with the other on a regular basis, they will be able to provide timely assistance and relevant information for each other.

Take advantage of RPA

Finally, here comes technology. RPA (robotic process automation) may become your superhero if you want to achieve the absolute working harmony between the two departments. Actually, RPA is not anything of the cutting-edge stuff: companies already spend an average of $483 per employee each year on HR tech, and this trend is very likely to go on growing.

Recent Arthur J. Gallagher’s U.S.pulse survey showed that employers keep investing in HR technology, even in spite of the uncertainties fueled by the COVID-19 pandemic. What is more, 69% of employers who took part in the survey plan to expand their HR solutions by 2022. Employers are just starting to realize how applying RPA can bring the relationship between the departments to a new level, and help the financial and HR professionals find a common ground. And it goes without saying that when finance and HR can work together smoothly, your business will only get stronger.

To better understand why RPA is a reasonable solution, let’s take a look at something known as cost leakage. Sounds like a common enemy of the business as a whole, human resources, and finance, doesn’t it? Now, a bit of statistical data: according to the Integrated Benefits Institute, the U.S. business owners spend over $880 billion per year on healthcare premiums. Also, a number of employers say that they realize that a considerable cost is spent on dealing with premium invoices. What is more, the Aberdeen Group found that about 15% of billing from benefits carriers contain errors. It means that for instance, in an organization with 100 workers receiving benefits, billing errors might cost the business more than $100,000 a year.

Even if employers use manual or outdated reconciliation technology and get back the money lost due to billing errors, they still experience large amounts unavailable because of timing delays and mistakes in premium invoice processing. On the flip side, technology helps eliminate errors and save you time and money.Basically, RPA solutions imitate human interaction with web browsers and applications, which allows the technology to perform actions that users can carry out, be it withdrawing invoices from a website, downloading files, running reports, and even more. Plus, RPA platforms can process data and efficiently manage workflows from multiple environments that produce large amounts of benefits-related data and generate different sources of workflows. With RPA technology, you can streamline the following tasks:

  1. Downloading and analysing invoice data
  2. Spotting changes to data
  3. Detecting data that doesn’t match between platforms
  4. Finding variances and tracking to resolution
  5. Integrating carrier and HRIS connections in order to allow for coordination of key data flow through user interfaces.

The Bottom Line

All in all, without a strong working relationship between finance and HR, companies can suffer inefficiency, loss of employee morale, and decrease in customer satisfaction. For a successful business, it’s imperative that the two teams closely collaborate. Removing the barriers between the human resources and finance functions can reap multiple benefits for an organization. When there is a clear comprehension of each other's goals, and critical evaluation of their shared value in supporting the company’s strategic vision, the collaboration between the teams can be truly effective. And great news is that it's quite achievable thanks to RPA technology that helps to streamline everything from payroll processing to recruitment software to learning and development solutions.

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