A look at revenue trends for pharma and life science companies in the past decade shows an average drop in revenue growth. In 2011, average revenue growth in the industry was only around 5 percent, due in part to expiring patents, long development cycles, and decreased return on R&D. Some experts also point to an increasingly uncertain environment of regulatory compliance as an ongoing financial challenge for companies in the niche.1
Successful life sciences companies are finding ways to reduce costs and increase efficiency without impacting the quality of research, development, and implementation. Using technological advancements to effect financial transformation is one way to see results.
Challenges Specific to Life Sciences
In a world gone mad for regulation--especially when it comes to money--every company faces accounting challenges. Life science companies face the same challenges everyone else does with a few unique issues thrown in.
- R&D companies often rely on grants, which come with unique rules for reporting expenses, monitoring how funds are used, and claiming income on taxes. Grant money may need to be treated differently than income, which complicates accounting.
- Pharma and device companies that deal directly or indirectly with patients could fall under HIPAA compliance requirements.
- Today's customers expect complete-package customer service. It's no longer enough for medical providers to deliver great service--claims and billing processes must be transparent and efficient.
- All niches within the life sciences field are increasingly competitive. Companies need to concentrate technical resources on solutions and development rather than in-house financial management.
- Global markets expand the control--and the complexity--of every part of a company. Gathering data, maintaining records, and reporting within compliance standards becomes a fulltime job for life science companies with a global scope.
Enter Cloud-Based Financial Management
Luckily, expanding markets that cause complexity issues for companies also provide the solution for financial transformation. Cloud-based accounting programs and a la carte service providers mean life science companies don't have to spend time handling every aspect of accounting. Leveraging cloud-based tools, companies can choose to:
- Outsource all financial reporting to a consulting group, such as Huron Consulting, which has a dedicated life sciences division.
- Consult with experts to create cloud resources for in-house financial management.
- Purchase cloud-accounting packages that include software and data storage designed to meet specific life science needs.
Benefits of Cloud-Based Technology
Traditionally, companies design or purchase software to manage finances. The result is a large up-front cost and a product that must be updated or changed with each new evolution in the company or industry. Cloud-based technology is already evolving at a high rate, which means it's poised to keep up with the demands of your company.
Other benefits of cloud solutions include the ability to:
- Customize cost through packages. Companies like Accenture offer point-by-point solutions, subscription services, and both pay-by-use and pay-by-performance contracts.
- Leverage expert accountants who understand industry regulations, tax law, and daily management needs. Companies such as Elliott Davis offer quality assurance, tax reporting, and consulting services for businesses of all sizes.
- Leverage experts in your own organization. Cloud portals let experts across your organization collaborate on financial management. From administrative staff who enter data to corporate accountants who finalize reports, each person can concentrate on his or her area while communicating and integrating effectively with others.
- Bring big data under control. Data is one of the most important -- and most difficult -- aspects of managing any part of a life science organization. Reduce rework and labor expense by housing data on a cloud server. Leaders can see real-time changes, managers can approve or disprove expenses without tedious paper forms, and reporting can be pulled from databases rather than gathered from a myriad of hardcopy and individually saved forms. The result is more efficient reporting with a reduced error rate.
Specific Case Study
Across the globe, life science companies are using cloud-based services to manage various levels of financial processes. One pharmaceutical company was challenged by a low-efficiency PO and vendor data system. The company leveraged cloud software to create a virtualized process. Key on-site staff oversee the process, which is handled on the cloud. The result is a 70 percent reduction in cost and a 60 percent increase in discount capture.1
Regardless of niche, life science companies must adapt to survive. Using cloud services to reduce the cost of financial management while maintaining compliance is one way companies can reduce the bottom line without negatively impacting product or service development and delivery.
For more infromation on leveraging technology for financial transfromation, join us at the 10th Annual Life Sciences Accounting & Reporting Congress, March 17-19, 2014, Philadelphia, PA.
(Image courtesy of www.alainpicard.us)