The Finance Function: A Business Growth Partner or Detractor?




Finance is increasingly taking an important role as the business partner. Thanks to digital and technology advancements, CFOs and their teams are now able to expand expectations beyond the traditional accounting and compliance functions. Routine finance and accounting activities are now automated thereby freeing up more time for finance executives to spend on strategic issues.

In high performing organizations, finance is collaborating more with the business and making a deeper impact on critical business decisions. Instead of taking the back seat, the function is playing a leading role supporting change initiatives and driving performance improvements.

Increased regulatory demands, competitive pressures, volatility, uncertainty and shifting customer behaviours are posing immense challenges on the day-to-day running of the business. In order to succeed and grow in this world, businesses must adapt to change and become forward-looking. Thus, managers and executives are calling on their finance executives to help shape the future of their companies.

With many expectations before them, it is no longer enough for finance to focus on scorekeeping and reporting the past. Finance must help business managers understand the current results, predict future performance based on different scenarios and provide insightful recommendations on how to run the business better and propel the business forward. Business managers are constantly looking for real-time information that will help them make informed decisions and finance can successfully act as the source of support.

Finance must embrace change.

Finance cannot continue to do things the same way repeatedly. To succeed in the current environment you need to change your processes, systems and periodically review your finance operating model and strategy. Many finance organizations are still reliant on legacy systems and outdated processes that are stifling the much needed innovation and growth.

Despite advanced developments in financial technologies, low performing organizations have not automated routine accounting and finance activities; these are still manual. These organizations are spending the majority of their time manually gathering, manipulating, consolidating and reporting historical performance. Budgeting and forecasting processes are also manual. Very little time is spend on performance analysis, risk analysis, strategy review and predicting the future. As a result, decision makers are lacking critical insights that drive robust decision-making processes.

Finance needs to embrace modern technologies, innovative and agile business models in order to improve the function’s effectiveness and efficiency. Strategies that have worked in the past will not automatically take you to the highest rank of success. Thus, as the business environment changes you also need to review and adjust your finance strategy. The finance strategy must be aligned with the business strategy of the organization. It doesn’t help for finance to do its own thing and the business to do theirs.

Finance must step up and prove its value

Although the expectations on finance to play a strategic role and improve business performance are high, the function must prove its value and that it deserves a seat around the table.

Making critical decisions such as which markets to play, improving the company’s product and service offerings, improving profitability and selecting mergers and acquisitions targets all require finance’s informational capabilities and analytical expertise. Finance must therefore understand the needs of the business and apply its expertise to those activities that are linked directly to the company’s success or failure in the marketplace.

The challenge for many finance leaders is that business managers are not completely trusting of the information provided by finance. When there is no trust in the source of information, it is difficult for the manager to act on that particular information. Finance must therefore collaborate more with business units to build and strengthen partnerships with their operational colleagues.

Rather than stand in the path of progress, finance must act as a navigator and help steer the business in the right direction. For instance, instead of blocking investment proposals and constantly saying NO to business managers, finance need to first understand competitive and environmental dynamics, model decisions under different scenarios, evaluate their financial impact and then explain to decision makers the revenue, cost and profit implications of their decisions.

If the decisions proposed by business unit managers and other executives have a negative financial impact, finance must be able to find and propose alternative opportunities to improve operational performance.

By continuously collaborating with the business and providing decision makers with actionable recommendations, finance will be offered a seat around the table.

Finance must become a trusted advisor and risk taker.

Good business decisions often depend on insights that emerge from good data analysis. Basing decisions on wrong assumptions and information often results in loses and devastating consequences for the business.

Thus, in order to become a trusted advisor finance must base its recommendations on facts and not gut feel. Finance must help the company get value from the data it currently owns. In today’s world of big data and analytics, organizations that are able to mine this data and find meaning will have an enormous advantage over those that do not.

Successfully executing a business growth strategy comes with both benefits and costs. Unfortunately, the majority of finance professionals are risk averse and fail to look at the bigger picture. Growing and succeeding in the current economic environment requires the business to develop a risk appetite and take calculated risks. Remember high risk, high returns.

However, this does not mean that all decisions should be taken lightly with no consideration of risk at all. Instead, finance should help articulate the company’s risk appetite to the business and ensure that all activities and investments undertaken are within the approved limit levels.

I welcome your thoughts and comments.

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