To remain successful and relevant to the business in today’s VUCA environment, Finance must move beyond the control and compliance status quo, become a better business partner, and provide insights that enable decision makers to allocate resources effectively and grow the business.
Become a better business partner
Finance Business Partnering (FBP) reaches far beyond number crunching and closing the books. Instead, FBP involves Finance taking a holistic view of the business and helping managers understand not just the financial results, but also the underlying causes, trends and drivers of those results.
CFOs should be able to identify, assess and address current and future conditions with long-term impact on the organization. In other words, they should be objective, proactive, analytical, and thinking beyond Finance, to be able to see the bigger picture and challenge existing assumptions. How can Finance successfully support the business to execute strategy?
In addition to understanding the business and developing forward-looking capabilities (through the use of rolling forecasts, driver-based planning and scenario modelling techniques), in order to become better business partners, CFOs should also improve their communication skills. They must be able to communicate the numbers in easy to understand terms. At the same time, they also must develop effective change management, interpersonal and leadership skills.
The above soft skills are key to bringing the desired results.
Successful finance transformation is about improving business performance as a whole, and not only about increasing process efficiency within the Finance function.
Finance teams should therefore engage with all business leaders on a continuous basis and focus on value-adding analysis to support better business decisions.
Improve the current operating model
As the role of the CFO continues to evolve from a number cruncher to a more strategic advisory role, the Finance operating model must also evolve. Strategies that have previously worked to deliver efficiency and drive growth will not do it today.
For instance, in the past many companies outsourced and offshored certain finance processes in order to shrink costs and support decreasing margins. However, new technologies are reversing this trend. There is a decline in outsourcing and offshoring trends, and a rise in inshoring.
Companies are realizing that by investing in advanced management and analytics technologies, they can automate and streamline processes that were once preferred candidates for outsourcing, increase efficiency and reduce costs.
These companies have also built Centres of Excellence and Shared Services Centres in order to increase efficiency.
You therefore need to perform an assessment of all dimensions of the your organization’s existing operating model (Organization, Processes, Controls, Technology, Data, Resources etc.) and evaluate if they are still relevant.
What are the forces disrupting and reshaping your current Finance operating model?
You also need to note the potential inter-dependencies between the various finance processes and activities as well as how they shape the overall value creation.
This will help you identify weaknesses in any processes, evaluate the impact on performance, and select smart ways to strengthen these processes, for example, through implementing new systems or upskilling and reskilling of current resources.
Thus, it is important to set out a clear vision and strategy for Finance and define key performance metrics that are aligned with business strategy.
Embrace new technologies
The gap between Finance and IT has significantly narrowed. Without IT, you cannot do Finance. New digital technologies are helping CFOs to shorten reporting cycles, improve forecast accuracy, better manage business risks, and speed up decision-making processes.
Innovation is no longer a nice to have, but an imperative. That’s why today’s CFOs are expected to be tech-savvy.
Digital technologies have the potential to transform Finance into a more agile, forward-looking and insight-driven function. Unfortunately, in many organizations, outdated legacy systems are limiting Finance’s ability to deliver value.
However, it is important to note that technology alone is not the answer. In order to achieve true digital transformation, you need to ensure that there are adequate support systems in place, from the right talent mix to the suitable operating model.
Although the number of digital tools out there is large, you need not invest in each tool on the market. Develop a clear digital strategy and choose the tool(s) that will help you positively change the way your business operates and deliver maximum results.
I welcome your thoughts and comments.