The finance function is an integral part of any business, and a good one provides a number of key benefits to an organization. They provide more for less, they streamline and cut transactional costs, they offer an effective control framework, and they are a vital aid to the firm’s decision making processes. Companies in the modern world face a number of challenges to achieving these, and go about doing so in several ways. We’ve looked at five elements that have proven to be the most effective among leaders in the field.
in the worst finance functions, waste is rampant. The best, on the other hand, are lean machines.
In order to achieve this, the PWC’s Unlocking Potential: Finance Effectiveness Benchmark Study 2013 found that firms were adopting a holistic approach and getting all parts of their business to pull towards the goals of the function.
The companies that succeed are those that plan carefully, gain a full understanding of what customers want, and focus their energy on meeting these needs. For example, will a customer read the full reports being produced for them, or is time better spent doing other things? The best planning processes are also often the simplest, and having an entire enterprise following that plan means it will be carried out far more effectively.
A lean finance function is far more agile than one encumbered by wastage. It helps a finance organization have the right amount of staff at the right location as and when they are needed, so they can be fluidly assigned to help meet the needs of customers and colleagues.
There is a growing disconnect between the skills firms are looking for in recruits and those being seen in graduates who are joining the working world. Talent is a key part of the finance function, with advances in data and technology requiring both employees who can develop it into real insights, and also adapt to a rapidly evolving environment.
There are a number of ways to achieve this. The best finance teams take a more long-sighted approach to recruitment, and invest heavily in staff development and practical on-the-job coaching. They employee standardized development plans that are linked to management goals, and thoroughly evaluate the skill set they are looking for. They then look to match this skill set both inside and outside of the finance function.
Manually generated spreadsheets are still a common site across finance functions, despite the plethora of highly effective platforms available. Many firms have also been left with multiple legacy systems, which effectively see crucial data siloed. Overcoming legacy systems is one of the main obstacles to bringing in technology which will create higher quality reports, and interfacing with siloed data means that employees spend far less time collecting data than analyzing it, reducing their productive output.
Investment in the best technology - likely to be some form of cloud technology in future years - and ready access to plentiful and reliable data are necessities for a decent finance function.
It is also vital that companies automate their key controls. The PWC’s study found that just 11% of key controls are automated in an average company, whereas this figure rose to 25% among the companies it ranked in the top quartile.
Emerging markets are something any good company should be looking towards as the world becomes ever more connected and globalization increases. To exploit the possibilities, businesses are moving away from structuring their finance function to cater for a specific location and implementing global ERP systems. Staff must also be appreciative of the different ways business is conducted from region to region, and the regulatory requirements in place.
The best companies adopt a vision that is shared across the entirety of the organization and then stick with it, rather than constantly embarking on constant reorganization. However, they do not stagnate within this vision. They constantly look for ways to improve their finance function and get all aspects of the business pulling in the same direction to stay ahead of the curve and make meaningful value-added changes as rapidly as possible. Consistency and repitition of core metrics is vital, as it allows for greater freedom to conduct in-depth analysis and find value-added insights. Whether it be by adopting the latest technology or being aware of changes to the recruitment market, a firm must be aware of any advantage it can exploit.