| Harnessing the finance function for 2020 |
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| Written by Adrie van der Luijt | |
| Friday, 25 April 2008 | |
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Page 2 of 2 Core value-added agenda To maintain its leadership position, by 2020 finance will have focused on four key activities in its core, value-added agenda. It has leveraged technology, standardised data, rigorously managed external relationships and developed its people. At the same time, finance has moved lower-value activities from business units to centres of excellence and shared service centres to reduce costs. Finance previously cut time and costs by embedding control frameworks in a single place – the IT system. To drive a high-performance business environment, finance could not rely on a proliferation of excel spreadsheets, multiple data sources and different data sets. Instead, finance has pushed for a consistent way of doing business, underpinned by a single data set. Finance has been responsible for driving a structured approach to management information demand management. Heightened financial transparency Finance is engaged with executives and managers in understanding the truly important business metrics to explain performance and drive action-orientated decision-making that can close potential gaps. The organisation is able to flag changes in the business environment early and explain their strategic objectives and resulting performance in a way that ensures the capital markets remain confident in the direction of the business performance. Finance and business operational models have ended up converging, while heightened financial transparency has made business performance open to external scrutiny. To help the organisation make timely decisions and maintain strategic advantage, finance is no longer consulted after the event but inputs into decisions as they are shaped. Risk implications Finance, as a function, has reinvented itself. 2020 finance leaders will need more than functional finance experience. Their primary role is to identify and drive value-enhancing opportunities that impact across the business. They understand the risk implications of their decisions in a dynamic business environment within an investment market that does not tolerate mistakes. Strong commercial and business understanding and great communications skills provide the “business partner” with a licence to operate. With a strong eye on the numbers, the finance professional of 2020 thinks and acts like a business entrepreneur. Proactively working with the business, they consider the internal and external business environment and identify potential opportunities and risks to the business. Throughout the decision-making process, finance must critically challenge the business to channel the most effective decisions that drive both long and short-term value creation. Once business decisions are made, finance must help manage the resulting change and ensure that anticipated value is realised. Global simplification and standardisation agenda Finance has needed to significantly increase its understanding of the business, to learn to use and interpret non-financial measures and to understand their impact on the financial performance of the organisation. Finance directors need to drive the global simplification and standardisation agenda in their business. There is a significant opportunity for finance and the business to benefit from global processes run on a standard suite of systems underpinned by a consistent data set. They should seek opportunities to fully automate existing shared service centre processes and drive the migration of lower value, mid-office activities to centres of excellence and shared service centres. Implementing information and planning systems, based on globally agreed performance drivers and simplify the provision of performance metrics, will enable the residual finance team to effectively support performance management across the business. Clearly articulated vision and strategy Reviewing the role of finance in driving business decision-making can help create a clear understanding of ways in which finance can add value across the organisation by supporting and challenging business decision-making. Rotations between finance and the business should be encouraged, to provide each part of the organisation with greater insight into their respective issues. A clearly articulated vision and strategy for finance can ensure that the finance community is committed to and aligned behind a set of common objectives that will support the internal customers’ needs. Finance executives who are able to make these changes to their organisation now will significantly increase their future competitive advantage. The journey to 2020 is about identifying opportunities to do this and making them a reality. Related articles
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