The Finance Organization As a Driver of Strategic Value

In this creativity age fueled by the digital revolution, the role of the finance organization has been magnified as never before.

The pressure points for almost all business organizations continue to be:

– Reduce enterprise cost base

– Make decisions faster

– Provide more transparency to internal and external stakeholders.

Finance organizations need to respond to these challenges by quickly transitioning from traditional functions such as:

Cycle time improvement for month end close and transaction processing

General Finance operations cost reduction

They need to embrace emerging new age strategic functions such as:

  • Analytical and executive decision support functions
  • Making data presentation actionable
  • Identifying operational savings and efficiencies
  • Portfolio management and resource allocation
  • Proactive enterprise risk management
  • Business partnership with the operational teams

The first challenge confronting any finance organization is to close the expectation gap with senior business decision makers.

Recent studies have indicated that there is a disconnect between what most finance organization perceive as their priority and what most senior business leaders perceive as the business priorities.

The difference between this two perceptions represents an expectation gap and this needs to be closed.

Specifically most finance organizations still view their role in light of traditional functions, while on the contrary business priorities are more aligned with the new age functions identified above.

The unfortunate reality is that a significant portion of these traditional finance functions are easily being automated, and in other instances being commoditized and outsourced.

Examples include functions like bank reconciliation which has virtually been eliminated by Electronic Bank Statements and Bank Monitor functionality in standard ERP systems.

Cash application is being replaced by receivables management and lockbox services by banks while accounts payable functions are being replaced by features such as Evaluated Receipt Settlements and EDI among other functions.

The silver lining here is the fact finance organizations comes to the table with a boatload of credibility and expertise. This is especially true in the areas of objectivity, access to information and foresight.

Finance is therefore in a pivotal position to leverage these capabilities for strategic partnership with the business. They can achieve this by focusing more on the new age function and industrializing the traditional functions.

At the risk of sounding like an alarmist, the reality is that an existential threat exists for the role of the finance organization as we know it today. To mitigate this threat, there needs to be a radical push towards adopting new age functions rapidly.

Competencies are gradually emerging to fill these void and are already morphing as professions.

Competencies like Enterprise Risk Management are now viewed as more strategic than the internal audit function. However, there is no reason why the current skills for internal audit cannot be easily supplemented to perform a more holistic enterprise risk management mandate.

Enterprise Portfolio Management and Resource Allocation is also another under represented competency. Whereas in reality, finance possesses a significant headstart in managing this function. This by order of impact to effort ratio represents the most critical area where finance can make an immediate and impactfull difference.

By already being involved in business case analyses and investment proposal approval, finance simply needs to learn the basics of portfolio management practice in order to institute a framework in this area.

Bridging the Transformation Gap

To bridge the transformation gap, finance needs to be very focused in gaining strategic insight by strongly developing skills and competencies in the following areas:

Forecast Accuracy
Competencies to define the origin and drivers of enterprise value and risk.
Strong interpersonal skills to convincingly communicate recommendations and effectively influence decisions
Personal Accountability

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