Best-Run Finance – What are the Key Factors?
Finance is no longer an island – as a matter of fact, Finance organizations are becoming the glue that holds together a consolidated, consistent view of all the departments in an organization.
The advent of the Sarbanes-Oxley Act in the U.S., and, more recently, IFRS, has focused enormous attention on the financial accountability and internal controls of companies across all industries. In response, company executives recognize that individual business activities do not occur in a vacuum, as they all have a bottom-line impact.
Increasingly, companies are drawing their finance organizations into greater collaboration with the operational aspects of the enterprise – including sales, marketing, manufacturing, service, even human resources – and are asking their financial officers to take on a more prominent role in defining strategy across the enterprise.
What do companies with successful finance functions have in common? Benchmarking studies have shown that they are:
- They are agile. Companies need to be able to turn on a dime, to continue to gain efficiencies and to react quickly to changing regulations. Centralizing and automating transactional processes through shared services, and implementing centralized compliance procedures, allows best-run companies to react quickly to changes and remain compliant.
- They are connected. Integrated processes and systems allow finance to spend less time on collecting and manipulating data, and more time on analyzing the meaning of the available information. With closed-loop processes in place across departments, finance can forecast potential revenue, run what-if analysis, and develop contingency plans to manage costs.
- They are metric-driven. Successful companies measure the behavior that they wish to encourage. Measuring efficiencies in transactional processes such as closing the books results not only in cost savings – a faster close means having information more quickly to make informed decisions. Measuring effectiveness means taking market conditions into account, allowing finance to recommend new products and markets to pursue.
Ultimately, finance organizations must strike a balance between the tactical – generating and analyzing financial results – and the strategic – advising the enterprise on company direction and risk factors.