Collaborative foundations a CFO should rely on

Over the past decade one of the key questions occupying the minds of chief financial officers has been how to shape the finance function to better support the business.

Primarily, this is recognition of deepening business complexity, with global operations driving a need for more effective insight and analysis from the finance department.

It is also a reflection of the desire for cost efficiencies and a wish for assurance that the regulatory and stewardship aspects of the organization are being handled effectively.

At the end of 2009 ACCA published its Accountants for Business report, a precursor to ACCA’s global 2010 theme of Accountants for Business, which considers the role of accountants across organizations as part of a new value agenda.

Finance was expected to be delivering much more effective insight to support the business because the decision-making environment was so treacherous.

The ability of finance to support the business, as outlined in the report, depends on a number of key issues. World class finance functions are better placed to deliver the organizations agenda primarily because their internal reputation is very strong.

This reputation is earned and not granted automatically by the business, so it is imperative that finance professionals and functions support the business in the most effective way and help the business drive value.

Strong finance leadership, effective IT and the alignment of finance strategy to the overall business were all cited by the report as the key differentiating characteristics of great finance functions. But above all else it is the quality of the people in finance that makes the real difference.

If skills , knowledge and capabilities of finance people are be leveraged in the right way the finance function becomes a valued partner to the business.

To tap into these qualities and to capitalize on these skills, the relationships that finance maintains across the business become very important. Maintaining and extending these relationships effectively should be a key strategic aim of the CFO and the finance function.

Relationships inside the business

Strong internal relationships help to extend finance expertise right across the business, and many finance functions have sought to systematically transfer financial understanding in this way.

It is sometimes referred to as building financial management capacity in the organization and is successful only if finance develops and maintains strong relationships and collaborate practices. The use of finance champions across the business is a common approach.

More specifically, the advent of ‘business partnering’ has been a key strategic aim of the finance function. This involves finance functions seeking to create value by aligning themselves more closely to the needs of the business, with shared objectives and support for improved decision - making.

In practice, the term covers myriad operating models. It can make strategic sense to embed finance talent in operating units, particularly where business operations are geographically dispersed or highly product - diversified. Supported by smaller centralized finance units driving a standard protocol across common processes such as reporting and investment appraisal, and an off shored or outsourced transaction processing function, the ‘retained’ finance function is typically more adept and more likely to drive value.

Challenges to overcome with the business partnering model include redesigning end-to-end processes, reviewing the skills and training needs of finance staff, and assessing the fitness for purpose of IT capabilities and decision support tools. Typically there are also significant implications for organizational design and roles, and the responsibilities of finance staff.

But good relationships help finance extend its remit, which goes hand in hand with greater influence. The perception of finance changes, so it is not seen simply as a back-office function crunching the numbers.

Instead, the finance function gets involved and leads on wider business initiatives such as change management programs, major projects, product development, and innovation and research. The astute CFO recognizes the critical influence of the finance function across the business.

Relationships matter, too, because sometimes the finance function has to initiate change programs that may trigger resistance.

For example, last year saw large cost reduction exercises across many businesses. Effective communication is key here.

In extending any relationship, it should be recognized that finance is not just an exporter of good practices across the business - it is an importer too.

The best finance functions recognize the contributions and added value that other departments can bring to how finance itself operates.

Consider, for example, the relationships between human resources and finance.

There is a natural alignment between the objectives of the two functions, both of which want recruit, develop and retain competent finance people in the organization.

Recognizing the specialized nature of finance operations, many HR departments have created business partnering roles specifically for finance, so that its needs can be better understood and delivered on. People capability is fundamental to the success of any finance function, so an effective working relationship between HR and finance is a business necessity.

Relationships outside the business

External relationships also matter. The range of stakeholders with a vested interest in the remit and activities of the finance function continues to grow, and, to many, the finance function is the face of the business.

In many ways, the CFO and the finance function are the guardians of the corporate brand, and the major interface between key stakeholders and the business.

The function has primary responsibility to the shareholders of the organization in ensuring that its financial matters are run with diligence and expertise, yet its influence and remit now extend well beyond this stakeholder group.

Finance continues to work with its traditional partners, such as tax authorities, auditors, Government regulators, the banks, investment authorities and pension advisers.

At the same time, finance’s remit is continuously expanding so that it comes into contact with other stakeholders such as corporate and social responsibility groups, property consultants and asset management groups, management consultancies, suppliers, customers, logistics partners and so on.

To fulfill these obligations effectively with all of the external stakeholders, good relationship management and the creation of a culture of trust and responsibility are key.

(ACCA)