As the ﬁnance function and its senior accountants become more pivotal in their organisation’s success, their roles and responsibilities broaden, with more stakeholders to satisfy. Christian Doherty delves into who relies on a modern ﬁnance function – and what for.
Every ﬁnance team knows who the business’s customers are. They’re the ones who give their money in return for a product or service.
However, what about the ﬁnance team’s customers? Who does ﬁnance exist to serve, and how can it demonstrate its value to the business?
Traditionally the answer was straightforward: the ﬁnance team reports to the ﬁnance director, the FD reports to the CEO and that was that. Deliver the numbers to the board and Companies House, submit the tax returns and keep the directors out of jail – simple.
However, for more business owners the emphasis is now on how the FD and their team can partner with others to drive the business forward.
“Turning up at the board meeting with some numbers and leaving it at that just won’t cut it any more,” says Mark Masson, senior adviser at recruitment ﬁrm FD Recruit.
Expectations, he says, have changed, and trends have emerged to magnify the demands on ﬁnance to fulﬁll a broader remit.
“Some boards and companies are enlightened, and they see the FD as very much that broader operational commercial person,” Mr Masson reports. “Others are a bit restrictive, and therefore that aﬀects the role as well.”
Central to ﬁnance’s growing role is technology – new, scalable tools that breach the traditional barriers separating ﬁnance from the rest of the business.
“Generally, these systems can be totally integrated with all the other operational systems in the company, so in a way technology is pulling the FD into the other areas of business as well,” Mr Masson adds.
Walking the walk
Andrew Hicks, FD of software services business Advanced, is living proof that ﬁnance leaders and their teams must now serve a wider range of masters. As FD, Mr Hicks says the emphasis is increasingly on developing ‘soft power’ in order to magnify ﬁnance’s inﬂuence over the wider business.
“Thanks to new technology tools and the evolution of the role, it has put the FD more front-and-centre as the bridge between the investors and business,” he says. “But beyond that, it’s now about understanding what the operational drivers are, and then challenging the business to enhance performance.”
For Mr Hicks, as the FD of a private equity-backed business, the underlying ethos of the investors is to build a company with real value.
“That means they monitor performance through operational eﬃciency and also return on investment. In short, they see the ﬁnance function as the key to translate what’s happening in the business into those terms.”
In practice, that means using both technology – data visualisation, in particular – and his commercial savvy to help support his colleagues’ performance improvement. “My role is to help translate and create real carry-on for what drives the business, what the metrics are and how they link into the ﬁnancials, so that my colleagues can see what they’re doing in the business and what it contributes to the whole.”
Speaking the language
But what form does that process take?
For Mr Hicks, leaving the language of ﬁnance behind is the key. He gives the example of working with Advance’s chief technology oﬃcer.
“I’ve changed the conversation around the eﬀectiveness of defect-ﬁxing within the existing product range towards thinking through how much are we investing there, what return are we getting and why the defect production rate is creating ineﬃciency,” he says.
“I try to get to the point where we’re just discussing how the CTO is running his team, and then partnering with him on the eﬀectiveness measures that he wants to drive as part of putting together a high-performing team. My job then is to help him unlock those and ﬁnd the link between that and the ﬁnancial contribution. Ultimately, the key is being able to communicate in their language.”
A different approach
Charlie Walker runs Harmonic Finance, a recruitment consultancy working with a range of companies to ﬁnd the right people to help them grow, from junior staﬀ to CFO level.
In his experience, the recent trend towards the automation of ‘mop and bucket’ transactional accounting “has left ﬁnance with nowhere to hide, and now requires a diﬀerent way of thinking from the chief ﬁnancial oﬃcer: one that is geared towards taking well calculated investment risks”.
Recent Harmonic research among its clients has showed a recurring theme: the role of ﬁnance is increasingly encroaching on what before would have been considered the chief operating oﬃcer’s patch.
“And so because of that, customers require diﬀerent things. Finance people may be natural introverts, but soft skills are so much more important – inﬂuencing skills, emotional intelligence. So it’s less back-oﬃce and more strategic,” says Mr Walker. “And it’s also about using the new tools to help the business understand itself better.”
Increasingly, data – capturing it, managing it, analysing and turning it into insight – is now perhaps the most powerful tool in ﬁnance’s armoury. And that is especially true in SMEs.
The Harmonic survey showed that 92 per cent of respondents working in start-ups and scale-ups believed that the successful future ﬁnance leaders will prioritise data and analytics. Walker isn’t surprised. “But while that’s being led by lots of ﬁrms that are growing ‘digital ﬁrst’, and by non-digital native ﬁrms growing to understand the importance of data, it presents a problem for ﬁnance,” he explains.
A new breed of problem
“A lot of entrepreneurs 10 years ago came from a sales background or trading/front oﬃce. Now you’re getting people who are technologists, and what’s happening is that they are getting loads of data and are overwhelmed. They don’t know what to do with it. So they want a ﬁnance leader and team who can look at the data through the CFO prism and ask, ‘Will we make money from this?’,” says Mr Walker.
From talking to clients, he believes that the key priority for ﬁnance teams is to understand how to monetise that data.
“That is what will get them out of a pure ﬁnance focus and into more operational areas and inﬂuencing strategy,” he says. “We’re now seeing a change: ﬁnance teams who can interpret the data and deliver analysis that might have sat under the CTO within the ﬁnance team. And that also includes things such as IT, business intelligence and pricing – which ﬁve years ago was a COO remit.”
But how can ﬁnance, sometimes lampooned as the ‘sales prevention unit’ and traditionally seen as a blocker to growth, convince others in the business that they can support growth?
“They need to collaborate,” says Mr Walker, who believes that the core challenge for more compliance-oriented ﬁnance professionals will be developing a longer-term view of the business by understanding what the data is telling them.
“The pressure is clear: you’ve got all this information at your ﬁngertips, and you’re not just running [back oﬃce] – what do you want to do? You’re in the board meeting; what do you want us to do?”
Many of the institutes are catching up with this approach.
In the US, much of Stanford’s prestigious CFO course focuses on business strategy and inﬂuencing from beyond the CFO remit, while more and more ﬁnance professionals at the beginning of their careers are opting for MBA-style education.
“We’re seeing people who are more proactive and aggressive, doing courses at places such as CASS, Cranﬁeld and so on, to get up to speed on BI and data management,” Mr Walker reports. And that’s not to mention ﬁnancial controller level people taking courses to learn to code SQL, rather than relying on external developers or freelancers.
There is the danger that by expanding ﬁnance’s role into more areas of the business, and taking an active role across more functions, that authority can become diluted as ﬁnance is seen less as a gatekeeper and more as a facilitator.
“That’s where the judgement lies around being relatively disciplined about where you’re spending your time to get the optimal result,” says Andrew Hicks, who believes that for the next cohort of ﬁnance leaders, balancing compliance and strategy will be the foundation of a successful career. And that requires what Hicks calls commercial curiosity.
“Try and understand how the business operates – and why – and what value it is generating. CFOs tend to be analytical, so having that understanding of what drives value, and what the moving pieces are, is so important.”
Christian Doherty is a freelance journalist