Are finance teams giving businesses what they want?

Finance functions are being told to spend more time on strategy and technological transformation, and less on bookkeeping. So how is that working out?

In the departmental hierarchy of power within an organisation, the finance team is usually near the top.

Few other departments have the same overview of a company’s financial health, strategy and operations.

In the past decade, the role of finance functions in small, medium and large businesses has changed. Company boards and company owners are expecting finance directors and finance staff to give more advice on business strategy, more detailed and accurate financial forecasts and respond faster to changes in their markets and economic circumstances.

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Automation is enabling routine accounting transactions, such as expenses, transaction sampling and much of bookkeeping, to be done by software rather than a human. Of course, there is still a requirement for traditional accounting and financial skills – such as, budgeting, cash flow and monthly management accountants.

These core skills will probably become more important this year as businesses around the word try to deal with the economic repercussions of the global coronavirus (Covid-19) pandemic.

Are finance teams delivering what their boards need?

Amid so much change, uncertainty and technological changes, how are finance departments performing? Are they delivering what their boards need, now and for the long-term? What challenges do finance departments in small and large companies face? How can they overcome them?

Performance in small and large companies is mixed, according to research and experts.

In large companies, finance departments are generally well aware of boardroom expectations for more strategic advice, in-depth data analysis and “dynamic capital allocation”, and better forecasting.

Yet according to global research published last year by KPMG – “Future Ready Finance 2019” – many finance departments in large companies are struggling to meet new expectations from company boards.

Two of three senior finance and management executives in various industries questioned by KPMG, said that their finance departments had struggled to implement their “most forward-thinking priorities”.

Peter Luscombe, UK head of finance transformation at KPMG, says he can’t think of any finance function that has all the factors for being a leading finance function. It’s not all bad news for finance departments, though. According to KPMG, a small group of finance departments (in the top 16% of top-performing companies surveyed) are “thriving”.

The best-performing finance departments typically do things including “agile working” (which is often used for software development and project management), “predictive analysis” to guide business decisions and “dynamic capital allocation”, which balances investments in proven technology with riskier, newer technologies.

Research on the performance of finance functions in small businesses is hard to come by. Experts say that smaller finance functions often struggle to keep track of technology and pick software that can help them advise business owners on strategy, cut costs and make better forecasts.

“What I find boards increasingly require from finance heads and finance departments is a working knowledge of not just tech but the entire tech eco systems,” says Martin Bissett, founder of the Upward Spiral Partnership, a consultancy to accounting firms.

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How do you measure up?

Could you answer these questions in a board or management meeting?

  • Should the business should switch its accounting software to a different supplier, and what the benefits of doing so would be?
  • Could using receipt-scanning apps for expenses increase productivity and cut costs?
  • Could all the finance and  accounting apps talk to each other?

Bob Eastoe, finance director at Hypnos, a medium-sized bed manufacturer based in Buckinghamshire, South East England,  says finance teams have three main  expectations to meet:

  1. Comply with regulations such as the  General Data Protection Regulation and HMRC’s “Making Tax Digital”.
  2. Provide accurate and timely business information, automating transactions  where possible.
  3. Use technology such as business  intelligence to provide “insightful”  analysis of financial and corporate data.

“All of this points to an increasing melding  of finance, systems and behaviour changes for the finance function,” says Eastoe.

Challenges for finance teams in large and small organisations

Finance staff in smaller businesses, where there may only be a couple of people in the department, typically do more multitasking than those in large companies.

Perspective: Hayley Beckley

FMAAT, HLP Consulting

Hayley is a former finance director at recruitment company, Novo UK. She is now finance director at HLP Consulting, a recruitment company she co-founded.

“My previous job was in quite a small business,” says Beckley. “My role in the business was more like a sounding board. Making tough decisions, you have all the numbers and facts and you have to look at the whole view of what a person or department adds. People look at finance departments and accounting as having a black-and-white view of business decisions. But you need to be emotionally, strategically and commercially aware… not just the profit and loss account.”

Perspective: Jacqui Wills

MAAT, McGowan Investments

Jacqui has worked in the finance departments of small and large businesses. She’s currently finance manager at McGowan Investments, a property investment company in Northamptonshire.

Previously, she worked as a finance manager at DHL. She prefers the variety of work in the finance department of a small business.

“One moment you can be processing invoices and then you could be doing cash flow,” says Willis. “I deal with everything, including sales and payments.”

At DHL, she oversaw the accounts of a couple of the company’s large retail customers.

“That involved producing weekly figures for the management teams of the two retail customers to help them see if we were keeping up with our targets, such as profitability,” she says. “We did management accounts and budgeting. My work was more compartmentalised than now.”

But whatever the size of the business they are working in, finance staff are expected to spend more time thinking about the future and less time about the past. “Before it was a case of presenting historic information and walking away – now we’re expected to bring something to the table,” says Farha Jamadar FMAAT, a financial accounts manager at Todd Doors Ltd, an SME headquartered in Middlesex. “Finance teams are now seen as advisors and sources of information, especially for future planning.”

Five ways to improve the finance function

1. Develop tech knowledge

“Organisations like the Institute of Directors (IoD) and the Federation of Small Businesses (FSB) have great resources, but they are often under-utilised,” says Martin Bissett, founder of the Upward Spiral Partnership, a consultancy to accounting firms. “People tell me they haven’t got time to do these courses or learning.”

2. Learn some  basic coding

Finance staff should learn basic computer coding such as SQL and VBA (coding for Excel), says Patrick Caulfield, finance director at Arthur Online, a property management platform. There are plenty of affordable courses online. A basic understanding of coding, combined with data tools such as Google Data Studio, can help finance staff collate and analyse different types of accounting and customer data. For example, it could help you work out the cost of acquiring customers for your business, Caulfield says.

3. Improve communication and finance skills

Improving performance isn’t just about technology. According to a report published in 2019 by PwC – “Your finance function is ready for change. Are you?” – five of the six main ways to improve the performance of finance departments are about people rather than technology. For example, improving communication, collaboration, skills and job roles. The report advises companies to be creative when thinking about the type of finance staff they will need. Such as using “personas” to imagine new roles for finance. Do you need “problem solvers” with business acumen? Or “value drivers” that can look at trade-offs in a wide range of scenarios? Or “dreamers” who can visualise stories, innovate and experiment?

4. Ease the skills shortage

Many finance departments struggle to get the right staff because of a skills shortage of financial professionals in the UK. Research conducted by Robert Walters, totaljobs and Jobsite, surveyed almost 1,000 accounting and finance professionals in the UK to gain insight into key skills shortage trends and recruitment strategies to combat skills gaps. Finance departments are trying to lessen the skills shortage by hiring temporary staff, training junior staff so they can do more senior roles, and trying new methods of recruitment such as advertising on LinkedIn. “Businesses will need to be increasingly innovative with their employment offers, not only to meet rising salary expectations, but to differentiate from their competitors,” says Luke Higgs, associate director at recruiter, Robert Walters. “This includes the provision of enhanced career development packages, flexible working practices and increased role autonomy.”

5. Investor relations

Finance functions in start-ups can help explain the company’s value to business, says Caulfield. “That’s what I do at Arthur Online. Investors get inundated with people looking for investment, and what they need is someone to cut through that and show them what the business is worth. It’s definitely the role of someone senior in the finance department to do this.”

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.

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