Finance Offers More Than Just Crunching Numbers
When it comes to business strategy and decision-making, some managers are turning to a superior alternative to the crystal ball: finance business partnering. Many companies are looking to their internal finance and accounting staff to assist in company decisions.
David Ketchin in the journal, Accountancy Age, noted that a recent global survey of 900 CFOs found that 61% thought business partnering was a high priority.
By leveraging their unique position in a company and their technical expertise, finance is no longer just a service department where managers come for “the numbers.” Rather, finance is becoming a vital strategic partner. Finance business partnering means making finance an active participant in development, decision making, and forming strategy.
Colin Slade, CFO of Tektronix, climbed the accounting/finance ranks at Tektronix in the early 90’s. During that time, he realized that the accounting/finance team’s mission was missing a vital component.
Although his team focused on numerical accuracy and providing clear reports, Mr. Slade felt the finance department lacked a thorough understanding of the company’s strategy as well as how to help realize it.
By adding finance staff and adjusting finance’s role within the company, the finance team at Tektronix became an active participant in development, decision making and strategy of the organization. Business partnering at Tektronix is based on three pillars:
- Identify – understand business objective
- Innovate – create a solution to address needs and fill gaps
- Implement – champion the solution and get it done
For management, it is important to recognize the value added role that finance can play. If finance business partnering is not a part of your organization, consider finance’s unique role in the organization with its intimate ties across the entire company, its ability to be a voice of reason in decision making, and its ability to provide transparency to results and estimates.
“Finance influences the right decisions, to improve performance” says Paul Oldham, Senior VP and Treasurer of Tektronix.
Recently, a Tektronix business unit was considering a recall of a product due to a faulty component. The recall would have cost millions. Rather than just recall all of the units, the division’s manager asked its finance business partner to analyze the data on the faulty units.
Based on the finance partner’s analysis of the faulty units, the division was able to isolate the batch of units with problems and stop a full recall, saving the company millions of dollars. Tektronix finance business partners also successfully executed a separate project to improve operational gross margins. Gross margins increased to all time highs, significantly improving the bottom line.
According to Don Durfee at CFO Magazine, “[W]hile the cost of finance since the early 1990s has fallen…the proportion of time that finance employees spend advising the business has barely budged.” In other words, finance departments have become more efficient but they are not being fully utilized for organizational value creation.
According to Ken Smith, Accounting Professor at the Atkinson Graduate School of Management, “Business partnering requires trust, communication, and the appropriate work load to be successful. Accounting and Finance staff have the ability to serve as a value-adding business advisor, but rarely have the time due to processing requirements. It often takes a finance ‘champion’ and a willing CEO to bring about a culture such as found at Tektronix.”
Smith adds, “Smaller organizations often have an easier time establishing this relationship since the CFO works closely with most other managers. It is when organizations grow that managers often lose touch of the value from listening and including finance in problem-solving and strategy.”