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Business' best friend

Finance people must be the critical friend of business, writes CIMA's John Windle

BUSINESSES FACE an economic storm in 2012, thanks to the debt crisis in the eurozone, rising costs and weakening demand from consumers in the face of fiscal austerity.

Just as a storm at sea requires all hands on deck, so the current challenge means all members of the management team must pull their weight.

Nowhere is this more evident than in the increasing requirement for finance professionals to partner with senior management to create value, rather than be confined to the traditional accounting function.

Finance leaders and their teams are now seen as an essential resource to guide companies through the economic maelstrom.

In fact, this transformation is already well underway as it is a more long-term response to structural economic challenges such as globalisation, rather than simply a short-term response to crisis.

According to research by CIMA (Chartered Institute of Management Accountants), more than three-quarters of global finance and management professionals said their organisation is more likely to meet its goals when finance staff worked in a management support role.

This evolution is most clearly taking place in larger organisations and the challenge is to ensure all businesses are ready for closer collaboration between the finance and decision-making sides of the firm.

Rather than a restricted role in collating and reporting on financial data, finance professionals are expected to apply their expertise to provide insight, define and implement strategy across the business.

This raises several, interconnected issues. A shift by finance professionals to increase partnering and supporting management means traditional financial accounting and focus on cost and process efficiency must still be carried out.

Over time, however, many finance professionals will no longer be directly involved in details of tax, accounting and finance processing, but be liberated to help formulate long-term strategic vision.

One logical option is to take advantage of the opportunities of shared service centres and outsourcing so the retained finance function can devote more focus on collaborating with the rest of the organisation.

As a result, the company has a cadre of senior finance managers onshore, providing finance business partnering services with support from offshore colleagues.

This is quite a cultural change and will require a different set of skills from the traditional finance department. This, in turn, will affect training and recruitment programmes.

There is a growing demand for finance people who, in addition to core finance and accounting skills, can offer commercial insight and strategic thinking combined with leadership skills.

This skill set may not be in the existing finance team. It is therefore essential to put development and training strategies and plans in place and to ensure the recruitment process identifies candidates with the requisite skills.

Of course, some critics may worry that, by outsourcing a larger share of the finance tasks, the retained finance organisation becomes less skilled in the technical side of the business.

I think that is a wrong conclusion. There is a place for outsourced services and it must not just be a cost play, but a quality play as well.

Skilled management accountants acting as business partners can add the input that will provide the trigger for a shift in strategy that can bring huge value to a business.

The management accountant’s role is to bring scenarios to the table to see what the company’s options are and to stimulate a debate about what the outcome can be.

Their unique skills mean they can use financial data to give major insights on trends in behaviour, draw conclusions about the strategic implications and risks, and help put that into practice by collaborating on building a long-term sustainable plan.

However, there is one more challenge. Once these new finance business partners have used their analytical skills to highlight a future direction for the business, they need to be able to communicate this to the board.

This means they must be able to take the specialist knowledge that they have as finance professionals and explain it in a clear fashion to other decision makers.

For many, this will be a step into an unfamiliar world but is one that will become increasingly critical. Communication is important because number-crunching is increasingly no longer done by the accountant, but by computerised systems.

The key is to look at the numbers, identify the risks and what will drive the business, and be able to present that conclusion to senior management. It is all about being proactive rather than reactive.

Sometimes it also means being prepared to challenge senior managers and have the difficult conversations that may be necessary.

To challenge while acting as a partner is a delicate balance. They need the skill set to be the critical friend.

At some point, the economic crisis will recede and the economy will move towards growth. Companies will increasingly look for people who can make a change in the weather rather than just compile the forecast.

John Windle is chief financial and operating officer of the Chartered Institute of Management Accountants (CIMA)

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