How To Fix Your Basic Finance Function

The Finance Function is changing and has been doing so for a while. I've investigated what's beyond (not behind) all this change. Beyond the final frontier of Finance. To do that we need to start with the basics, though. The finance transformation for dummies you could say. The reason is that before you start to think about doing any of the interesting stuff like supporting the business and doing Big Data analysis you need to master the fundamentals such as AR/AP, book close, internal controls etc. And you need to master them at a lower cost than ever before. You can do outsourcing, offshoring and even automation. More importantly, though I've learned through recent offshoring projects that ensuring that one team/person has end-to-end (E2E) accountability for the processes is critical for success.

Don't look at me it was the service centre

When different teams are doing part of a process despite having clear handover points it's always difficult to find the root cause to a problem. It becomes too easy for anyone involved in the process to point fingers at someone else. So first thing first, when you want to fix your basic finance function, is clear roles and responsibilities, clear demarcation lines between teams and one person responsible for the process E2E. Once this is in place you can start to optimise the heck out of your basic finance processes and aim for a four-day top quartile performance in closing the books. Now it's time to start working on your data quality which might actually set you back a bit as highlighted by the same survey. For what good is a fast close if the data is garbage?

One set of numbers

First, you fix the data quality so you ensure that numbers used for management reporting cannot be challenged from a technical perspective. Then you ensure that there's only one way to get these numbers and that's from Finance. Too often it has happened that other functions bring their own numbers into a meeting and no conclusions are reached because you can't even agree on the baseline. Or how about the time you showed up at an important senior management meeting and the CCO looked at your slides and immediately pointed to a number that didn't seem right? Whether it was the system that didn't have the right number or you made a formula error in Excel, we've all seen this happen. If you can't get data quality or simple calculations to work then you've got no place sitting at the senior management table.

So in short, you need to do the following to fix your basic finance function.

1. Recognise that you need to deliver this service at the lowest possible cost, faster than ever before and at an even higher quality
2. Once you've outsourced, offshored or automated you need to ensure that there's still one responsible person for a given process and the execution of it
3. Own the numbers! Don't let other functions create their own numbers and make sure you eliminate all the small mistakes that lead to mistrust in the numbers

"I'm sorry our system doesn't have that capability"

Let's say you nailed all of the above and you can comfortably sit down at the table. You've fixed all the basics of finance and now the business starts asking for more. Quickly you realise that your old outdated systems don't have that capability. They might help you close the books fast and give you the correct numbers but advanced analytics, fancy graphics, and fast working data cubes are all out of reach. In fact, you might have been allowed to sit down at the table but you'll quickly be thrown out again if you don't have more to bring than the latest monthly P&L and balance sheet. Fixing the basic finance function is merely the ante that will get you in the game, however, we all know that all the players before you won't fold so you will need to do something to play in the game. Next week we'll then try to explore what system capabilities you need in order to do 21st Century Finance.

What else is necessary to fix the basic finance function? Are you working with any systems today that you believe are cutting edge then let me hear about them! And what else is going on in your finance function these days? Are you doing some interesting new developments or are you just trying to keep up with everyone else? Like, comment and share also if you think this a stupid idea or if it’s already been done and what I’m doing is only stating the obvious.