The evolving role of the finance function means that managers need to be more strategic, technologically astute and data-focused as they go about their work. Robert Lovell looks at some of the tools of the trade.
In recent years mobile and cloud systems have introduced more flexibility and freedom, making it easier for finance chiefs to communicate better and get closer to their line-of-business colleagues, for example to work collaboratively on business cases, forecasts, and budgets.
And as elements of financial management, corporate governance and compliance have been passed to specialists or automated by software, FDs are spending more time guiding their organisations’ strategies. To be effective at this, they need the right systems in place.
Appropriate technology is crucial and should be viewed as an investment in the overall business and not just a cost drain that goes into maintaining legacy systems.
Drawing from case studies, interviews with CFOs/FDs and our own members, this article casts light on the some of the tools and techniques that have become essentials for the modern finance director.
Using a smartphone will let an FD spend more time meeting other people and “walking the business”, but still staying in touch with the finance team, KPIs and email.
Cloud and the trend towards bringing your own devices (BYOD) into work help them do this.
Alan Ferguson, chief financial officer at metals producer Lonmin, told AccountingWEB why he opted for the BlackBerry over an iPhone: “I’ve always had one and it’s now become essential. It’s not the most important thing in my life, but my job would be incredibly complicated without it.”
Vodafone’s Andy Halford also went with the BlackBerry because he “sends so many emails and prefers the keyboard” on a Blackberry to a touchscreen.
However he added that his favourite gadget was the iPad: “There’s so much you can use it for because the quality of the screen is so good. It’s a huge step forward.”
There hundreds of FD-friendly productivity apps on the market, so time invested in investigating the likes of Dropbox, Evernote and expense management apps would be well spent.
2. Web services
Because of the role it plays, it's natural for finance to lag behind sales, marketing and HR in the application of a new technology like cloud computing, but leaving aside the specialist functions finance carries out, there are still numerous options out there to support collaboration and communication within the team, including shared notebooks, online meeting spaces and document downloads.
These cloud services are all worth investigating, but look out for the options that are being tailored for the finance function, including:
- integrated ecommerce ordering
- online invoice finance services
- payment platforms
- co-operative buying exchanges.
Make it your business to find out what’s available, and how it could potentially work for you.
For example, Canford Audio recently expanded and developed its customer base, but struggled to capitalise on important “sales enhancing” information. The company came up a solution based on an integrated enterprise social networking (ESN) solution from m-hance. Canford wanted to link its sales, technical support, product management, marketing, design office and supply chain staff into its core back-office processes to improve collaboration and reduce inefficiency.
The m-hance Social Business module was integrated into Canford’s financial management system, enabling employees to interact and interact and knowledge-share spontaneously with relevant teams and other company departments.
3. Data analytics
As businesses realise the value of the data they hold, responsibility usually falls to the FD to ensure the data is accounted for and used effectively. Finance managers should put data strategies in place to extract maximum value from their data.
Data analytics is the discipline of interrogating that data to extract greater insights and deliver tangible improvements. AccountingWEB has an archive of articles and tutorials on the application of business intelligence. And even if you haven't got access to a specialist reporting and analysis suite, there's a lot you can do with Excel pivot tables and tools such as the PowerPivot add-in.
Drawing insights from the numbers within their business is one way FDs should look to produce a return on investment. We reported recently how some businesses go even further by putting a value on their data and including it on the balance sheet. Whether you adopt this approach or not, FDs should keep tabs on what data assets their business holds, and take a view on its current and future value.
Directors also need to be aware of the financial implications of data loss. FDs will need to take into account a variety of threats and pay attention to commercial impacts if data is lost.
4. KPI dashboards
Some of the cloud approaches mentioned already allow finance chiefs to reduce or even eliminate ad hoc reporting by giving colleagues and line managers the tools to do their own reporting. But the more data you present to someone, the lower the chances that they will read it or used it in decision making. Why not be more strategic about it and reduce the reporting workload for everybody by working with colleagues to identify the measures that really matter? Then the FD can construct simple web-based dashboards to cater for their main reporting needs.
The discipline of defining these KPIs and working out how to deliver them can also provide important new perspectives on the business. By focusing on only those measures that managers at different levels are able to influence, you and they can get new insights into what drives your business - and you will be in a better position to manage strategically if their KPIs align with yours. Have a look at our KPIs page for overviews and detailed tutorials on this subject.
5. Automated budgeting tools
Budgeting and forecasting can be the biggest drains on an FDs’ time and patience, particularly if they involve complex consolidations or extended negotiation with line managers.
Yet Vodafone CFO Andy Halford sees forecasting as crucial to commercial success: “The recession has made people realise that predicting the future is much more difficult than it used to be and therefore the accuracy of forward looking information is more important and powerful than it was before.
“Finance functions are going to have to work closely with businesses on forward looking data in future.”
Once you’ve experienced the immediacy and convenience of online planning and budgeting tools, you’ll never look back.
Advanced Business Solutions and other providers like them have developed innovative budgeting and forecasting systems. Shepway District Council, for example, managed to gain greater control over its budgets, and improve financial transparency by implementing Advanced’s financial management system, which includes a web-based Collaborative Planning tool.
Council accountant Leigh Hall said the online planning system gave an “instant, holistic view” of actuals, budgets and forecasts.
“The system has already increased productivity, with the monthly reports produced being viewed by the management team within 10 working days of month end,” she said.
Some pioneers in the software sector are even attempting to harness social media for this purpose, but AccountingWEB hasn’t seen much evidence of success yet.
It is very easy to become inward looking in finance , when the factors that will really affect your business may be taking shape elsewhere.
Good finance directors put themselves about to find out what’s happening out there. They regularly meet with peers and find out what’s affecting them, getting involved in industry bodies and software user groups to pick up on best practices.
For example, Sift chief executive and former KPMG accountant Ben Heald told AccountingWEB that he and his FD attend separate networking groups three times a year, where each time you present a challenge to the group and they then give you advice.
Heald explained the benefit: “Asking someone else for advice tends to make you learn about it and by presenting to someone else you formalise a view yourself.”
However, as a high-flying FTSE 100 CFO Lonmin’s Alan Ferguson took a slightly different view on networking habits: “I have limited time for this nowadays. The world has changed. There is still some of this that goes on, but nowhere near the extent it used to.”
But who knows, you may even turn up an opportunity for self advancement?
7. Professional expertise
If you are an ambitions finance manager and aren't up to speed on some of these techniques, use this article as a starting point. But you can’t do it all yourself or invent everything in-house. Recognise that other people may have been there and done it before you – and take advantage of their expertise. Developing your learning skills and theoretical reading can only take you so far and takes time.
Ultimately, if you need timely tax advice, or help with due diligence, you would be better off turning to a good accountant for help, or lawyers for professional property and M&A work, and depending on the field into which you want to move, consultants, marketers and the like – anyone who might give your firm an advantage in a short space of time.
What other essential tools and techniques do you think are required for the modern FD?
About Robert Lovell
Business and finance journalist