 By Nik Mohd Hasyudeen Yusoff
Most finance functions of enterprises provide accounting and financial management support as part of the overall operations of those enterprises. For small and medium enterprises, the significant portion of the tasks of the finance function revolve around financial reporting activities to comply with the requirements of the laws including submission of tax returns as well as day to day cash management activities. Some may be involve in decision support by providing information for the directors and management in making operating and strategic decisions. While directors and management could be comfortable with the present performance of their finance function, they should also review whether the present performance is adequate in order to face the ever changing business environment.
What are the additional areas in the finance function of your organisation which could be further enhanced and contribute more value to the overall business?
Beyond accounting and cash management, there are opportunities for the finance function to create additional value especially when there are encouraged and invited to be involved in the strategy formulation and implementation. Instead of just providing traditional financial performance report, further analysis of the information which has strategic implications would assist enterprises in enhancing their competitiveness, for example:
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Analysis in the reduction in profit margin in a market segment results in the management to consider focusing into higher margin segments and provide more marketing resources to strengthen the market position in the high margin segments;
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Impact study on the business due to the increase in fuel price enables the management to decide the strategic response and formulate action plans in mitigating the impacts as well as taking opportunities that come together with it;
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New ideas and proposals with high quality financial implication analysis would enable the directors and management to decide the options which provide better returns given the risk elements involved;
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The finance function could also be involved in the risk management initiative of the businesses to ensure risks are identified and mitigated as well as ensuring opportunities arre not left unattended.
If your businesses are not already getting value such as indicated in the examples above, how could you create more value from your finance functions?
There are few reasons why your finance function are not contributing these additional value at the moment. among those reasons are:
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There directors and management are not aware of the opportunities; therefore resources are not allocated towards the development of additional capabilities of the finance function;
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The skill sets available in the finance function may not be able to deliver the additional value proposition
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The finance function is focused on compliance activities and not much time and resources allocated to stategic areas;
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Further guidance and coaching are required to develop the talents available in the finance function before they are able to provide additional services in suppoting decision making and risk management
Having understood the opportunities and reasons behind why the potential value has yet to be unlocked from the finance function, directors and management should consider exploring the ways of getting more from the finance function that your presently have. This could be achieved by setting a clear expectation from the finance function, providing additional resources and supporting infrastructure, out-sourcing certain functions so that the people in the finance function could focus more on the value-adding activities and bring the finance function into your risk management framework.
Since now you are aware about the excitement and opportunities from having a more robust finance function, the next steps that you make would be very important. What would you do after reading this thoughts from Inovastra?
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