Unfortunately, in many SME’s the finance function is viewed as a cost that is required in order to ensure transactions are processed, cash is received, and all purchases and expenses are recorded and paid. It may also be responsible for the processing of wages and salaries. Additionally, there will be routine reporting and the filing of any necessary returns.
Such a view however, in failing to “value” the finance function, invariably results in the business as a whole, being considerably less valuable.
So what should the finance function be doing and how does this add value? The finance function should be taking a key strategic lead in the management of the business; establishing the aspirations and goals of the business and turning these into clear deliverable plans for action.
From forecasting tools it is possible to establish a view of what the future will look like if the plans are delivered but also, importantly, confirm other possible outcomes – better or worse.
However, such forecasts are not a once a year exercise but must be live tools that govern action in the business. Following the well know saying of “what gets measured get done”, actual performance needs to be regularly and routinely measured against plans. In this key performance indicators are established which inform decision making and aid the improvement of results. Empirical evidence repeatedly demonstrates how decision making based on systems of effective planning, measurement and monitoring consistently deliver significant performance improvement.
The view of seeing accounting activity as simply one of recording the past, like a match scorecard, does a disservice to the whole business but most importantly to the owners themselves who are failing to achieve the full value of their business from improved performance. An additional benefit to the owner ever planning a sale of their investment is that a business with a track record of financial forecasting and monitoring is more highly sought after and valued by investors.
Further articles on how the finance function can add value will cover:
If you would like to know more but don’t want to wait for the articles get in touch now.
Tony works closely with business owners to provide them with personal financial independence.
This is achieved by ensuring their business has a financial management function which provides…
Post articles and opinions on Professionals UK
to attract new clients and referrals. Feature in newsletters.
Join for free today and upload your articles for new contacts to read and enquire further.
