Blog of Strategic,General and Financial Management (English/Spanish)

Strategycorner is now expanding its content to include posts about General Management, Financial Management, Finance Transformation, Marketing and HR Management. Posts will be published in English or Spanish.

At the end of the blog there are different charts about Strategic Management in Spanish. In the archive area you could find a lot of posts about strategy and its execution in English/Spanish.

Jesús Peral
Executive MBA IE Business School, Madrid,Spain

Master in Strategic Management
IDE-CESEM Business School, Madrid, Spain

Find at the end of blog all charts related to Strategic Management topics commented in the posts

Mapa Estratégico Genérico/Strategy Map

Mapa Estratégico Genérico/Strategy Map
Mapa Estratégico Completo

Modelo de Dirección Estratégica/Strategic Management Model

Modelo de Dirección Estratégica/Strategic Management Model
Modelo desarrollado en las entradas 1 a 100. Ver archivo del blog
Búsqueda personalizada

domingo, 24 de mayo de 2015

Can finance department create value ? Yes, we can


Sometimes when a CFO takes charge of the finance department he/she is facing the boring task of being a simple tool for the company placed aside of the business and even to be considered the necessary bureaucracy to be run in parallel to the core business.

Although the above-mentioned scenario is changing very rapidly nowadays it is on the hands of the finance community to do a radical change and show that our department is really a profit center supporting the business potential.

In this post I intent to share some ideas which I consider are critical to cope with the so-called finance transformation.

Let me start with a simple statement:  which is more important “earn money” or “have money “?  Have money, no doubt.

We, as finance experts, know that earn money does not necessarily means we have money in the company. And when we decide to have it, we aim not to have money in excess (idle money) but having the minimum to run operations and get some additional debt capacity.

Within this process one of the most important goals would be to improve the image perceived from third parties about our performance to gain credibility. This would include our relationships with customers, suppliers, communication with internal customers, financial institutions etc.

A second goal is clearly to manage and reduce the finance charges and expenses. Here it is important to increase our negotiation power in front of our sources of funds, typically banks and other financial institutions. Create a balanced scorecard showing clearly our targets and measuring the deviations and achievements would be really helpful.

In terms of reducing administrative costs it is important to standardize and automate where possible finding areas of continuous improvements and being focused on what actually matters to support business and add value to the organization.

The finance team has to be motivated and proud to belong to this function. We need to foster mentoring and coaching and allow the reconciliation between our personal and professional life.

One aspect which normally is not taken into account is to determine our internal customer and how we need to manage our relationships. This is an important element for creating value. For example, we could help the sales function by offering alternatives to gain share of business in external customers. In other cases we can provide a quick valuation of the feasibility of a particular capital investment project. Receive a periodical feedback of our performance from our internal customers will allow us to find areas of improvement. Innovation is also a magical tool.

Too often, finance transformation initiatives either focus on creating efficiencies, for example, to reduce costs and remove non-core activities, or becoming more effective, for example, delivering more insightful analytics or providing better business intelligence. In my opinion, the effective and efficient are not mutually exclusive strategies.

Finally I would like to stress that transformation objectives have to be designed to achieve both efficient and effective results. While some initiatives will be focused on effectiveness and  others towards efficiency both should be balanced in order for the global finance function to be properly transformed and with the aim of the value creation. Many of the current successful transformation strategies focus on increasing the overall effectiveness of the finance function reducing simultaneously costs and complexity. But these efficiency driven objectives are often posed by reducing the headcount, which is an error in my honest view. To the contrary this should be balanced against the potential value creation opportunities that could be generated by those people, for example, managing better the processes and volume of data in the reporting periods and changing the focus from data gathering to the analysis of information.

No hay comentarios:

Publicar un comentario