12 Ways to Improve Your Finance Function
There has been a fair amount of comment in the press that UK firms have been poor at improving their productivity. Here are 12 ideas for what can you do to improve the productivity of your finance function:
1. Paint a picture of what good looks like If each member of your finance team has a clear picture in their head of what they are meant to be doing as they go about their daily work, they will make smart decisions. As a finance leader the more that you can do to:
improve your team’s understanding of what finance is there to do
what you would like it to become
what is important + what is not
the more productive your team will become.
2. Focus on what matters Most people can only focus on up to 3 things at a time , probably only one if they are trying to make a change. Most people find that there is always just too much to do. Part of the role of the leader is to sort the wheat from the chaff. Too much time in too many businesses is spent focusing on the wrong things. You should take time with your finance team & key stakeholders agreeing what the top 3 priorities are. Then ask your team to spend more time on these and less on other things.
3. Invest in good people Ok, it’s blindingly obvious but it’s also blindingly true. Invest in hiring good people! But don’t forget to keep investing in them once you have hired them. One of the reasons that we have productivity problems in the UK is that we don’t invest enough in training and development of our people. Unremitting support for development and coaching individuals is a must if you want good performance.
4. Make smart use of flexible resourcing around a core team You don’t have to pay for all of the people all of the time. With good quality, part-time, flexible resources available at every level of business, you can bring in specialist resources as you need them. This could be working with a part-time management accountant, book-keeper, outsourcing payroll processing, hiring a part-time finance director or analyst. The future of work is increased flexibility and part-time for most.
5. Speed up month-end reporting There is no reason that every business cannot close its month-end accounts in less than 5 days. Despite this, there are still plenty of organisations where management have to wait up to 3 weeks to receive information on the previous month’s performance. This delay not only hampers decision-making, it creates inefficiency in the finance team. Every day saved in month-end processing frees up the finance team to do other things. If you have not done so already, speed up! See here for more.
6. Scrap annual budgeting Annual budgeting is an increasingly discredited activity. It takes too long, ties up too many resources and leads to poor decisions made at the wrong time, causing frustration all round. Many businesses have got rid of the process with material benefits. See here for more.
7. Improve forecasting Scrapping annual budgeting does not mean that well-performing businesses do not take time to plan the future. On the contrary they try to get better at it on a more regular basis. Investing in regular rolling forecasts looking ahead 12 to 15 months, helps managers make good decisions and deal with changes in the external and internal business environment at the time they happen, not when the annual budget rolls around.
8. Create effective management information Good management information leads to good decisions. 3 common problems with management information in many businesses are:
there is too much of it = wasted information
what there is, looks awful
it is not dynamic, remaining the same each month although the needs of the business have changed.
If you want to improve, start with the monthly board pack, make it slim, engaging and dynamic. It should show trends in performance using pictures that give executives top-line information. If people want detail they can ask for it, or even better, be able to drill down through online queries. Contents should be looked at regularly (say, quarterly) and changed as management priorities shift.
9. Deploy relevant IT tools well Wake up!!! We are still in the middle of the digital revolution!!! Information technology is a fundamental tool of the finance function. You need to be all over it. There are a plethora of systems and packages available to record, analyse and forecast information. I have 3 tips for managing these:
Be familiar with the best accounting, forecasting and reporting tools for your type of business.
Implement what you use well: taking time to think about what you want to use it for and continuously improve its use.
Have great MS Excel skills: whatever systems you use, MS Excel is likely to be a key tool. Make sure that your team are great at it.
10. Adopt a policy of “good enough” Too often in finance we spend too much time getting to an exact answer when “close enough” will do and take half the time. This does not mean that the answer we give is wrong, it is "good enough" = materially correct. If "true and fair" is good enough for the annual accounts it's good enough for internal analysis.
11. Apply lean management techniques Many of you will be familiar with the concepts of lean management but have you tried applying these to your finance function? There is lots that you can do: from scrum working, to eliminating waste, encouraging innovation and continuous improvement. Applying lean management can revolutionise the productivity and effectiveness of your finance function.
12. Measure your productivity and effectiveness And finally, you should measure how the finance team are getting on. This should include measures of hard facts, such as:
numbers of transactions processed
speed of month-end reporting
error rates.
But should also include softer measures such as customer and staff satisfaction. The goal of the finance function is to be effective, measuring its productivity will help you find out if it is achieving this.
Bellevue Partners can help finance functions improve their performance. Please get in touch if you would like to find out how we can help you.