5 Principles for 21st Century Financial Management
It is good to see that fusty old accounting departments full of out-of-touch, brown-suited, socially challenged accountants are largely relics of the past. I am, however, surprised how many finance functions still fail to deliver up-to-date, relevant information, remaining stuck with many of the management practices of the last century.To help every organisation develop a finance function that is fit to support a modern business I have defined 5 principles for effective financial management in the 21st Century. These can be used as a challenge and benchmark for finance functions in every business, however big or small. Does yours measure up?
1. Be forward looking, engaged commercial business partners
Treat users of information as your customers.
Make sure that your staff understand the business that they work in.
Don't let yourself be taken for granted. Too many people in finance departments end up working crazy hours because they are under-funded or inefficient. This is not a sustainable or acceptable working practice!
2. Provide easy access to relevant & transparent management information.
Give management access to the information that they need to do their job. Don't hoard it.
Web technology makes it relatively straightforward to provide information wherever people are.
3. Deliver this information quickly in a way that is simple to understand.
As much information as possible should be real-time.
Month-end accounts should be available within 5 days of month-end, if not quicker. No excuses!
4. Information must be under-pinned by robust, efficient data processing & objective accounting procedures.
Accuracy is achieved largely by getting it right first time and focusing on a clean balance sheet. Make sure that it is regularly reconciled.
Don't play accounting games. These confuse people and distract the business from achieving its core goals.
5. Measure the impact of the finance function on business profit and cash-flow. Continuously improve how you achieve these.
Use kaizen methods to continuously improve the finance function's performance
Don't forget to reward innovation.
Actively seek feedback on the function's performance from its customers.
I cannot think of any reason why every finance function cannot apply these principles. Am I barking at the moon? Do you think that they are being applied well in your business? What have I missed? Please get in touch if you'd like to discuss.