Optimizing a Finance Function
The following steps, once executed, will enhance the value of the finance function in any organization by ensuring that decision useful data is produced timely and accurately.
Focus on internal controls to ensure that data is accurate
Proper internal controls will help ensure that data is accurate. This is the most important, but also most neglected, aspect of financial management. Bad data leads to bad decisions.
Streamline accounting processes
The purpose of streamlining accounting processes is to minimize the number of times people need to “touch” data. Any time data is being keyed into spreadsheets indicates an opportunity to streamline. Identifying bottlenecks and accompanying solutions with a focus on automation is an important element of this step. The use of checklists, recurring journal entries and other “basics” will also contribute greatly to a more streamlined process.
Accelerate financial reports
Good internal controls will produce reliable data. A streamlined accounting process will make the data accessible on a timely basis. If you’ve got those steps nailed, it’s not a stretch to accelerate your financial reporting timeline.
Meaningful budgets and forecasts with accompanying analysis
Everyone needs a budget, right? Budgets are a roadmap to your business goals and, like using any map, you need to track your progress toward your intended goal. The budgeting process is very detailed and results in a detailed plan. Forecasts should be viewed as more frequent, higher level updates to the budget with comparisons to both the budget and prior year. Both should be accompanied by appropriate analysis.
Identification of key performance indicators to be measured and reported daily/weekly/monthly
Key performance indicators are the drivers of your business. This is information that you absolutely need to know to make business decisions. Each business has its own drivers and “hot buttons”. Some need to be reported daily so that business managers are making decisions with the best information possible. Others may be reported weekly or even monthly.
Analysis
Analysis is a great value added function. Proper analysis can answer current questions such as, “Why are margins declining when sales are up?” to “Should we enter into this new line of business?” Proper analysis is also essential to pricing decisions. For many businesses, a Price, Volume, Mix, Cost analysis is essential to understand the impact of these elements on margins.
Strategy
This is the ultimate goal. To have all preceding steps functioning smoothly so that time may be taken to formulate strategy and quantify the impact of strategic alternatives.