This article explores the changes in Finance and how Finance can and should play an important role in shaping the business of an organization. Finance has often been mired in record keeping with little time or resource for strategic business planning. In recent years, compliance has forced Finance to spend more time and resource on record keeping (and new processes to perform record keeping), but now it is time for Finance to again be actively involved in the business. Finance is a service organization to the business and as such needs to provide the financial metrics for the business as well as understand the non-financial metrics that drive the business.
The changes brought forth by Sarbanes-Oxley have placed an inordinate amount of emphasis on accounting, processes and documentation. Accounting should not run a business, but rather support that business. Accounting is a foundation for driving the business, and a key component in the finance organization. Companies are in business to provide valuable products to their customers while generating value for the shareholders. By closely collaborating with the business units, Finance can contribute to core business activities, partnering to provide decision support to business managers and employees while ensuring compliance with regulatory standards. Finance needs to understand the business drivers for revenue and product costs, not just the numbers. In this respect, Finance becomes clearly aligned with the traditional product management function. It is the job of Product Management to determine what the product (or service) costs and how much the market will bear and if there is enough profit margin to meet the company's financial goals.
It is easy to see how Finance can be caught between a rock and a hard place, i.e., regulations (SOX, SEC, GAAP) on one hand and the stakeholders (investors, customers and employees) on the other. Compliance needs to support the business process, not hinder it. The same systems that have traditionally supported financial reporting can be enhanced to provide business metrics that enable proactive business management from Finance.
Systems have become an integral part of the finance organization, integrating accounting (mainly reporting of historical events) with sales, i.e. revenue generation and recording, and with financial planning. Today's enterprise systems are key to generating the business intelligence necessary to manage all aspects of a business entity. It is important to get all the parts of the organization to participate in any major systems implementations. Without some skin in the game parts of the company may not feel any responsibility to use the system once it is installed. And... this could result in unhappy employees who do not understand why they have to change. Be sure to engage everyone upfront, and ideally, identify key champions in each department to carry the flag. Clearly articulate the benefits they will receive (either directly or indirectly) from the new system and procedures. Remember change is tough but everyone needs to see the whole picture, not just their silo. The whole is greater than the sum of its parts.
In summary, if you are in Finance, remember you are a service provider and business partner with responsibility to work with all the key groups within your organization to drive the business to be successful. And... if you are not in Finance, remember that Finance provides a valuable service to assist you in performing your function. Finance is a valued partner to the business, more than a record keeper.