The world is changing, Business is changing – A new generation of leaders are changing how work is done, the rise of Big Data is providing leaders with more information than ever before and globalization has opened up a world of new opportunities. The business has changed, so has the role of Finance.
The role of finance now goes beyond just the numbers. It is now time for finance professionals to become strong business partners in order to formulate the strategy, communicate and lead it. Strategy, leadership and financial decision making all go hand-in-hand to create a long-term value creation for the business. So, all finance professionals buck up! It is time to take help from professional courses in finance and strategic leadership to go beyond numbers and become a strategic partner.
Let’s see in detail how finance can play a more integral role in the strategic planning and decision-making process:
- Reality Check
Managers of departmental units in an organization may be too optimistic about what they can achieve. This is where the finance professionals pitch in to assess whether the goals are actually realistic and attainable. If there are too much wildly optimistic goals set forth, it needs to be tempered down by allocating the right budget. Also, risk assessment is very important and it is only possible for the finance experts to determine the element of risk involved when formulating a plan.
- Pricing and Cost Decisions
When the business formulates the strategic plan of the business, it comes up with action plans that need to be executed to undertake specific steps or task. Important financial considerations like the allocation of resources to execute action plans can only be determined by the finance department. Wrong calculation of costs and major expenses, will put the company’s heath in financial jeopardy.
- Planning for Success
Business strategies are formulated to attain the specific objectives set out by the organization. It goes without saying that one of the prime goals of the business is to increase sales. The finance team helps to forecast and predict the results of the strategies using various models. By doing this, they will work in collaboration with other teams to come up with the right forecast models and forecast profits.
- Implementing and Managing Strategies
The BSC or balanced scorecard is one of the most effective metrics for implementing and monitoring strategy execution. The finance team assesses the BSC to establish the overall alignment of strategy with expected business performance and it emphasizes the importance of establishing financial goals for employees, functional areas and business units.
- Analytical Support
Were the strategies implemented successful or do they need a revision? Again, here the finance team meticulously measures the success of strategies with profitability ratios, growth indices and other metrics of the business performance. These metrics are reported each month and their financial trend is also assessed to determine the success or failure of the particular strategy.
For instance, a metric that measures the number of click-through rates after posting Facebook Ads will help to decide whether placing the ads on Facebook is actually a successful strategy. It is the finance team that plays an important role to seek such metrics in order to examine the underlying reasons for the success or failure of a particular strategy.
A Vision for Finance
New capabilities in Finance enable it to be a powerful strategic partner than ever before by providing more insightful analysis into the underlying causes of the business performance. In fact, finance should lead the charge and be at the forefront of better business performance.
By creating and communicating information, decision-making capabilities and key performance indicators, finance are now poised to take an integral role to initiate and guide the implementation of business strategy. Here are the top strategic roles for Finance:
- Measurement of the performance of critical processes so that improvement or deterioration is visible and its underlying causes are clearly understood and communicated to relevant parties
- Redeploying capital from under-performing projects or activities that are not yielding an attractive return on investment to more lucrative opportunities
- Supply of proactive, relevant, time-sensitive and actionable information to business leaders in order to aid efficient decision making
- Forecasting and communicating changes in the market so that the business can position the company to exploit the opportunity or mitigate the risk
It is clear that the role of Finance has changed significantly from a traditional scorekeeper to one of a strategic leader. Today’s finance should be commercial beyond the numbers and use their abilities to help lead the business to a successful future. To learn more about how you can strengthen the strategic financial leadership of your business, register for financial courses online to stay at the top.