As experienced Group Financial Controllers and CFOs, we think it is…and bringing more people into the budgeting, planning and forecasting (BP&F) process will help you grow the position of finance.
In our recent whitepaper ‘The Changing Role of the Finance Team’ I talk about how collaboration and devolvement are a key factor in ensuring the future success of you, your team and the business. This article looks at this area in more detail.
By sharing responsibility, you add more value
Your team can add more value to your organisation when
- a) you’re involved in establishing strategy and
- b) you enable other departments, such as sales and marketing, to take part in the execution of that strategy.
In our experience, there are two benefits that derive from this;
- Responsibility is devolved taking the pressure off the finance team; and
- Increased accountability and responsibility within your organisation
In addition, becoming a better collaborative business partner gives the finance team the opportunity to work closely with other departments and move to the heart of the organisation. In terms of the BP&F process – rather than creating the numbers, the finance team involve the operational departments in the process and build the budget from the bottom-up.
Let’s start with the HAYNE BP&F Maturity Graph
To move to the far right of the maturity graph, the involvement of the whole organisation is a pre-requisite. We would expect contributions from all parts of the organisation; finance, sales, marketing, operations, HR etc. This includes participation in the process, subsequent ownership of the numbers and accountability for performance.
The cultural barrier
One of the challenges that I faced was how to involve other departments in the BP&F process. In some organisations departments were encouraged to participate, in others they were not. The ones which didn’t encourage collaboration often had a ‘top down’ mentality, derived from a historical culture. Having the wrong culture in the business can be a major barrier in delivering a best practice BP&F process. This can also be one of the hardest challenges to overcome. Resistance to change comes from the historical control that finance has exerted over the process, often to the point that the budget is imposed on the operating teams and is largely disconnected from day-to-day operational activity. They are understandably resistant to being held responsible for the budget and any negative performance against it. Worse still, finance can be seen as ‘policing’. Worst of all, when finance genuinely try to engage with the business to understand the drivers it can be perceived as ‘snooping’.
Today’s reality
In our experience, most organisations have at least a high financial budget model e.g. a P&L. The numbers in this are often underpinned by a spreadsheet model created by each department that contain the detail, often at a highly granular level; an example being an HR budget by member of staff. These spreadsheets ‘model’ the individual requirements of each department but are disconnected i.e. the HR budget spreadsheet changes but it does not automatically update the financial budget. In most cases the finance team do not have access or visibility of the underlying spreadsheets.
What needs to happen?
The fundamental goal of financial performance management (FPM) is to promote and improve corporate effectiveness. It is a continuous process where finance and other departments work together to plan, monitor and review corporate objectives or goals and contribution to the organisation. This can only be achieved if the BP&F process includes financial as well as operational changes to the organisation. Examples of financial changes would be FX variations and pricing (to an extent). Operational changes would include new products, product obsolescence, changes in stock management policy, the effects of major CAPEX, competitor behaviour, and other external influences. If this collaboration occurs then responsibility and accountability will naturally devolve to the business user, leaving the finance team to be elevated to a more strategic level.
To conclude
To enable you and your finance team to grow strategically and deliver key insights to help the business flourish – you need to be able to collaborate with other departments easily and effectively. Capturing more data from the business will provide you with more information, but by devolving and using technology to automate tasks it will give you the time you need to deliver real business insight.
Like this article? Then try…
‘The Changing Role of the Finance Team’
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