If you aren’t considering reliable, timely, and effective financial, operational and strategic information regularly in your business, you can’t be making data-driven, forward-looking decisions in a reasonable timeframe. The result of not doing these things? Pain, stress, and consultants’ fees.
It sounds blatantly obvious, and something you may not have been worried about, but how long does it take your Finance team to close-out the month-end and prepare the board pack?
For a lot of business leaders and board members we talk to, the answer is “I’m still waiting for a board pack, let alone insightful analysis…”, often:
1. Reporting is limited to historical data, which makes it difficult to assess progress and make decisions.
2. Generic monthly reports don’t focus on the key issues, which means it isn’t always clear if there’s a problem and what you should do about it.
3. The forecast, if it exists, is based on uncommercial/unrealistic assumptions, or doesn’t consider enough scenarios to triangulate a reasonably plausible outcome of the current strategic direction.
Like many areas of business, finance has become more complex, just consider the:
1. unparalleled level of uncertainty, coupled with increasing compliance
2. increased pressure on the finance team to move beyond compliance and take a more strategic focus, which may involve pulling data from non-financial sources
3. expectation that the finance team become more agile, whereas finance has historically been process driven
4. increasing prevalence of fraud as the world becomes more connected, less centralised, and fraud attempts become more sophisticated
5. lack of available, skilled labour in Australia, despite the requirement that the finance team be across most aspects of the business.
The list continues when the business is in distress. For instance, i) forecasting and reforecasting, ii) managing bank instigated investigative accountant reviews, iii) increased compliance and reporting via a deed of forbearance, iv) assisting a capital raise, v) driving asset sales, vi) managing cash flow and unhappy suppliers vii) chasing debtors, viii) managing data rooms for lawyers, consultants etc.… you get the picture!
Added to that Finance might be dealing directly (or indirectly) with some of the most important stakeholders – staff for payroll, customers for accounts receivable, investors, and the Bank – whilst supporting the business leaders.
The end result? Something usually breaks. So, consider the following points, which could make a difference:
1. It is usually possible to reduce the time it takes to produce monthly reports. It requires a combination of efficient processes, effective controls, and technology-enabled solutions. Proctor and Gamble, Ford and Coca Cola are reportedly all able to do it under 3 days. Closer to home, Rio Tinto, Telstra, and a few of the big banks have similar timeframes. It should be possible to reduce your monthly reporting time, and free up time for strategic analysis.
2. There is a plethora of forecasting software available today, which make forecasting affordable, reliable, and efficient. Many of them will link directly to your accounting software, and are relatively straight forward.
3. Establish a link (usually the CFO) between the Board and the Finance team to ensure the expectations and needs of the Board are known and can be balanced with what is feasible given the status of the Finance team, systems and processes available.
4. Increase the Finance team’s capacity by hiring or leveraging consultants. Hiring is cheaper but might be more difficult or risky. Consultants are expensive but usually come with strong skillsets, and fresh perspectives from trial and error on hundreds of other businesses, plus you can usually terminate them on short notice without any HR issues. The risk of not building capacity in the team is that your most talented, and usually most burnt out, finance team members leave, taking with them many years of corporate knowledge.
The outcome of building capacity, managing expectations, and improving reporting is that your Finance team can start to think strategically, pre-empt questions, and provide useful information for business leaders to make sure the ship is steering in the right direction… not drifting, or worse, slowly sinking.
Vantage Performance is a team of 25 people around Australia who help business leaders solve critical challenges and build stronger more resilient businesses. We work with businesses at any stage of the business life cycle to conquer the next insurmountable hurdle, whether it is lack of growth, stagnation, or decline. Our client list ranges from small not-for-profit community services to large publicly listed companies. Critical thinking and pragmatic problem solving is industry agnostic. If you have a business challenge and think you might need some help solving it, get in touch here.
