The finance team—whether led by a CFO, finance director, or other financial management position—plays a vital function in any growing business, but in many cases, companies are missing out on a crucial opportunity to utilize this team beyond its typical back office responsibilities of managing the day-to-day bookkeeping and generating regular financial reports.
Because of its in-depth knowledge of key financial metrics and numbers, the finance team is uniquely positioned to play an important role in helping to drive business strategy, assess risks, optimize operations, and enhance profits. Without the finance team looking after these aspects, growing companies can find themselves against some serious roadblocks, such as cash flow problems, costly inefficiencies, or stalled growth.
As a CEO or business owner, it’s important to develop a strategic relationship with your finance team. Here are some tips to ensure you’re optimizing the finance team’s role in your overall business plan:
Work with the right people
A top-notch finance team requires more than accounting qualifications. Knowing how to reconcile books and manage invoices are just one small part of what a great finance team can do for a company. In fact, top financial officers report that traditional accounting activities only make up a quarter of their primary responsibilities—the rest is dedicated to alignment, strategy, and operations.
A skilled finance team is one that keeps a close eye on the company’s business metrics and provides ongoing strategic advice that aligns finances with the overall growth plan and business objectives. When hiring your CFO or finance director, or when evaluating an outside financial consulting company, look for these key attributes:
- A strategic goal-oriented approach to finance beyond day-to-day back office tasks
- A solid understanding of your business type and what standard metrics are for the industry
- The ability to interpret real-time financial data and translate it to actionable insights
- Strong communication skills and the ability to work productively with other teams to implement strategic actions
Communicate clearly your goals and set expectations
One common mistake that business owners make is not clearly communicating the company’s goals, plans, and objectives to the finance team, then expecting the finance team to be able to provide insightful information in their reporting.
Finance teams should be a part of every business strategy conversation from the beginning, so that they best understand the overall direction that the company is going in, as well as any major plans that involve capital acquisition, inventory, purchasing, projections, and revenues, among others. By keeping the finance team in the loop, they will know exactly which numbers and metrics to focus on.
When meeting with your finance and management teams, lay out the expectations of what information you expect them to provide for you. Some questions to review might include:
- What are the future goals and objectives of this company?
- What kind of return are you expecting to see?
- What time period do these goals need to be met?
- What metrics are standard for our industry?
- What metrics will we be using in our company, and are we all in agreement?
- What reports will be part of every end-of-month close meeting?
Look backward, think forward
Effective companies utilize their finance teams to help them not only to analyze the past, but also to project the future. Great finance teams should be responsible for forecasting and assessing risks; their role as gatekeeper helps to ensure the company doesn’t find itself in unexpected financial troubles.
When reviewing short-term plans for your company, challenge your finance team to challenge the assumptions that other teams have made, whether that’s vetting purchasing plans to running sensitivity analysis on sales projections. As they can see what’s happening across all departments and teams, they are in a unique position to check for blind spots and raise concerns when something appears off.
When thinking long-term strategy, look to your finance team to provide the historical data and analysis needed to direct the way forward. Working toward your “Profit per X”? Your finance team can identify which metrics are working best for your company and offer suggestions for how to optimize those metrics, whether that’s cutting operational costs, increasing prices, or driving ancillary sales.
By empowering your finance team to become more tactical and strategic in their role, you create a foundation for your company to be more agile and responsive in the market, and you pave the way for accelerated growth.