Here’s How Finance Teams are Driving Business Priorities

Over the last few months, we’ve heard a lot about the finance team’s elevated role within organisations. Much of that commentary has rightly been focused on cash flow – taking stock of the resources in reserve, outstanding receivables and pending liabilities, then making estimates to help businesses adapt to the new reality.

These actions are still crucial. But as much as finance teams are critical to delivering working capital right now, the bigger picture is that they are fundamentally central to laying the foundations for recovery and growth.

This is being reflected in-industry. 45 percent of executives say the influence of the finance department has grown either slightly (26 percent) or substantially (19 percent) since December. This is down to the finance department’s role in getting companies back on their feet and keeping them there. But it’s also symptomatic of preparing for the long term.

Here are the three components that will ensure finance teams continue to influence at the top table.

Determine, and continually monitor, KPIs

Monitoring key performance indicators (KPIs) of priority processes is particularly important when dealing with economic uncertainty, as an organisation can’t manage what it can’t measure.

Finance professionals benefit from a company-wide view to be able to monitor KPIs. Monitoring needs to be in real-time, as standard monthly or weekly reports don’t provide early warnings to operational inefficiencies.

But as much as monitoring is vital, critical decisions need to be made regarding the most productive KPIs to measure, based on the organisation’s size, industry and workforce. In a Brainyard survey amongst executives, operating cash flow was identified as the top KPI that management teams want to see constantly updated, since this information will inform critical decisions.

Finance professionals should encourage the rest of the business, even more so than usual, to update them on changing customer needs and challenges, so they can anticipate risk, manage cash flow and adapt accordingly. It may also mean focusing sales and marketing teams around metrics that are related to delivering best-performing products and services to deliver cash to the business.

For other organisations, operational diligence might be a priority. During periods of growth, some level of inefficiency is tolerable, but when companies need to contain costs, it simply isn’t an option. Eliminating inefficiencies by redesigning sloppy processes and automating manual tasks, and setting clear delivery deadlines will set organisational expectations.

Use data to forecast multiple scenarios

Scenario planning and forecasting have been key to predicting ‘what if’ scenarios over recent months. What’s our cash runway based on X, Y or Z? How does working from home or returning to the office change our costs? The role of scenario planning has been elevated as it helps businesses deal with what the past few months have thrown at us. And looking forward to the traditional August – December budget season, scenario planning is taking on new significance.

Forecasting is hard even in normal times. Even so, finance leaders must build out a handful of scenarios that are grounded in reality and assume a wide range of outcomes. Every organisation must relook at its forecast for sales, expenses and cash flow and retest its assumptions. These scenarios should include modeling cash flow, burn rate and liquidity under multiple scenarios.

Adopting a shorter planning window is also key for continuity and recovery. Most businesses operate on a 12-month budget cycle and manage strategic plans with longer timeframes, but at this time, the focus must shift from long-term to immediate priorities. Using a 30 to 45-day window may allow a business to plan for immediate actions, whether relating to maintaining liquidity or payroll.

Once cash flow is under control, and budgeting is being carried out in real time, CFOs must accelerate forecasting work, using continually updated business information to strategically plan for every eventuality. Real-time analytics enable finance leaders to make fast decisions. It is about producing actionable insights built on historical trends, current conditions and likely scenarios so decision-makers can forecast what will happen next.

Empower the wider team

Leaders will look to their finance teams to deliver the tools and insights that will pave the way for short-term continuity and long-term success. With the right information, the business as a whole is empowered to focus on what matters most, and return to normal operations when conditions allow.

To continue on this path, a cultural shift is needed to embrace remote working as the norm. Just over a quarter (26 percent) of executives say they require most or all of the finance team to return to the office when possible. Clearly, a major part of the short and medium term is creating and sustaining high-performing virtual teams in an environment that supports the business. Beyond the obvious technological challenges of ensuring teams have access to the right information and systems to do their jobs, finance leaders must be prepared to evolve their management abilities.

When managed well, virtualising how and where people work could lead to improvements in productivity, as well as increased engagement. Finance leaders need to focus on removing the blockers that will enable them to put their best talent into helping solve their biggest issues, such as identifying opportunities for recurring revenue and how to get more relevant data into the hands of key stakeholders.

Businesses are beginning to rebuild and thrive again. This change has created a moment for innovation and opportunity with businesses identifying new skillsets, business models, and even new industries. Being able to evolve quickly and make fast, well-informed decisions will be key, and finance leaders and their teams will be at the heart of those strategic moves. And in the process, the finance function can create value and elevate its role as a business partner for the long term.