This is a continuation of last Thursday’s discussion on what Finance should stop doing and why. This post discusses what Finance should do from a holistic and restructuring perspective. Read the two articles in tandem for the most in-depth, overall insights. Here’s the link to the other article: http://theresourcefulceo.com/2016/11/six-uneffective-and-unproductive-activities-that-financeaccounting-does/ – TCW
Six Actions Finance Should Start Doing
1. Shift to Continuous Monitoring
Don’t just automatically automate. You need to think deeply about what your company wants to achieve and the best means for your company to achieve those objectives. Rethink the entire prospect of automation with a focus on generating and utilizing information daily and weekly.
2. Create driver-based rolling forecasts.
You make assumptions about how much revenue you will generate and how much you will spend based on market data and trends and past performance. However, the market does not always perform as expected and you find that your assumptions were somewhat off or completely erroneous. Using a static, inflexible budget makes it difficult to make the appropriate adjustments in real-time. But using rolling forecasts does the opposite. These allow you to make updates as frequent or infrequently as the assumptions change.
3. Leverage internal and external big data
Before there was all this messaging about “big data”, there was big data…just without the branding as such. You can experience information overload or not be able to tell what is important because there is so much of it. You need an appropriate receiver. This means you need people, software, or both that helps you identify patterns and trends or outliers that you can use to make changes in your business.
4. Engage in scenario planning
By engaging in scenario planning, you can improve your overall business operations and strengthen your company. This process identifies weaknesses and strengths. Thinking through various scenarios helps you to identify options and the actions to take. For example, if you need cash for a particular project or piece of equipment, you can get it from these particular providers.
Develop multiple scenarios, for example, revenue flow so freely, you barely spend any extra funds to generate that large number. Alternatively, sales shrink so significantly, you may need to consider bankruptcy. This process helps you to identify opportunities, threats and their causes. Look for leading indicators as those will help you hone in any issues or opportunities.
5. Potentially increase your ROI through cloud computing
You can access software and services that will help your financial and business operations through the cloud. These include financial software, CRM – customer relationship management – and more.
6. Make faster decisions with better visualizations.
By seeing your financial numbers and your management dashboard numbers in chart or other visual form, you can easily tell how you are doing. In addition, more people who don’t understand “the numbers” can readily determine what colors, lines, graphs are indicating, once the key/legend is explained. For example, most (except for the colorblind minority) can tell when a “good” green chart line is overtaken by a “bad” red chart line.
These are six actions that you can take to improve and strengthen your financial operations and your overall business. Start small! Trying to do too much too soon can sap morale and lead to overzealous and highly ineffective actions. Starting small can help you build support, momentum and success, which will give you and your finance and operations team the confidence needed to take bigger steps decisively.
Let us here at The Resourceful CEO help you improve your financial operations. We focus on restructuring and improving operations to generate more operational cash flow and build a stronger, higher value business. Contact us for a free consultation.