Leading for Increased Strategic Impact
The Association of Financial Professionals (AFP) reports that CFOs expect their finance teams to double the amount of time they spend on strategic activities by 2020—a recommendation we fully support!
In Five Key Ways FP&A Should Be a Better Business Partner, the AFP notes the following five key ways in which finance can add strategic value to their organizations. These happen to be powerful inspiration points for leaders who want to help their companies achieve more through strategic budgeting.
1. Improving the forecast
The AFP article notes that finance leaders play a key role in ensuring an accurate financial forecast, which of course is critical to business success.
Getting an accurate forecast is challenging because many departments submit expense forecasts based on what their teams spent during the previous period rather than based on a reasoned analysis of what’s ahead. (And to be fair, information about the previous time period may or may not even be available, depending on your expense reporting cycle). It’s pretty hard to make proactive financial decisions when you’re using old data or still catching up on past spending.
Finance leaders can help improve their team’s forecast and budget by ensuring all team members have up-to-date spend information and by driving meaningful cross-functional conversation and collaboration throughout the budgeting process.
Achieve more: CenterCard tracks and categorizes current and committed expenses in real time, giving everyone the most up-to-date figures for more accurate forecasting.
2. Driving the right decisions
The AFP observes an important shift in focus for financial teams from tracking data to providing the right information to guide strategic decision making, and this feeds perfectly into strategic budgeting. Center’s VP of Finance and Accounting Jeff Drummond emphasizes that sufficient levels of control allow all employees to actively participate in strategic decision-making, instead of limiting the program to just a handful of people that management “trusts.” When you can redirect time and energy from piecing together information to discussing strategic priorities as a team, your business will benefit.
3. Creating a two-way flow
The AFP encourages finance leaders to ensure information is flowing in both directions. In addition to providing colleagues with helpful, up-to-date information, taking the time to truly understand each department’s needs and priorities supports a more proactive and strategic budgeting process. Our recent survey of more than 250 U.S. business owners and managers revealed that ongoing communication and budget updates was the top driver of overall budget effectiveness, for businesses of all sizes.
4. Making sure everyone is aligned around the strategy
The AFP encourages finance leaders to play a key role in proactively driving business performance through cross-department collaboration, and the budget is a highly visible opportunity to do just that. As our own Corporate Controller Brian Maslen likes to say, “Real-time data provides opportunities to course correct, but also to rationalize spend around the most productive areas.” It’s critical to keep each department budget aligned to the overall company strategy.
5. Allowing the business to anticipate the future
Finally, the AFP emphasizes that finance leaders play a key role in helping all departments, from marketing to HR, anticipate the future, and this is certainly true for budgeting. As Tony Levy of IBM Analytics Software puts it, “FP&A insight allows the business units to anticipate the future; that’s the value finance brings to the relationship with the business.” When you can connect revenue-related metrics like churn, lifetime value, and conversion rates to long-term financial performance, you can help clarify priorities and cultivate a more strategic view.
TO THE POINT:
Top finance leaders add significant strategic value to their organizations by improving the forecast, driving the right decisions, creating a two-way flow of information, driving alignment around the strategy, and helping the business to anticipate the future across departments. The budgeting process is a high-impact place to lead the shift to a more strategic approach.