CEOs overloading their finance functions

2010

Chief executives are expecting far too much from their finance functions, more often than not because they have told them to focus on number crunching rather than giving them the tools and training to become more effective strategic partners.

Just a fifth of finance staff work in partnership roles within their business, a survey of FTSE-100 and FTSE-250 companies in the UK by accountancy firm PricewaterhouseCoopers has concluded.

At the same time more than half said they spent their days simply gathering data rather than analysing it.

Unsurprisingly, finance professionals have become increasingly relied upon by CEOs throughout the recession, with their role in managing the financial performance of the business, mitigating risk and ensuring the cost effectiveness of operations being seen, rightly, as absolutely central to survival in tough times.

In fact, nearly two thirds of the CEOs polled argued their finance function did, or should, play a leading role in the strategic planning process, in particular through supporting them.

Yet 80 per cent also said they felt dissatisfied with the level of management information they received and wanted more meaningful analysis and forward-looking data.

This was despite the fact that nearly half of all financial professionals had access only to one database for financial information, with fewer than a quarter having access to wider management information, multiple applications and databases.

Those companies where the finance function was working more effectively typically invested nearly a third more resources into analytical activities and, crucially, paid staff a quarter more than other organisations.

They were able to close and report their financial results much faster, on average within nine days as against 12 days for the average company.

The most effective finance functions had also addressed efficiency as part of their agenda, with nearly two thirds saying they had established shared service centres or consolidated some element of their transaction processing, so giving the in-house function more freedom to concentrate on analysis and strategic support.

Nick Jarman, partner in the finance effectiveness consulting practice at PricewaterhouseCoopers, said: "As operating models and competitive challenges continue to evolve, the findings from the study clearly show that both CEOs and finance professionals have some significant hurdles to overcome before the finance function truly becomes the effective strategic partner the business requires.

"If CEOs want their finance professionals to become more adept at providing insightful management information, they will need to invest in training and reward to ensure their finance function has the right skills and capabilities to perform the role required.

"In addition, standardising and simplifying processes, data and supporting technology to minimise the costs associated with gathering financial and non-financial information will clearly be a big step towards re-balancing the role of the finance function," he added.

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Older Comments

Rightly, CEOs have had to rely on finance functions in these tough times. This is due in part because finance professionals have high sense of responsibility and support and have proven that they are stronger strategic partners. Sadly, no further ivestment have been made in the finance function commensurate with the added responsibilities. i mean the same staff numbers, no systems, poor remuneration and limited access to non financial information. But this is the best opportunity for leaders of finance function to press for those investments now that finance contribution is highly needed. Analysis dont just happen. they are based on data gathered and so if finance is required to drive results, which we've proven to be capable of, then without additional staff, reliable data gathering, risk management, controls will be given less attention and this is far more dangerous than all the corporate scandals that have happened so far.

The traditional finance role needs to be maintained in the interest of investors. The additional requirements are welcome but they need not replace the core activities.

Matthew Mani Ghana West Africa