6 traits of leading finance functions

6 traits of leading finance functions


By Samantha White

Over the past two years, regulatory changes, compliance changes, and the rising volume of data available have made the role of the finance function increasingly complex. Few organisations are able to harness the insights that could be generated from the data they hold, and getting the data into a usable, consistent format is a common challenge.

Many organisations are keen to update the finance function but have yet to identify a way to implement the new processes and technologies required to boost efficiency without disrupting day-to-day activities.

The objective for many finance teams is not to reduce headcount but rather to redeploy staff in more productive ways. The report’s authors predict that in the long term, new technologies such as blockchain and artificial intelligence (AI) will see the finance function expand because more will be expected of it.

A survey by SAP and Oxford Economics explored these themes with representatives of 1,500 companies around the world. Seventy-three per cent of respondents were CFOs.

Traits that make a finance leader

The researchers identified a cadre of 173 leaders (11.5% of the survey sample) where the finance function drives performance across the wider organisation. The researchers then studied their common characteristics.

The researchers found that six practices that set finance leaders apart also boost performance and efficiency, as well as the effectiveness of governance, risk, and compliance across the organisation.

The first two are fairly straightforward: At fast-growing companies, the finance function deals with core processes very effectively and drives strategic growth initiatives. Four other key traits set them apart. According to the report, effective finance departments:

Have a high profile around the business and influence in other areas. Finance chiefs are spending more time with internal clients, demonstrating the power of analysis that finance can provide, as well as how it can support strategy. In those companies whose revenues rose by more than 5% during the past year, 83% of respondents reported that their finance function’s influence and visibility have increased across the organisation.

Of that same group of high performers, 63% said finance exerts a strong influence over supply chain and procurement, and 70% said finance influences innovation and new product development, compared with 49% and 53% of respondents in companies experiencing lower revenue growth rates, respectively. 

Adopt technology to improve efficiency. Leaders are at least three times more likely than non-leaders to say technologies such as blockchain and AI are important to the finance function’s current success. As automation boosts efficiency, finance professionals are freed up to focus on value-added tasks.

Real-time analytics (used to drive strategic growth initiatives) was deemed critically important or very important to the finance function’s performance by 83% of leaders, compared with 45% of non-leaders.

Eighty per cent of leaders consider predictive analytics (used to improve organisational efficiency) to be highly important to the function’s success, compared with 37% of non-leaders. The internet of things is seen as a vital component of success by 66% of leaders, versus 31% of non-leaders.

Work closely with the governance, risk, and compliance team and excel at handling regulatory change. Regulatory and compliance changes were highlighted as an area of concern in the research, and 77% of respondents said that these have added complexity to the finance function in the past two years.

The report’s authors suggest that leaders encourage collaboration between the finance and risk management functions by ensuring they can easily share standardised data and reporting.

Collaborate with departments throughout the organisation. Collaboration is an essential ingredient in strong performance. Of the companies represented in the survey who had zero or negative revenue and profit growth, 46% said an isolated finance function prevents them from achieving their business goals.

In addition to working closely with traditional partner areas of the business, such as internal audit, risk management, compliance, and operations, leading finance functions collaborate with other areas such as marketing, sales, and customer service.

There is a big potential payoff for collaboration with these areas, the report suggests. This interaction may help explain why 40% of leaders reported market share growth over the past year, compared with 21% of non-leaders.

Tone from the top is an important contributor. At the fastest-growing companies, collaboration between finance and other business units was driven by the company’s senior leadership.

Samantha White (Samantha.White@aicpa-cima.com) is a CGMA Magazine senior editor.