Co-authored with Ashley Waite
At EO, we meet on average 10-15 CFOs per month. The key recurring themes from my meetings tend to be centred on change management and how CFOs can drive these projects, whilst being transparent and more connected to the business.
We sat down with Ashley Waite, Finance and IT Transformation Director at NTT Data to co-author this article. Ashley believes that CFOs need to focus on three key interrelated elements: people, process and technology. He also talked about how this will enable CFOs and their teams to become better business partners.
Proactive CFOs look for new ways to improve back end operations and performance. Common areas targeted include:
- Reduce duplication and effort leading to more timely financial results
- Improve reliability, accuracy and transparency into financial results
To achieve sustained improvement organisations are realising the value in engaging strong finance professionals with expertise in business process mapping, re-engineering and transformation. Ashley refers to a finance activity "reconciliation of balance sheet accounts" to show how the correlation exists between these 3 elements: people, process and technology. Not having time to reconcile balance sheet accounts prior to month end close is often a poor excuse, however the impact can lead to significantly distorted profits and be misleading to the business.
To be a great business partner, finance professionals must be active in helping the business deliver against their KPIs. They need to share goals and metrics, be customer centric and help remove organisational barriers.
When KPIs are heavily weighted towards P&L targets and not so much on the balance sheet, finance teams become solely focused on managing the P&L. However, during increasingly uncertain economic times, Project and Commercial Managers should have performance obligations with KPIs linked to working capital balances. Further, there should not be any unexpected surprises hidden in the balance sheet that would be considered a financial impact to the P&L.
To design and implement an effective balance sheet reconciliation process across countries requires a finance transformation specialist who has the experience, foresight and motivations to drive the business forward. They should be a qualified accountant, with skills including but not limited to advanced Excel, controlling, financial accounting, multi-currency group reporting, relevant ERP and business intelligence (BI) tools, commercial awareness, change management and effective leadership.
Of course, finding finance professionals with this range of skills is not always easy. As a function, finance needs to consider exposing its employees to these types of experiences so that the organisation is nurturing finance professionals who are well equipped to cope with the modern demands on finance leadership.
Finance professionals would do well to learn from disciplined, data driven approaches like Six Sigma which are designed to help create the most efficient processes and this can be applied to the design of balance sheet reconciliations. Principles such as:
- Focusing on the customer
- Identifying and understanding how the work gets done (the value stream)
- Managing improvements and smoothing the process flow
- Removing non-value-added steps and waste
- Managing by fact and reducing variation
Once you have a methodology, you then need to break the balance sheet into two parts, grouping accounts that should be monitored and managed by the:
- Business e.g. revenue related working capital
- Finance department e.g. non-trade related
Organisations should design the balance sheet reconciliations to service three key requirements:
- Local Statutory
- Group Reporting
The design should be linked to a centralised technology solution (BI Tool). The benefits can then extend to off-shoring, forming part of Record to Report (R2R).
It is essential to differentiate the source accounting ledgers from a BI tool to enable us to better understand the business.
For example, balance sheet reconciliations validate the numbers in the source systems and the BI tool provides the analysis or information to business, region and group.
If the reported numbers in the balance sheet are not understood, then CFOs must consider the dangers of unforeseen P&L and cash flow impact. By having enough transparency within a BI tool will help mitigate these misstatements.
Having a good BI tool that has access to all data sources is imperative, as it will eliminate guesswork, get faster answers to your business questions and allow key business metric reports to be created when and where you need them.
So What Next?
Driving forward a change agenda is always a challenge within a business, and finance professionals should be a key facilitator of that process. Having the right people in the right seats can mean the difference between success and failure, so download our Talent Hiring Checklist and learn our tried and tested approach to sourcing the best finance talent.
About Ashley Waite
Ashley is a results driven qualified Accountant and Finance IT Transformation professional; certified in a number of qualifications including: Prince2 and Six Sigma. He is currently the Finance and IT Transformation Director at NTT Data, working as a change agent to deliver innovative, incisive and pragmatic solutions for financial, process, people and technological issues.