In my career to date, I have had the opportunity to work for three small and medium-sized enterprises (SMEs). I was able to witness how these home-grown businesses were transformed into sizeable entities. 

These SMEs shared several common characteristics – a high level of entrepreneurial spirit, a clear vision and a competent and committed team of staff. Another common trait was the key role played by the finance department in the success of the business.

Many SME owners view supporting functions like finance as cost centres that add nothing to revenue, where any output simply increases operational costs. 

In fact, there are a number of ways in which the finance department and finance professionals can create value. 

Take cash management and cost of borrowing. The finance department’s relationship with the company’s bankers often influences the interest rates it pays. Once the banker understands your business and has confidence in your company, you are likely to be able to negotiate a lower rate. Imagine the savings from a 0.5% to 1% deduction on your borrowing rates. 

Good cashflow planning can help a company manage liquidity issues. Liquidity problems can be costly if poorly managed, as it is near impossible for a company to raise funds on very short notice at a reasonable cost. Many businesses fail because of inadequate cashflow, particularly when in expansionary mode. 

Finance professionals are also involved in inventory ageing analysis, product cycle analysis and sales strategies. Such analysis reflects the health of your inventory, and helps prompt the necessary sales and marketing actions. 

In procurement, the finance department can help negotiate improvements in terms and conditions, such as better payment milestones, or minimal non-delivery or late delivery risk. It also has a key part to play in tax planning. 

Finally, most merger and acquisition deals will involve the company’s CFO. CFOs control a centralised base of financial information in all organisations, and they have direct access to the board, top management, on-the-ground managers and shareholders. This puts them in an ideal position to make informed strategic decisions or to advise the board and the CEO in making them. 

In order for finance professionals to perform this value-adding role, they must fulfil certain criteria. I dub these the four Cs. They must:

  • Be committed to their job and to the company
  • Be competent in both technical skills and operational knowledge
  • Be able to communicate to all levels of the business
  • Possess commercial sense – knowledge of the business, the market and the industry they operate in.

As a result of increased economic uncertainty, volatility and risk, the finance function of today must fully understand the business, its environment and factors that drive value and create growth opportunities.

New research by ACCA and IMA (Institute of Management Accountants) suggests that intangibles such as data, branding, intellectual property and talent are the catalyst for growth in many businesses.

Their report, Tomorrow’s finance enterprise, reiterates that ‘understanding how the business generates value is core to the future CFO role; in the push to drive sustainable return on enterprise assets, finance leaders need clarity on where growth will come from and where to allocate enterprise capital. But they can’t do this unless they get their hands on the right data. The CFO function has a critical future role to play in getting the enterprise data basics right as a starting point for better decision making.’

To ensure they continue to create value for the organisations they work for, finance professionals like you and me must keep abreast of the multitude of changes impacting our operating landscapes, from technological advances to the proliferation of consumer choice and new emerging industries and trends. 

We must ask ourselves key questions, such as ‘What can we do differently, in order to drive future growth and value for the organisation?’, ‘How big a role will data play in creating future value?’ and, last but not least, ‘How can the finance department be better placed to support the growth strategy of the organisation?’