This article was first published in the January 2016 international edition of Accounting and Business magazine.

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So much has changed since I qualified as an accountant in 1980. Yes, we had computers but they were unrecognisably different from the PCs and laptops of today. The internet was only something software companies did, mobile phones were inventions of science fiction, and social media would have been fantasy.

The role of the accountant was all about recording transactions, balancing books, management accounts and external reporting, with a budget thrown in once a year. ‘Strategic plans’ were something that only oil companies did.

But faced with all these changes, it seems that we humans are the ones who have failed to adapt. If the finance function is not only to catch up with past change but also manage what is about to come, it needs to have three things: vision, value-creating activities and a strategy for finance.

Seeing things

‘Vision’ can be defined as a picture of the future role and focus of the finance function and how it fulfils that. Vision can be captured in words, visuals or both. It needs to balance being aspirational versus inspirational, and being tangible versus practical.

Finance should consider doing some ‘from-to’ analysis of the key shifts that might be needed to attain the vision. It might be helpful to imagine where you are as a function compared with where you wish to end up, and break this down into a number of ‘from-to’ scenarios (see box below).

With the latest IT systems, the modern finance function should be able to step back from more routine transaction reporting and become far more involved in challenging the business fundamentals, and especially in challenging resource allocation. Reporting, although a core role, has limited value, as the past can’t be changed but the future can be. Equally, ‘controlling’ is a limited role, while ‘guiding’ (for example, through education and coaching) and ‘facilitation’ can actually create new economic value – and prevent value destruction.

The finance function is perhaps the most routine of all departments, and a lot of time that might be spent on higher-value activities gets pushed back because of this. But routines ought to be questioned: are they really needed and, if so, how can they be done in the least possible time and with fewest resources?

Lastly, elements of a vision might be that finance moves from a tactical role, where 85-90% of activity is spent on number-crunching and reporting, to a strategic role, where that activity is reduced to 20-25% (you should get worried if it is over 50%). This may also help give the finance function a sense of being properly involved in the decision-making.

Keeping score

One useful way of deploying this is to characterise some of the more extreme ‘froms’ and ‘tos’ and to score these – from, say, 1 to 5 or 1 to 10. You score where you are now and then target where you wish to be in the future (for example, to move from a 4 to an 8). The difference becomes the ‘strategic gap’ that you then need to address with change strategies.

As for value-creating activities, I recommend using the model of the ‘business value system’. This is essentially drawing up a map of all the value activities that the finance function does and how they operate together.

Working recently with the FD of a global company, we came up with the following value-creating activities (with those at the top being those where most attention and time had been spent):

  1. Firefighting
  2. Reporting
  3. Meetings
  4. Commercial and legal
  5. Systems improvement
  6. Cost management
  7. People management within finance
  8. Helping solve bigger business problems
  9. Coaching
  10. Acquisitions
  11. Training
  12. Coaching
  13. Input to large bids
  14. Strategic advice at board level
  15. Coming up with own strategic ideas.

The FD was challenged to move the top item quite a bit lower down and to elevate items 8, 13, 14 and 15. It was necessary to scrutinise the value of all those meetings (item 3) and to spend less time on reporting (item 2) in order to make time for activities that produced more positive, ‘turn-on’ value. This required major adjustments to the FD’s time allocation, attention and mindset. The FD also had to make major redeployments of senior staff.

This analysis took less than an hour, using the ‘business value system’ visual tool, which is typically a series of circles connected to highlight interdependencies.

Mind the gap

Finally, to develop a strategy for the finance function, you need to evaluate your current position and consider where you might take it (which your tentative ‘vision’ above has done for you). The gap between the two – between the present position and the future – is the ‘strategic gap’. You then assess the possibilities for configuring finance as a mini business and generate the strategic options. To do this I suggest using the following ‘lines of enquiry’, where appropriate: 

  • Seek new value-creating activities
  • Assess shifts in existing value-creating activities 
  • Consider what value-diluting activities you could stop doing
  • Simplify activities
  • Look at ‘insourcing’ versus outsourcing
  • Review structure, skills and systems choices.

Once you have a list of options to consider, the next steps might be the following: look at how interdependent these are; draw up a matrix of the strategic options you have shortlisted against the criteria on the strategic option grid, using, for example, strategic attractiveness, financial attractiveness, implementation difficulty, uncertainty and risk, and stakeholder acceptability; then rate each of these between 1 and 3 (1 is worst, 3 is best) and thus out of 15. You can then see what you need do to make each option better and stress-test them (for example, by asking what the one big thing is that you might have forgotten).

Tony Grundy is an independent consultant and trainer, and lectures at Henley Business School.

Swipe to view table

From here to there

From To
Transaction focus Resource allocation
Reporting  Planning
Controlling Guiding and facilitation
Routines Project work
Tactical role Strategic role
Detached Actively involved and proactive