The finance team is a well-respected and important department in any business. Most provide expert accounting and compliance services, build budgets, and offer checks and balances against rash decisions.
That's the starting point. But how can you truly maximise the impact of the finance function?
Today, the best CFOs and finance teams are also true business partners. They deliver smart analysis to decision-makers, allocate resources dynamically, and drive real growth.
This is strategic finance - the new gold standard.
This article explores the concept and offers key ways to make strategy central to your finance function. We also identify common blockers, including slow processes and outsized workloads, which hold finance teams back.
Let’s get into what strategic finance is, and how to implement more high-level strategy into the finance function of your business.
What is strategic finance?
Strategic finance is simply putting the company's growth and long-term vision at the heart of the finance function. Decisions may be controversial or require immediate sacrifices to generate long term change, but are always data-driven.
Overseen by the finance department, key decision makers use strategic analysis to delve deeper into current operational issues and create an action plan. The overall purpose of strategic finance is to steer the company towards its goals - revenue growth, sustainability, environmental impact, and more.
“When you’re changing the culture of a business, everyone has to be along for the ride. This is why the finance function holds all the cards in the transformation game. We sit in the middle of the feedback loop from planning through action to analysis.” - Anders Liu-Lindberg.
To find out why Anders states that “transformation strategies and FP&A are a marriage made in heaven,” read on.
Why the finance function is ideally placed for strategy
Fortunately, the finance function sits at a unique cross-point in the company. With a direct view into each department, financial managers must work with other departments to inform their plans and create bottom-up budgets.
CFOs and finance executives also have some of most senior roles in the entire business, and deal constantly with stakeholders. This vertical hierarchy gives finance authority within the business, and makes it the perfect catalyst for strategic planning.
Here are two core reasons why the finance function is so naturally strategic.
Analysts by nature
Let’s face it; the finance department usually has the best analysts in the company. They're often self-proclaimed ‘data nerds,’ which simply isn't the case for most other job roles.
And finance professionals are invaluable in any corporate feedback loop. Considering their proximity to the data, they can work with both ground-level and high-level information to move the company forward.
Most strategic decisions are reflected in the numbers. With direct access to expenses, profits and losses, for example, the finance team is the first to know and ideally placed to monitor the effects of any changes.
A core service unit
The primary purpose of the finance department is to serve other teams the insights they so badly need. They hold the figures to provide a deep analytical view of what’s happening now, and what’s required next to help the business progress.
Certain departments in your company have to focus almost exclusively on generating results, such as sales and marketing. But the finance function is a service unit at heart, working on the business rather than inside it.
And the natural strategic nature of the finance department means that they are usually great at measuring opportunity and risk. Therefore, when decisions are made (even if controversial), the rest of the company respects the choice and “trusts the process”.
Stakeholders may disagree with the internal decisions of the company. But because the finance department is service-based, this helps it execute changes to meet the financial goals of the company.
How to use technology to build a strategic finance function
While finance departments are perfectly positioned for maximum impact, many of their other day-to-day tasks take up time that should be spent more strategically. In fact, only 40% of finance professionals feel that most of their work adds value:
There are everyday tasks that can be automated to let finance departments focus on strategy, without compromising on the quality of their other work.
Primarily, finance teams should use tools to help identify trends and issues in the numbers. Since business forecasting is based on the numbers, it’s pretty simple to outsource to an automated program without too much issue. And the insights will be similar, if not the exact same, to those gleaned through manual analysis - without the significant time input.
And applying automation tools to your figures provides quicker results than that of manual manipulation. This can be highly beneficial to your business, since real-time data lets decision-makers take more timely actions. With finance leaders stating that one of their main objectives in 2022 is to reduce friction, technology will be key to building a strategic finance function.
Where finance teams should use automation
The types of technology available are pretty much endless, so begin by automating your most time-consuming, tedious work. The goal is to free up time (and brain space) for more critical work.
Great finance automation exists for:
- Accounting and bookkeeping
- Spend management (including expense automation, payment reconciliation, and cash flow)
- Forecasting, especially if you have clean revenue and spend data
- Approvals and manual compliance checks
- Accounts payable and invoicing
Essentially any repeated, low-creativity task can (and probably should) be automated. So start with the highest impact for your finance function - the tasks that take too long and provide very little value.
Make more strategic financial decisions with Spendesk
Spendesk gives you real-time spend data, as and when it’s needed. Your finance department always knows what's being spent and how this matches your planned business budget. Most importantly, it kills the endless paper and email trails that come with expense claims and credit card payments.
But what is the relevance of spend data on strategic finance decisions?
In reality, it’s what drives the entire company forward. Spend analysis lets your finance team determine what had the biggest impact on profits, and where to re-invest to keep building revenue. Automating your spend data also highlights where money has been wasted in real-time.
Overall, you have more visibility over spend, and stop wasting time on menial tasks. Which frees your finance function to be the strategic force it should be.