Financial management is in the process of change
Stefan Östman’s blogpost October 13, 2017
What do we want to keep, what is developing in financial management? A real expert should look beyond the next year's budget. A real added value for the organization is that the knowledgeable financial administration works alongside the business, providing real and sufficient information about the situation.
Financial management needs to look at the operating environment in the long run: international competition is growing and digitalisation creates unprecedented business models. There is also pressure on cost savings. Word choices can easily lead us to see support functions as a cost, even though professional financial management provides significant depth to knowledge. A child can go with the washing water if, in the turmoil of change, we want to do things differently than before.
The work of the financial department can be roughly divided into routines and development work. Fire will also be switched off. Development work should create value, for example, in the form of analyzes. Today, part of the financial administration work is delegated to business units. Decisions have a point, as routines do not always leave time for development work. Decentralization of financial management can also cause the level of information in the business units to be comparable, which can not be managed as well as with the support of a centralized function. Based on the information, management is a strength for the company, not necessarily by decentralization.
The task of the financial administration is to tell what is the real result of the company. The task of the economic function is also to describe in a comprehensible and timely manner what level of profitability is. This goal may not be met in business self-analyzes.
The first step towards value-added financial management is effective routines based on clear and logical accounting. Thus, the processes are transparent and there are no skeletons in the cabinet. Efficient small organizations can even aim to ensure that the balance sheets are settled well in advance of the financial statements. Here are monthly summaries.
There are many benefits to decentralized work at the division, but at the account level, the procedure often creates a pattern that makes looking at more detailed cost structure as labor-intensive and time-consuming. At the same time, the results may not be as reliable.
Concrete information is easier to communicate and embrace. The right information makes it safer to make decisions and actions. In principle, there should be a sufficiently versatile chart of accounts with no gray areas left. This is to avoid a hassle and to benefit from the right and sufficient knowledge of the solutions.
Without the fully integrated information system, the company must basically define all of its information needs in advance. It is not easy, and it leads unquestionably to rising costs, longer response times, and longer reporting timeslots.