Archives For

Why balanced finance capability matters in finance today

accapr —  15 May 2013 — Leave a comment

research-insights92

By Jamie Lyon, head of corporate sector, ACCA

Reading a lot of the commentary on finance and the role of today’s CFO you’d be forgiven for thinking that today’s finance function spends all of its time on strategy formulation and execution. I don’t doubt for one second how important the role of finance as a strategic business partner to the organisation is, or the critical role progressive CFOs increasingly play in strategic support to the organisation. But it is also worth remembering the role the finance organisation plays in what I would call the fundamentals – cost management, cash-flow management, finance operations and so on. There are of course differences and changes in priorities – the strategy of the business, the prevailing state of the economy, its industry sector – are naturally factors which shape and influence the focus of finance leaders and the function at any given time. But it seems irrational to think that great finance functions are still not held to account on the strength of control and financial management of the organisation. This indeed is at the core of its fiduciary responsibilities. It’s also critical to get this right if you truly aspire to supporting the strategic agenda of the business – these multiple aims of the finance organisation are not mutually exclusive. Having this bedrock of broad finance capability is also, of course, particularly relevant in a period of on-going volatility and growth challenges.

We recently produced a report examining the future needs of the finance function, and the implications for developing the capabilities needed. The report, the complete finance professional, draws on a wide range of studies, including ACCA research specifically with CFOs and other finance leaders, to test these ideas out. The conclusions were very simple. Great finance functions needs to be able to draw on a wide range of finance capabilities. They can’t survive on staffing their functions with people schooled on a narrow version of management accounting, and this isn’t particularly healthy for developing the capabilities needed in future finance leaders either. Let’s consider the roles some finance professionals perform to illustrate the point – can financial analysts drive truly effective decision-making if they don’t have a broader understanding of risk; can internal auditors perform their roles effectively without a strong grounding across financial and management accounting disciplines; can accountants with investment appraisal responsibilities get by with no awareness of tax, or regulatory changes which may have implications on project benefits…and so on. I don’t quite think so.

Secondly, with public debt, currency instability, emerging market growth, commodity price rises and many other signs of significant volatility, finance leaders themselves are in a huge period of flux, change and uncertainty; we know the role of CFOs continues to evolve but it’s the shear breadth of skills and knowledge that is now called into play; also given the level of volatility in the global economy we see a real call out to balance the quest for growth with the need for control – this ‘balanced finance leadership’ really is as a hallmark of the top finance job right now. The report also comes to other simple conclusions – a recognition that the changing face of finance operations with the advent of shared services, outsourcing, centres of excellence and the retained organisation demands both excellence in traditional finance capabilities (e.g. process mastery, transparency in controls, specialised finance expertise) as well as new capabilities (transformation, project management, dealing with change, customer centricity and so on); and that strong finance functions earn the partnering mandate best by ensuring effective finance stewardship of the organisation as a strong foundation; in short you can’t neglect one for the other, it doesn’t quite work like that.

At ACCA we continue to advocate the need for breadth and depth of financial understanding in finance functions today.

In ACCA, CFO, Finance Transformation, Jamie Lyon , ,
permalink

10 years of ACCA in the Czech Republic

accapr —  29 April 2013 — 1 Comment

K Benesova 02

By Katka Benešová, head of ACCA Czech Republic, Slovakia and Hungary

This year marks the ACCA office in Prague changing the way professional accountants develop careers in the Czech Republic, Slovakia and Hungary for 10 years.

Earlier this month ACCA’s vice president, Anthony Harbinson, hosted a gala dinner in Prague to mark this great anniversary. Together with members and partners we discussed and celebrated how the past 10 years have been.

In reaching this milestone, we felt that it was time to look at how the accountants’ role, reputation and public value is perceived among our members and students. We commissioned extensive research on the Changing role of the finance professional in both the Czech Republic and Slovakia – 271 respondents were polled.

Despite the economic issues of past the five years, accountants believe that the public perception of them has improved or stayed the same since 2008 (50 per cent). However 37 per cent said it had declined. Technical skills (61 per cent) and trustworthiness (57 per cent) were considered to be key personal attributes for accountants. They are followed by professional ethics and personal integrity (49 per cent).

Eighty per cent of the accountants who responded to our research believe professional accountancy bodies help ensure those within the profession act responsibly.

Czech and Slovak accountants often deal with conflicting demands. Eighty-five per cent said they follow the interest of their employers. But 51 per cent say accountants should follow the public interest in their work. Eighteen per cent of accountants reported that they have had serious dilemmas between public, personal and their employers’ interests.

The findings of our survey revealed the accountancy profession is keen to act ethically and responsibly for the commercial success of their company, financial markets’ stability and economic prosperity. It is good to see that our members see certain transactions and acts as an ethical dilemma and we also appreciate their openness to share this information in our report.

The research findings shows that professional accountants are seen as business partners and contribute to the overall business success of their organisations. This will have a positive impact on the local profession, and professional accountants, regarding what value they bring to the organisation. And as they already face ethical dilemmas in their jobs, this can also have a positive impact on the local economy in the Czech Republic building transparency and enhancing public value.

In ACCA, National Offices, Public Value , , , , , ,
permalink

Global Business Services at the top table? Servants don’t dine with their employers

accapr —  5 April 2013 — Leave a comment

blog-image-test

By Deborah Kops, founder and managing principal of Sourcing Change

Over the past few weeks, it seems as if everyone in the accountancy world is talking about GBS, GBS, GBS. Shared services organisations encompassing one function in a few countries with a centre or two purport to be running global business services.

Companies with transactional accounting processes operating around the world declare that they are GBS leaders. Sourcing leaders managing an outsourcing deal or two are trying to link governance together under the guise of GBS. Procurement heads are dangling the notion of GBS in front of their bosses as a strategy to move up the proverbial value chain. Newcomers to shared services and outsourcing are even christening their first forays into consolidated business models as GBS. The chatter has become so pervasive, it’s starting to sound like cicadas mating in the summer.

If you take a cynical view of GBS, it’s almost as if changing the name of the processes and systems that serve the business, and putting as much of them as possible under one organisation will magically create new prestige and impact. With a new moniker, and more scope, will CXOs will suddenly be clamouring for GBS leaders—whose calling card is adept cost containment, reasonable customer service, some level of stakeholder management, and a track record of process excellence to join them, putting their two cents into every strategic decision.

But does organising under the banner GBS elevate the importance of business operations execution, making it more strategic? Will knitting services together really earn a seat at the corporate high table? Or is the value that business services ultimately delivers to the enterprise remain reliable, out of sight/out of mind operations? And, by the way, that’s no mean feat. As process operations become more sophisticated and industrialised, it not only increases cost-effectiveness, but boosts agility.

Any good corporate leader or manager aspires to create value for his or her organisation. There’s no doubt that the roles we variously group within shared services, sourcing or outsourcing leadership have as their mission to deliver consistent and predictable business processes that underpin operations to a range of corporate stakeholders by manipulating the levers consolidation, standardisation, process improvement, sourcing and technology enablement. But isn’t creating a reliable operating platform that delivers the ultimate means to an end – providing better service to the organisation so that they can get on with the business of being strategic good enough? What’s unimportant about taking over the management of the tasks critical to corporate operations to the next level, increasing efficiency and effectiveness, by performing them on a silent running basis?
There’s a difference between execution value and strategic value. I suspect that corporate leadership will look to GBS in any of its iterations as operations, not strategic direction; in fact, troll the internet for mention of GBS and the entries supports that observation: “GBS optimises the mix of resources, process acumen, and technology to deliver… services on an enterprise-wide basis to support business strategy” according to HfS Research. That’s still pretty important stuff.

It comes down to one word: service. The root of both service and servant is the same. Servants don’t dine with their families, and I’d posit that those who provide service don’t have a seat at the top table.

In Finance Transformation, Guest , , , , , , ,
permalink

NHS finance staff must work closely with clinicians following NHS reforms

accapr —  3 April 2013 — 1 Comment

escalator

By Huw Edwards, ACCA member, NHS Graduate Management Scheme – Finance

Clinicians are, quite rightly, at the heart of the new structure of the NHS. This means that now more than ever before, the relationship between finance professionals and clinicians is crucial to its success.

Clinical leaders are likely to need our help if they are to maintain financial grip whilst delivering radical change. Learning how to work with clinical staff is therefore an important part of the development of student accountants such as me. But this relationship is a two-way street. Clinicians need to work well with accountants if they want to lead the change we need to deliver a high quality, sustainable health service. The temptation from both sides is to wait until we’re in more senior positions before really getting to know each other. But if we can build relationships at the start of our careers, we should reap the rewards for many years to come.

In any industry or sector, student accountants need to get to know their business. We need to do this so we can translate the knowledge gained from studying into something usable in the real world. After all, in order to be applicable across the whole spectrum of business in the UK and abroad, the ACCA syllabus will always be somewhat abstracted from the day-to-day work we do. Part of the challenge of qualifying is balancing the demands of passing the exams with learning our business in order to make our studies relevant.

Getting to grips with the technical aspects of healthcare finance, from the internal market and payment by results to service line reporting and management, is hard enough. Then there is the shifting landscape of organisations as a result of the reforms. Accounting for the closedown of PCTs and SHAs is sure to be a testing experience for our colleagues in commissioning this year-end.

Financial implications of clinical decisions

In healthcare if we want to really know our business, we need to know our clinicians. The decisions clinicians make have far reaching financial implications. Whether it’s in treating an individual patient or (following the Health and Social Care Act) planning services at population level, clinicians are the major driver of cost in the health service. Finance teams are going to have to help them understand the financial consequences of these decisions, whether that’s by modelling what may happen, or monitoring what has happened, as a result.

Looking ahead, our ability to assist and influence clinical staff will be a key skill for accountants and is something we must develop.

Some hard decisions

It would be difficult to exaggerate the challenge facing the NHS over the coming years. The expected rise in demand as a result of demographic changes and the increasing complexity of healthcare, combined with a prolonged economic winter, mean we are going to have to radically change how we deliver services.

But neither the public nor those of us working in health will accept radical change if it is at the expense of quality. If we are going to protect, and indeed improve, the quality of our health services in this hostile economic climate it is clear that we need to make some tough decisions.

Clinicians are now the main group responsible for rationing care. Clinical Commissioning Groups (CCGs) put clinicians at the heart of planning health services for their local population, and clinicians already ration care in a less transparent way, through the decisions they make with individual patients – so called ‘Bedside rationing’ – such as deciding which type of drug to prescribe or what diagnostic tests to undertake. So an awareness of the financial result of their decisions is more important for clinicians than ever before. They are being tasked with taking costs out without diluting the quality of services.

Working closer together, sooner

Working together should be seen as a key part of the development of both student accountants and junior doctors. But just as student accountants don’t see much of our clinical colleagues at present, junior doctors are unlikely to have regular (or indeed any) contact with their finance department. I expect there is little knowledge among them about how their service is funded, beyond the odd telling off from their consultant for not coding all the multi-morbidities on discharge summaries. There are a number of possible reasons for this, but perhaps it’s just part of learning a profession; the world tends to be quite insular for trainees of any profession as we balance studying with the day job.

The sooner we start talking and finding out what each other does the easier it will be to get the tough decisions right.

In ACCA, Guest, Public Sector , , , , , ,
permalink

Shared Services and Outsourcing: Aren’t we just moving the deck chairs around?

accapr —  27 March 2013 — 7 Comments

tall building, modern CFO

By Deborah Kops, founder and managing principal of Sourcing Change

If you think about our efforts to transform business functions through shared services and outsourcing, are we just trying to make them more efficient and cost-effective? Are we really tackling enough change to make them more relevant to today’s business needs? In effect, aren’t business functions as we know them obsolete, and changing them in-situ is just fodder for conference agendas, full employment for consultants, and topics for bloggers (such as yours truly)?

If you think about it, nothing much has changed in horizontal functions such as finance, IT, HR, marketing and legal for years. Sure, we tweak reporting lines – corporate versus business lines versus geographies; implement technologies to standardise; invest in “transformation” to gain incremental improvement; and change the delivery model through outsourcing and shared services, near-shoring and offshoring. But when it comes down to it, we haven’t really changed the relationship of these functions to the business. We merely focus on cost and efficiency of the same old delivery.

Contrast the dynamism of the so-called ‘front of the house’. Business lines constantly merge, spin off, or break apart in response to the market. Companies merge or divest in order to become more competitive. Yet we hold on religiously to the concept of standardising and consolidating business support platforms, thinking by managing cost we’ll add a lot of value to the business. By setting up shared services and outsourcing, aren’t we just moving the deck chairs to one side of the ship?

That’s not to say that cost-effectiveness and harmonisation are not corporate virtues, and do not create value. But when we focus on building generic platforms, maybe we’re missing a bigger bet. Perhaps it’s time to look at what component of business support functions should be close to or actually within the business. Perhaps, in the thirst for business model innovation, it’s time to admit that it’s conceivable that one size does not fit all. Mono-functional teams may not be our best bet.

If you are an avid follower of the daily HBR blog, you may have read Paul Leinwand and Cesare Mainardi’s 8 February post, Rethinking the Function of Business Functions. In it, the authors submit that “Wal-Mart doesn’t succeed just because of a strong operations group. It has built impressive capabilities that include logistics, inventory processes, buying standards, real estate practices and labour models — most of which it created for itself.” And the post goes on to cite Amazon’s ability to mix it up in new and different ways. In effect, the authors believe that we consider these companies great in part because they incorporated business functions into the business cross-functionally to create value.

The blog goes on to say that mono-functional teams are only oriented to the short-term, conflicting needs of all of their constituents. And, by implication, the value they create sinks to the lowest common denominator. There’s almost no ability to break out, or combine business support functions with the business in new and different ways.

Isn’t this true of shared services and outsourcing? The success of these models is predicated on consistency in structure, performance, service levels, and, most importantly, a customer relationship as opposed to a collaborative relationship. As a result, the perceived value is cost and predictability rather than problem solving and innovation.

Perhaps, after we go through a shared services and outsourcing phase which results in eliminating excess, it will make sense to tear it apart, moving processes closer to the business to create value. One day, sourcing just could be obsolete.

In Finance Transformation, Guest , , , , ,
permalink