This article discusses the evolving role of accounting professionals in providing real-time business insights and valuable contributions to decision-making.
It is no news that every aspect of the current world business environment is increasingly becoming complex and volatile, exposing businesses to more risk and uncertain outcomes. The current reality has forced owners of companies to seek ways to manage risk, remain viable, improve performance, and ultimately increase their value proposition.
Today’s expectation of the accounting profession is rapidly changing with the rise in digital technologies and big data analytics, which has reshaped the finance and accounting function, specifically the collection and reporting of financial data. As a result, companies are seeking accounting professionals, whether in-house or outsourced, who can handle their data beyond just the historical analysis of numbers but go the extra mile to understand their business goals, provide strategies, analyze financial and non-financial information, and provide recommendations to support decision-making in uncertain circumstances.
The current reality presents an opportunity for accounting professionals to fill the expectation gap by evolving beyond the traditional accounting functions and diving into a world of business intelligence to provide critical real-time support and insights that increase the company’s value proposition and help make valuable contributions to operational and strategic decision-making to the companies and clients.
Finance Business Partnership (FBP)
The concept of finance business partnership has been around for a while; it captures a vision where accountants move beyond the focus on historical numbers and creates an active partnership with other business units. The goal of the established partnership is to advise in operational decision-making that drives better financial performance and provides targeted strategic insights based on the prevailing macroeconomic trends, industry, and competitor dynamics in an uncertain business environment. Listed below are some of the job responsibilities of finance business partners:
- Improve the impact of financial reporting on business performance.
- Deliver insights that link financial reports to business strategies with supported analysis.
- Advise on practical commercial opportunities.
- Initiating and influencing strategic and operational decisions to ensure financial targets are delivered.
- Build strong partnership relationships with all business units, management, and stakeholders.
Interestingly, accounting professionals in many companies can be deeply involved in the abovementioned responsibilities without the term Finance business partners in their job titles. Some job titles CFO, financial controller, financial planning and analysis, management accountant, financial director, and decision support, can all be financing business partnership roles as there are no established job titles for finance business partners.
In a recent research report, the Charted Institute of Management Accountants (CIMA) demonstrated how the finance business partnership could be deployed in uncertain business conditions for value creation. The research report outlined four principles for finance and business partnerships that accounting professionals can adopt to resolve business issues.
Principle 1: Create opportunities for discussion with management and stakeholders for answers instead of relying on numbers from the financial reports.
Principle 2: Implement practices to raise and praise doubts in uncertain situations and mediate different viewpoints when engaging with internal and external stakeholders.
Principle 3: Use of visualization tools to facilitate a better understanding of information.
Principle 4: Simplify coordinating systems to invite scrutiny and generate new knowledge construction methods.
These principles were adopted in Toyota UK Sales & Marketing unit to assess investment proposals and decisions that can generate a favourable response to market opportunities and demand. The principles resulted in the Business partners mediating between internal stakeholders (sales & marketing) and external stakeholders (such as advertising agencies and distributors) to create an investment proposal with relevant measures to boost customer value.
Core Competencies of FBPs
The foundation of a finance business partnership is the ability to understand the business, its competitive environment, current and future strategic positioning, priorities, systems, and processes to provide value-driven recommendations. Given the required labour and inevitable time limits, deciding on the depth of inquiry requires significant deliberation. Finance business partners take a proactive approach to understanding the value chain of companies, which aids them in scouting for opportunities that maximize operational performance.
There are structured business insight tools that can provide more insights into businesses.
- PEST (Political, Economic, Sociological, and Technological) analysis to analyse a company’s current macro environment.
- The famous Porter’s five forces competitive positioning model determines strategy profitability in a competitive environment.
- NOISE (Needs, Opportunities, Improvements, Strengths & Exceptions) Analysis to provide solution-based strategic planning.
- TOWS (Threats, Opportunities, Weaknesses & Strengths) Matrix to identify internal and external business circumstances.
The issue of understanding the business is never-ending. As the business environment factors play out, there will always be more to learn; hence, the finance business partners must verify initial business knowledge. Also, since conditions alter, finance business partners must constantly revise their perspectives and expertise.
Commercial Business Acumen
Recent research on the finance business partnership reveals commercial business acumen to be a high-priority competence required from finance business partners. The ability to understand how money can be generated and think outside accounting functions to provide improvement across a business value chain is crucial. Finance business partners can contribute towards an organizational goal by harnessing the strength in the numbers to recognize trends and ask relevant questions to develop insights into how the business can increase sales, reduce costs, and mitigate risks.
Finance business partners can use analytical tools for financial modeling and data visualization in different instances to solve business problems. Examples are Power BI, Excel Statistical tools, Monte Carlo simulation, Shareholder value analysis, and zero or activity-based costing.
Communication and Influence
FBPs can develop and maintain trusted relationships and partnerships with business management and stakeholders due to high emotional intelligence. Finance business partners demonstrate a perfect harmony of Relationship Building, Conflict Resolution, Negotiation, Presentation, and Facilitation skills. Finance business partners are also better positioned to negotiate, challenge assertively, and communicate ideas, impact, insights, and recommendations clearly and concisely that management can implement.
The capacity to develop win-win solutions is one of the distinguishing attributes of a successful finance business partnership. Finance business partners exhibit passion, a drive to make a difference, and a willingness to work, stand up at meetings (even when the issue is unrelated to finances), convey interest and excitement, and accept responsibility for advancing crucial business projects. Finance business partners provide a balance between opposing interests and deliver solutions so that the client and management can conveniently commit to them.
The customer should always come first, and this claim should be uncontested. In reality, many account and finance departments work in isolation, creating services and reports that are irrelevant to or barely relevant to the business. Finance business partners must first create value for the customers. Every action taken should be appropriate to the customers and ultimately lead to wiser business choices.
Limitations to Effective Finance Business Partnership
Since the 1980s, there has been discussion about the possibility that finance business partners who become overly close to corporate managers could misbehave. For example, whether supporting one division versus the organization as a whole or when supporting organizational management versus external stakeholders, finance business partnering frequently necessitates walking a delicate line. To find the correct balance, accounting professionals must develop a strong sense of ethics and the resolve to defend ethical principles. The objective should be ethical behaviour throughout the entire business unit. The position of the accounting and finance unit is unique because they are in a place to evade regulations with far-reaching effects and undermine governance procedures through false reporting. Accounting professionals must strictly follow ethical standards set by professional bodies.
Integrity and bravery are crucial personal attributes, but top management must encourage them and provide an excellent example. Building an ethical culture can be aided via internal audits, whistleblowing procedures, performance reviews, and reporting systems.
The biggest obstacle to effective finance business partnerships is time. Even when their positions are set to prioritize finance business partnering activities, accounting professionals who have been given finance business partnering roles but need essential knowledge, abilities, and attitudes can divert their attention to things they find more comfortable. Business partnership responsibilities will also become stressful due to operational managers' opposition, which will again make it more preferred to spend time elsewhere.
Impact of FBP on Business Performance
It is hard to demonstrate that finance business partnerships improve business operational performance. Factors like competitive strategy, product innovation, and favourable economic situations affect performance, and their impact will be considered more important than whether a business has implemented finance business partnering. Therefore, it is challenging to distinguish between the effectiveness of the finance business partnering model's actual execution and its impact. Finance departments, however, lose their credibility when dealing with evidence-based management if they do not at least attempt to connect their performance to the business.
Finance Business Partnerships and SMEs
In Nigeria today, small, and medium enterprise constitutes 50% of our GDP, hence providing effective finance business partnering in the context of this article will improve the quality of decisions made by SME’s business owners, thereby making and infusing great financial prowess across the business and Nigeria as a whole.
In many ways, finance business partnership comes easier to SMEs than to larger businesses. Staff in smaller companies are more involved in different areas of the business on a day-to-day basis. There is less functional specialization, and fewer business silos, while informal relationships across other parts of the company are typically stronger. All these set the stage for the involvement of finance business partners.
SMEs face challenges despite their optimistic, can-do outlook in building businesses. Finance business partners can bring a countervailing, evidence-based approach. Finance business partnerships can identify SMEs' business challenges and offer solutions while saving time and money. Resources are a challenge for SMEs, as they sometimes need more resources to hire the personnel they need or pay enough to compete for the most talented individuals. In such instances, outsourcing is the best alternative.
Finance business partnership has emerged and is gradually viewed by most companies as a strategic approach to increasing value proposition. Many businesses have already embraced business partnerships in finance, HR, and other functional areas. Companies must transform the accounting function to be more effective and efficient, which is being enabled by developments in information technology and data analytics which puts finance business partners in a unique position to help navigate the business. Businesses that adopt finance business partnerships experience a turnaround in financial and operational performance; therefore, companies should invest in deploying FBP in a suitable business unit. Accounting professionals should develop and build sufficient capacity and skills to work confidently in the finance business partner role