Eurozone challenges and rising business demands force finance teams to streamline operations
Four in 10 finance departments expect to see their budgets cut in 2014, faced with rising investor demands on margins and the uncertainties of a two-track recovery in Europe.
Yet despite lower budget predictions, over 70% of finance leaders say they are being asked to expand their role and do more to support other parts of the business.
This could involve introducing financial data analysis, identifying acquisition targets or rolling out new internal control frameworks in growth markets. Over eight in ten (81%) of companies have undertaken one of these ‘transformation’ projects in the last year, according to the latest report of forty-five global finance departments by member-based advisory firm CEB.
Fulfilling both imperatives is impossible unless finance becomes more efficient with its everyday operations and also more selective in which areas it chooses to support, according to CEB’s experts.
Paul Dennis, senior director at CEB, said: “CFOs have realised that now, more than ever, different parts of the business need fundamentally different levels of support from their finance departments. The ‘two-track’ recovery in Europe, powered mainly by the UK and Germany, means that some core markets are in need of investment for growth whereas other markets, including much of southern Europe, continue to suffer from the impact of austerity and a shortfall of credit.”
“This means a growing expectation on finance leaders to play a more strategic role in the business and allocate their time to more than just ‘keeping the books’. The only way finance departments can do both is to look carefully at which areas they can really add value.”
CEB found that nine in 10 finance leaders are trying to support every internal business request, including many that have negligible impact on the overall business, or are outside the remit of the finance function.
In a resource-constrained environment, meeting this volume of demand is simply not possible. With most business partners unaware of the demands placed on finance and the costs of service provision, this culture also risks plunging huge amounts of both time and money into projects that won’t ever deliver long-term returns.
Mr Dennis added: “At the moment we are seeing a case of the loudest voice wins. It’s time for finance departments to take a much more proactive stance about which activities they should invest in. Ultimately this means aligning resources against areas of highest return, getting rid of unprofitable services and, crucially, pushing back on demands from other parts of business.”
CEB, the leading member-based advisory company, equips more than 10,000 organizations around the globe with insights, tools and actionable solutions to transform enterprise performance. By combining advanced research and analytics with best practices from member companies, CEB helps leaders realize outsized returns by more effectively managing talent, information, customers and risk. Member companies include approximately 85% of the Fortune 500, half the Dow Jones Asian Titans, and nearly 85% of the FTSE 100.