Paula Downey Jones, CFO, SmartDebit 

Business partnering has been a buzz word in the Finance profession for many years now, but what does it mean in practice for SMEs and how can you transform a Finance function from a back-office role to a genuine business partner?

The role of Finance is evolving. Although the foundations of transactional bookkeeping will always be required, today’s Finance leaders and their teams have a much larger part to play in shaping strategy and improving commercial decision making. Achieving this by working alongside other departments and teams is often referred to as ‘business partnering’.

From my own experience as CFO of a growing Fintech company, financial business partnering has been critical in driving profitable growth, and over the last five years we have moved the Finance function from a bookkeeping service to a strategic business partner.  I often see the test of how we are viewed by the rest of the business as how the business refers to us. If we are referred to as an Accounts team and advised about decisions after the event then we are not contributing enough to the strategic focus of the company. Success is being invited to comment and contribute to all major decisions before they happen. I also prefer us to be referred to as a Finance team as this label comes with recognition of the level we operate at.

When transforming a Finance function it is important not to lose sight of the basic operations. Invoicing and credit control, paying suppliers on time, paying employees on time and good cash flow management must work well and accurately, as without this we simply do not have credibility and cracks will appear in the financial management. Robust financial controls that are communicated and understood across the whole organisation are also essential for ensuring one of the key roles of Finance – that of safeguarding the assets – is achieved.  The key to implementing and maintaining successful financial controls is gaining the buy-in from all areas of the business. To achieve this, a deep understanding of why the controls are needed is required to avoid simply being seen as a layer of bureaucracy. The media is littered with examples of what can go wrong when financial controls don’t work, and sharing these examples can help communicate the necessity for them, along with the very important and visible buy-in from top management.

Once the fundamental operations are in place, it is the role of Finance to provide a fit-for-purpose accounting system that, alongside the financial controls discussed above, ensures that data is accurate, timely and relevant.  This data is the foundation needed to provide support to make good decisions, and once there is confidence in the accuracy and accessibility of financial data, the real business partnering can begin.

The first step towards business partnering is to produce concise, relevant and timely management accounts. In order to ensure these accounts are seen as valuable, and read on a regular basis, they should balance the need for transparency with keeping the information to a minimum so not to overburden the reader. Consider who the audience are and what their focus is, or should be. The three financial statements (Profit and Loss Account, Balance Sheet and Cashflow) are good for transparency and financial control, so these statements should be shared with the Board of Directors. However, it is also worth considering a one page dashboard showing key metrics and summaries which is dynamic and can be used as a quick snapshot. This gives the Finance team the opportunity to highlight key issues that are pertinent at that time.

Once the routine operations, controls and management reporting are in place, analysis and targeted reviews can start to add value. The management accounts are a great starting place to identify areas for improvement and can be used to instigate more in-depth reviews. For example, the management accounts could identify a declining profit margin in a particular area that could then prompt further reviews which, in turn, could drive operational decisions or changes to how a product is being managed.

The central role that Finance has within an organisation puts it in a unique position to identify potential, or real, issues that may not be visible to others in the business and this is where Finance can really start to add value.  It is the demonstration of value-add here that can encourage the rest of the business to involve Finance in key decisions, which in turn has an improvement on the outcome.  It’s a bit of a ‘chicken and egg’ situation, in that often we find we have to prove our worth before being invited in to show our worth more regularly, and this is particularly true when we are working in organisations which have only seen Finance as a back office function until now.

Financial education is hugely important for everyone in the organisation to ensure buy-in at all levels.  In practical terms, this means supporting managers who are new to financial information to be able to fully understand what they are seeing, and how they can then interpret and challenge that information to ensure the best decisions are being made. It also means communicating to new starters about Finance policies such as the Expense policy or the Purchase to Pay policy. It maybe helpful for Finance to have a slot on induction programmes to guide new starters through this, and also to share the role that Finance has in creating value-add within the company at the very first opportunity so that the team is remembered when it counts.

The final piece of the business partnering jigsaw is Finance driving the development of the organisation’s strategy. There is a natural flow from the annual budgeting towards strategic evolution and, as the co-ordinators of the annual budget, Finance are in a key position to also help drive the development of the company’s strategy. As we all know, the budget should be the outcome of the organisation’s strategic planning cycle, but very often it works the other way round with budgets written that can then dictate the plans due to budget constraints. This piece of the Finance functional jigsaw sits at the top of the chain, as for some organisations with a limited experience of Finance value-add, having Finance drive the development of strategy can be hard to accept. However, as Finance evolves within an organisation and it is seen as a value-adding function it becomes easier to facilitate this strategy development. A one day meeting with the whole leadership team at the beginning of the budgeting season can focus minds and either result in tweaking of the current strategy or a complete overhaul. This pre-budgeting session is important to allow the leadership team to agree and align themselves on the strategy which will then flow down throughout the organisation, and from this the budget will follow.

By working with other functions, supporting each other and driving strategy, there will be many resulting benefits. Quite often, there will be far greater empathy and lower levels of frustration. The increased level of involvement by Finance across the organisation adds interest and value, and Finance teams have far greater awareness of what is happening across the organisation which means further value can be added, and so the cycle continues perpetually.  Being able to predict more and be increasingly proactive in problem solving, rather than being reactive and fighting fires, is obviously hugely satisfying. Training and mentoring colleagues within a Finance team or in other departments are massively rewarding, and ultimately help the whole organisation to deliver higher value activities, while also helping the development of both the trainer and trainee.

Paula Downey Jones FCMA is the CFO of SmartDebit, the UK’s leading Direct Debit service provider. She has over 25 years’ experience across a wide range of business scenarios including grass roots start up to finance restructuring/rescue to blue chip global expansion.