Evolution of the role of financial services of the company

Author: Андрей Бойко

To be successful, any company must be ready for rapid and global changes. And what role does the financial service play in this process? – It is no longer enough just to “count” and “prepare a report” for the leader. And that’s why …

In the recent past, the basic role of the company’s financial services, most often, was taken to one capacious concept – “walking gentleman”. The main task of accountants (namely, this position was predominant in the financial service) was the maintenance of book-keeping and tax account, as well as the preparation of financial reporting. Actually, such functional is obligatory for all companies and regulated at legislative level.

With this approach, the founders and management could only see the actual situation in the company over the past reporting period, which was clearly not enough. However, the “guilt” of accountants in it is present no, and the importance of their work is not minimized.

In course of time the workers of financial service began to be responsible for charges control, indeed, only in administrative part. Slowly a “walking gentleman” began to grow into a “inspector”.

It is difficult to imagine a situation when the company’s business environment and customer demand remain unchanging long time. The need to develop the company and formalize the goals entrusted the financial service with new responsibilities – to plan, analyze and control. Thus, the role of an “analyst” arose, which assumed a significant expansion of functional of financial service:

But this “restless boss” was not enough. Complication of internal communications and business processes, as well as the need for detailed reporting (that was not provided by the financial reporting) and the distribution of responsibility between different divisions within the company, resulted in the origin of administrative account. Naturally, this task can be charged to service maximally independent of interests of business-subdivisions, that is financial.

It is needed to say, the need for “delights” of management reporting reaches such heights that in large international companies, the departments of the administrative accounting on the regular quantity approach the size of book-keeping. But it is quite another history already.…

Accumulation of the most essential information about company’s activity in a single “processing” center, and also necessity to analyse and correctly interpret information for making managerial decisions – automatically promoted meaningfulness of financial service. And now the business departments of the company had to quickly obtain actual data about their work and consult about the impact of business initiatives on the final financial indicators – such a role of the financial service can be conditionally called as “consultant” (or “propagandist” of the company’s economic culture). It is this “consultant” that owns a set of tools for managing the company’s financial position.

Schematically, the levels of maturity of the financial service (including their key characteristics) at different stages of their development are presented in the figure below:

Roles of financial services in the company

And what’s next: have all the benefits for the company managed to squeeze out of the financial service? – Forbes research in multinational corporations shows that 57% of CFOs consider the provision of expanded business analytics as the key ability of the financial service of the future. At the same time, over the last few years, financiers spend 1.5 times more time searching for and processing information necessary for the preparation of management reporting.

It can be argued that the financial service has long been engaged in analyzing of huge data amounts from both external (macroeconomic and sectoral reviews, public service statistics, news and archived data of Bloomberg, Reuters or Factiva) and internal sources (accounting system, CRM, ERP).

However, the main problem remains the real use of such business analytics to increase the company’s productivity, and hence its profitability.
Today companies invest huge amounts of money in the technology of searching and processing of business information, but often they do not have positive results precisely because they pay insufficient attention to training (and that not unimportant – to convince) personnel to use such data in practice.

Someone should be in the company to lead the process of managing business data (search, analysis and correct interpretation) to determine the future development vector of the company (after all, accountants for a long time know how to account for “past achievements”). And it is quite logical, this should be done by the same financial service.

Thus, the future role of the financial service is essentially a “strategist”, which is responsible not only for the company’s financial position, but also is the owner of the business intelligence management process that determines the company’s competitive advantages in the market.

Exactly financial service must become the driver of application of analytics in all functional blocks of the company (from purchases and expenses optimization to sales and customer service), and also to stimulate the rapid introduction of ideas and use of all opportunities identified in the process of business data analyzing.

Андрей Бойко

Project Manager

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