CFO As A Business Partner - Finance Effectiveness Services And Finance Effectiveness Services

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CFO As A Business Partner - Finance Effectiveness
Services And Finance Effectiveness Services
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With increasing complexity in the business
environment, CFOs need to work closely with key
stakeholders in drawing up risk mitigation plans.
Every finance department and CFO aspires that the
function that he/she leads adds value to the
business.
Finance and the role of a CFO in being a driver
rather than just being a record keeper is now a
part of virtually every finance transformation
session. Most of us are aware of the role of a
CFO in being able to contribute to the company's
strategy, growth, work with cross functional
teams, manage and lead board discussions and
investor relations and build robust systems.
While these are part of the daily discourse on
the role of a CFO and also a part of their job
descriptions, there are areas where CFOs and
finance teams are doing interesting work to
improve the effectiveness of the finance function
and contribute to the business. Here are my three
picks
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Distributor Linkages
Organisations which have a complex supply chain
mechanism particularly those in pharma, FMCG,
chemicals, which sell through a
distributor/dealer network, require market
related data to be able to do their production
planning and manage their inventory levels.
Market information relating to the regions,
product type, SKU's, discount schemes etc is used
to predict customer behaviour. Most of the times
this information at the level of the end consumer
is not available to the company as the tracking
stops at the level of the distributor. The other
issue is the lack of linkages between the
distributors' data and the data available with
the company, resulting in loss of time in
reconciliations.
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Distributor Linkages
This makes it difficult to set credit limits for
distributors, track inventory and receivable
levels, track the benefit of the discount schemes
thereby putting strain on working capital levels
in the business. Some large companies and CFOs
have realised the importance of this exercise and
have integrated the distributor systems to their
ERP's or rolled out the SD module of their ERP's
to the distributors to allow them real time
tracking. The other area where CFO are bringing
in efficiency is in on boarding new distributors
or evaluating existing ones particularly in
assessment of return on investment (ROI) of the
distributor. CFO's have also partnered with the
distributors and helped them negotiate with banks
to extend 'channel finance' which allows them to
leverage the company's 'balance sheet' to avail
working capital facility with banks.
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Enterprise Risk Management
t is an area that has gained more significance in
the recent months because of its inclusion in the
Companies Act, 2013. However, managing and
mitigating risks in the business has always been
an inherent part of the CFO's role for a very
long time. With increasing complexity in the
business environment, the need to understand the
environment around is even more important.
Companies and leaders are spending more time than
ever in identifying these risks. Now CFOs are
working closely with the key stakeholders in
drawing up risk mitigation plans. The really good
CFOs are also ensuring that these plans are being
reviewed periodically and not just because
regulations require them to do so.
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Internal Audit Findings Implementation
Most often than not, the findings of the internal
audit department or an external firm are not
acted upon or not acted upon fully. This is not
to suggest that companies do not view this
seriously in most cases the requirement to have
an internal audit itself is viewed as one that is
required since it is 'prescribed' and not one
that can have a telling impact on the business if
done well. We also come across situations where
the brief given to internal audit teams is fairly
restrictive and these are viewed by other
functions as an 'extension' to what the finance
department does without having an impact on what
they do.
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Internal Audit Findings Implementation
CFOs today are spending time in communicating the
importance of the internal audit function to
stakeholders in other functions, involving them
in defining the scope and the outcomes out of
this exercise and helping them evaluate whether
the exercise has truly added value to the
business as a whole. The gap often lies in the
implementation. As the popular saying goes 'the
devil often lies in the detail'. If this is not
implemented well, this often blows up in the face
at some point in time in the future and more
often than not the CFO bears the brunt. There are
many other areas CFOs can have a direct impact on
the business. But businesses should first need to
accommodate and embrace the finance function as a
partner. Remember better the quality of the
finance function, higher the business growth.
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By Deepak Narayanan Co-founder Director, MyCFO
http//mycfo.in
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