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How robust is your financial function?

How robust is your financial function?

WENDY SMITH, DIRECTOR OF ACCOUNTING AND FINANCIAL ADVISORY AT DELOITTE IN THE WESTERN CAPE POSES THIS QUESTION, KNOWING THAT ALL FINANCIAL MANAGERS HAVE CONCERNS ABOUT THE EFFICIENCY OF THEIR BUSINESS’S FINANCIAL FUNCTION.

SMITH says that this question is particularly pertinent right now, given the current global economic downturn and South Africa’s volatile economic climate and currency market.

“Given the intensified need to focus on effective budgeting and cash flow management, Financial Managers are faced with increasing pressures and demands on their time. It is becoming progressively more difficult for them to evaluate the efficiency and effectiveness of their financial functions whilst maintaining a focus on the daily operations,” 
says Smith. 

Speaking from almost two decades of experience, Smith has noticed in her dealings with clients that an increasing number of financial managers have to deal with a far broader area of responsibility today than they did a decade ago. The need to contribute more significantly to strategic and operational change is creating an overwhelming burden as Financial Managers are expected to: 

  • Contribute content to strategic planning  
  • Deliver high quality financial reporting to executives and 
the Board
  • Sustain an efficient and effective financial control system
  • Monitor cash flows
  • Prepare reliable forecasts. 

In addition, the recent trend to streamline and restructure Finance teams to optimise headcount and related costs can result in the Finance manager finding themselves stretched between competing issues. 

On the other hand, as a Financial Manager, keeping ahead of the game is being made easier today through improved technology and intelligent ERP systems.  These can provide financial managers with effective tools to provide quality reporting and ‘dashboards’ of performance. However, such systems rely on sound underlying financial data generated through robust processes and controls. Without this it’s as good as bad information in, and bad information out.

It is for these reasons that Smith recommends businesses conduct a full finance function health check on a regular basis – “we would suggest at least every alternate year. It is good practice to evaluate whether or not the finance function is meeting expectations and providing the quality data and feedback necessary to help make the best decisions for your business. The success of an effective finance function and relevant reporting is directly dependent on how robust the behind-the-scenes financial controls are,” says Smith.

A typical health-
check will:

  • Include an assessment of current capabilities within the Finance function, such as:
    • Transaction Processing
    • Accounts payable and Accounts 
Receivable
    • Business  controls
    • Management 
Reporting 
    • Regulation and Governance
  • Provide, as output, a consensus opinion gap analysis of the Finance function’s “as is” capability versus its 
“to be” aims
  • Usually be used as a first step to assist with the prioritisation of the Finance 
team’s efforts
  • Include feedback on the perception of Finance’s role within the wider organisation.

In conclusion, Smith emphasises: “One needs to regard the financial health check as you would a personal physical examination. It is best done at least every alternate year by an experienced professional practitioner, to ensure everything is functioning at its peak and that there are no risk factors affecting your long 
term health.”

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