Tips on Structuring a Modern Finance Function

By
Alvin Ip, CFO @ Aspire
Published
August 15, 2022

In this ever changing world, I’ve found there are but two constants: Death, and Finance. I’ve found that out of that inevitable duo, only the latter is solely within our control to manage and optimise. 

Finance as a business function is ubiquitous, having long been a core department for many, if not all businesses, for decades. While this essential function has evolved steadily over the last century, COVID-19, market stagnation, and rapid advances in emerging technologies over the last decade forced rapid changes on many finance elements, including changes to organisational design — structures, networks and workflows, and roles. I believe that Finance leaders will need to account for these new realities in their long-term plans for the shape of the finance function. With technology and digitisation creating new business models in every sector, finance departments are feeling the effects.

The Evolution of Finance Teams. 

Over the last 10 years, finance departments have been able to reduce operating costs thanks in large part to a boom in technology and digital tools. In fact, I’ve found that the trade-off between cost reduction and increased effectiveness of the finance function is a false choice; leading finance departments that have streamlined their operations are the absolute guardians of value creation, lowering their own spend and shifting work towards higher-value activities. 

In essence, the digitalisation and automation of mundane and manual processes means finance teams are able to adopt flatter and smaller structures, with roles being consolidated into fewer positions. This means that Finance leaders can now spend as much as 19% more time on value-added (versus transaction processing) compared with the previous decade.

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This flatter structure and consolidation of roles means finance managers and CFOs need to be clear about the activities they do or don’t need to perform, while allowing employees to work more independently. Some steps I highly recommend finance leaders take include:

  • Determining the potential for optimisation by reviewing your existing processes with your team, identifying the hardest hit areas and where support is needed. 
  • Identifying the tasks most suited to optimisation by asking staff which tasks are repetitive and have the lowest risk of inaccuracies, are non-critical activities, or limited impact on the wider business
  • Establish a “go” culture where employees are empowered to make independent decisions within clearly established thresholds of finance management policy, beyond which escalation is required. 
  • Leverage digital tools to connect your finance team with the wider business, like Aspire’s Spend Management system that allows your team to centrally manage company spend with ease. 

Implementing a modern finance function: Where to begin?

Whether your organisation is a small but rapidly growing enterprise, or a well established brand, your finance department will definitely need to implement some form of agility to meet the demands of today’s operations. 

While I am a big proponent of promoting intangibles in a work environment, I understand some concerns about how to put these into practice. I’ve found that the above traits are easily attainable by applying some key practical steps:

1. Start with robust fundamentals. 

Like Michelle Yeoh, it can be tempting to tackle everything, everywhere all at once. However, most of us are not capable of dedicating copious resources to such an endeavour, at least not yet. It’s important to establish a strong foundation. 

For me, this means ensuring sound accounting practices, dependable real-time data, and solid numbers. Your first step should be ensuring that these basic functions are capable of supporting the wider finance team. As you grow, things inevitably become more complex, and without a strong foundation of data and processes, your finance team will crumble. 

2. Understand Your Critical Functions

With over 15 years of experience in finance, I can safely say that finance teams come in all shapes and sizes. However, whether yours is the large team with significant manpower, or a 1-3 person group for a growing startup, your finance team will have to manage the following critical functions:

  • Accounting, Tax and Reporting - In charge of the preparation of your management accounts, financial statements and tax returns. This team should move from a technical team to a business partner role to help in the decision making of the business.
  • Strategy and Planning - The brains of your finance outfit, overseeing, and managing your business’s long term financial outlook.
  • Treasury - In small organisations, Finance operations will often fill the role of treasury. This is your team’s bread and butter, managing your organisation’s day to day financial needs. This includes setting and maintaining internal financial controls, accounting, taxation and financial reporting.
  • Business Intelligence (BI) and Analytics - Especially for larger finance teams, this function is critical, allowing them to analyse and process data, allowing them to find insights that improve your business. It can be within a separate data department, where the BI and Analytics team will serve all departments within a company. My view is that managing our data is critical for a modern Company, and we need to have a unique set of metrics to track our performance, that’s why it is sometimes a good fit to be embedded within the FInance department, at least at the start.
  • Head of FInance/CFO - Your Head of Finance/CFO is responsible for more than just the finance team reporting to them. They should be a strategic advisor to the CEO, and need to be involved in supporting and driving key decisions within the company.

3. Integrate Your Digital Tools

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Many thought leaders in finance, myself included, have long heralded the need for optimisation and automation of mundane and manual processes in finance for many reasons, from reduced costs to increased efficiency. Organisations with the greatest understanding of how to optimise their processes will opt for ‘best-in-class’ tools or software that can integrate seamlessly within their ecosystem. I would strongly advise all organisations to take this approach, as it is essential to fast growing businesses. Many of these tools available on the market are not able to seamlessly integrate your financial data into a single pane-of-glass view, resulting in issues that can severely hinder a company’s growth, including siloed data, redundancies, as well as bloated overheads without the benefit of efficiency. 

When readying your finance function for digital transformation, I highly recommend making integration one of, if not your top priority.

4. Connecting Finance with the Wider Business

Integrating digital finance tools and OS like Aspire is one half of a solution. It’s hard for me to overstate how crucial it will be for finance teams to work collaboratively across your organisation. I believe the last few years have been an even better teacher than I could ever be in demonstrating this importance. These past two years emphasised for me how necessary it is to strategize, plan, and collaborate across your organisation in order to drive steady growth and foster a culture of trust and transparency. 

When CFOs purposefully structure finance teams for collaboration, departments across the organisation can reliably receive guidance and insight from the unique perspectives they have into the business.  This is because, arguably, the Finance team knows the most granular ins-and-outs of the business.

5. Data, Data, Data

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It’s clear to me that the importance of data is growing at a record pace. The amount of data in the world is anticipated to reach 175 zettabytes (175 billion terabytes) by 2025. The data that the finance department will use to create competitive advantages and remain compliant is no exception. This exponential growth poses a significant challenge for finance teams as they seek to distil ever larger and more complex data sets into a single source of truth that provides actionable information and insights to the rest of the organisation.

Being able to leverage this data to drive cost optimisation, accelerate growth and improve profit margins will undoubtedly give your company an edge over its competitors, a strong reason why Finance should be involved in setting your organisation’s data strategy.

The Next Steps to Modernise your Finance Function

While your next steps will be highly dependent on the people in your team and your current model of operation, your objective should remain the same. I believe modernising, and indeed future-proofing your finance department requires continuous adaptation as technology continues to evolve. At the same time, the core finance department functions and roles need to be addressed to support your business needs. I highly recommend that CFOs conduct what I call a “Value Scan”:  Asking themselves some questions regarding the potential value gained from modernising and digitising finance processes, as well as the feasibility of doing so. 

Software-as-a-service (SaaS) providers like Aspire can help you capitalise on this opportunity, as we continue to help businesses globally save time and money using our All-in-one finance OS to create a next generation finance function. This can provide your business with the insights, performance and planning capabilities your executive team needs to support dynamic decision making through the next decade. It’s time to capitalise on it, or get left behind by the competition.

Download this article as an e-book: Tips on Structuring a Modern Finance Function

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