Charis FD - Your Friend in Finance

I hope that you found the New Subscriber series of articles helpful over the last two months. They were designed to cover the full range of issues that form part of our business financial management model, centred on the Business Performance Management wheel. All the areas are designed to help you take control of the business finances and manage the finances intentionally.

The purpose of doing the series, apart from giving you some helpful advice, was to do two things:

Firstly, I hoped to demonstrate that Charis FD has a rational model for business financial management, a model that makes sense and covers all the important challenges that you face in making money in your SME.

Second, I hoped to give you an insight into the role that a Finance Director can play in your business. Many small business owners have built their businesses on their own, and whilst they may have met Finance Directors they don't really know exactly what they do or why they might need one.

There is a common misconception that Finance Directors and Finance people in general are simply "bean counters". They punch the numbers into the system and tell you how much money you are making. But you will have gathered by now that there is much more that they can offer. They can help you to be clear on your strategy, to plan effectively; they can help you decide which actions are worth doing, what changes will add value; they can help you measure and monitor business performance and analyse it in order to help make effective decisions; they can help you manage stakeholders; and they can help to manage risk and put in place an internal control system to help to prevent losses and errors.

But here is the tension that you may be feeling now: You can see where your business would benefit from getting better in all the areas we've talked about. But you don't have the time or the confidence in doing it yourself. But neither do you have enough money to employ someone full-time to be a Finance Director in your business and sort it all out. And, to be honest, it may not be a full time job if your business is in the under-£20m turnover bracket.

If that's what you are feeling, then Charis FD's service may be for you. We specialise in delivering assistance to people like you in a flexible and affordable way. Our service has broadly four levels, depending on your needs and your budget. We can provide you with a programme of assistance, combining telephone and email support with a varying number of days onsite working with you. We could be with you as little as one day per month or as much as two days a week.

Our aim is to give you confidence in managing the business finances, which will lead to, amongst other things, improved profitability and better cashflow.

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If you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

If you want to look back on any of the previous email newsletters we have sent, they are on the Creative Finance & Management blog.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

This is number 6 in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

Here we go: ...

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Your Finance Team - a Valued Asset

If you have read all the articles that we have sent to you in this new subscriber series, you will hopefully have learnt something not only about managing business performance, but also about the skills and expertise that professional finance people can bring to your business. So I'm actually not going to labour on about the value of finance people and accountants, as the title suggests.

What I am going to do is try to get you thinking about what resources you might need in your Finance function. Perhaps there may be areas you haven't thought of. And if I can help you to get your Finance function fit for purpose then your business performance wheel will turn a lot more smoothly and you will be more successful.

I'd like to think about the Finance function as a set of resources consisting of processes, systems and people. People operate processes, and systems help to facilitate and automate processes. All the elements interact with each other.

Let's think about how Finance functions develop as a business grows, as that may indicate the priority of various elements.

The first thing you ever employ an accountant to do is to set up your company and then prepare and audit its annual accounts and tax computations. This is almost universally true of small businesses - even I have an accountant who does that for me, and I'm a qualified accountant myself!! This is what I would call the compliance requirement.

Above a certain threshold the law says you have to have an audit (if you are trading through a limited company), so you will never get away from a relationship with an external accountancy practice. But you may get to the point where you have the expertise in house to prepare the accounts and save money on their fees! Only the very very big companies have internal tax people, and even they still spend money on tax advice from the accounting firms.

In the early stages you record all the transactions yourself. After a while the business gets too big for you to cope with that, and so you employ a bookkeeper. You also have an accounting system. This is the transaction recording requirement.

In the early days your accounting system may have been a book, a file or a spreadsheet. Then you may have got a proper package like Sage or MYOB. Perhaps you've now got to the stage where you've moved onto something more flexible and with better functionality - like Microsoft AX, Great Plains or Navision.

The key things about your accounting system are that it is there to help you meet both the compliance requirements (holding proper accounting records, and doing VAT returns), and to help you measure your business performance. It becomes a key enabler of your business performance management wheel. If you want information out of it to measure your performance you have to be able to put accurate base data into it somehow. And that's where you need to have a look at the transaction recording processes and see whether you have a problem with GIGO - "Garbage In Garbage Out"!

Back to the growth story... So you're employing a bookkeeper to record transactions in a system, but you are writing the sales invoices yourself and paying your suppliers with your chequebook, your business debit card or through internet banking. At some stage that gets too onerous, so you take on an accounts clerk or two. They take care of the operational finance and control requirement.

So you may now have a Purchase Ledger Clerk recording the supplier invoices and preparing payment runs for you to authorise. You may also have an Invoice Clerk, preparing all the sales invoices to send out. On a part-time basis you may also have a Payroll Clerk or outsource the payroll to a bureau. Between them they could also take care of the bookkeeping requirements, but you may then want an accountant to make sure that all the operational finance, control and transaction recording processes are tied together.

I added the word control in with operational finance to indicate that once you delegate your invoicing, recording and payments, you need to have controls to ensure that people are doing things correctly. This is even more true when you are employing more people elsewhere in the business, since they will need procedures to follow to spend money or commit the business to contracts. I will talk more about this in my eighth article in this series. The point for now is that transactional controls are guarded by the Finance team on your behalf.

By this stage you are normally struggling to get information out of the system to measure the performance of the business if you try to do it yourself. If you are taking note of what I've been saying in previous articles then unless you are a whizz with Microsoft Excel spreadsheets, database queries and pivot tables, you will probably already have an in-house accountant doing reports for you. This is the business performance management requirement.

So you see, whilst I have been talking about business performance management constantly in these articles, I do understand that there is a lot more to the core Finance function. And these core activities need to be managed properly and grow with the business.

Conversely, these weekly articles may have opened your eyes to how much more can be built on your core Finance team in order to help you to manage the performance of the business.

At some stage of growth the business will need a Head of Finance or a Finance Director, a fully qualified accountant with a few years of business experience, to help you manage the full range of core finance (compliance, transaction recording, operational finance and control) and business performance management activities. Has your business reached that stage yet? Have these articles opened your eyes to how much more you should be doing to manage your business performance?

For many businesses there will be a stage where they have a small Finance team and know they need to do more in the realm of business performance management, but they cannot justify the cost of a senior Finance person or think there wouldn't be enough work for a full time role. The fledgling Finance team also probably needs some guidance and direction from someone more experienced.

That's where a flexible service such as the one offered by Charis FD comes in handy. We can provide advice and hands on support in all elements of business performance management, including helping you manage your Finance team, on an ongoing basis. And we can do that by being on site with you anything from one day a month to two days a week or more. Have a look at our website for further details.

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If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

This is the fourth in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we are sending you an article aimed at helping you to think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter. We are doing it to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

Here we go: ...

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Measurement and Management go Together

"What gets measured gets done!" is often quoted as a truism. The other way I would put it is, "if you don't measure it, you don't manage it". What I want to do in this article is show you the principles of how to apply that to managing the performance of your business. You do want to manage the performance of your business, don't you? You know that if you don't manage performance then your business will almost certainly underperform?

I've tried to say in the last three new subscriber newsletters that you have to be intentional in managing business performance, or in managing a business in general. If you want your business to perform well, you have to know and specify what you want it to achieve and have defined strategies for achieving those goals. You should also have given yourself targets for what each of your strategies should achieve.

But you can do all that and still not succeed. One of the main reasons that happens in smaller businesses is that they don't check regularly to see whether they are succeeding or not. They don't measure the outcome of their strategies, or at least not regularly enough. It's no use getting to the end of the year when the auditors come in, or when you sit down with your accountant, to find out that you haven't grown your business as much as you wanted to, or you spent too much. It's a bit late then. You need to measure outcomes monthly, weekly, and daily in some cases.

Getting into the nitty gritty for a minute, the basic financial performance reports you need to have on a monthly basis are the income statement (or "profit and loss account") and the balance sheet.

The income statement should not be in so much detail that you can't see the wood for the trees, but should be in enough detail to see where your money is coming from and where it is going to. For example, if you sell the same small set of products to a few regular customers, then show your income by customer or customer group. On the other hand if you have a varied product set you may want to show your income by product. This depends what your marketing and sales strategies are - segment your income in the same way you segment your sales for strategy purposes. Then you can see if your strategy is making any difference.

Similarly you will want to show your costs in the income statement in a way that makes sense. You may show them by type (e.g. premises, people, insurance, IT, etc) or by department (e.g. operations, sales, finance, IT, HR, etc) or both. It depends how complex your department structure is and how you manage your business.

The balance sheet shows the value of what the business owns, what it owes and what it is owed. It is useful to see particularly the cash balance, the debtors balance (what your customers owe you) and the creditors balance (what you owe suppliers).

But this is just the basic level. Every business should do those without question. You need more. If your strategy is targeting increasing sales, then you must also get more detailed reports on sales. If your sales cycle is less than a month, then perhaps you should be getting sales reports weekly or daily. If your strategy depends on production quantities and operational efficiency, then perhaps you need daily or weekly reports on those things.

And again, don't just look at financial performance. Performance measurement and management are much broader than that. If you are a service business, perhaps you need to measure that utilisation ratios for your consultants (time spent generating revenue divided by time available). If you have a long sales cycle, perhaps you need to get weekly or monthly reports on leads generated and sales pipeline reports. If these things are critical in your strategy to achieve your vision for the business, then you can't manage them properly without measuring how you are doing.

To sum up, what are the key things to think about in performance measurement and reporting? What, how and how often - those are the three key questions. What to measure will depend on your strategy, the things you are doing that are important to getting the business towards achieving its vision. How to measure it will have to be thought through carefully - it could be a figure, a ratio, a traffic light, a pie chart, etc. How often will depend on how often things change. You want to be able to make decisions and adjust your strategy and tactics on the basis of what the information is telling you, so the information has to be timely.

Finally, all this measurement will be worth nothing if you don't use it, if you don't make decisions based on the information. No strategy is perfectly infallible. The information you get may tell you that you are not quite getting it right. If you are learning from the reports you get, you will investigate further and tweak or change your strategy depending on what you find. This the feedback loop complete. The business performance management wheel that I talked about in the first of these articles depends on completing the whole cycle - develop your strategy, carry out your strategy, measure your performance and learn from the information to develop your strategy... and so it goes on.

I'm worried that this all sounds complicated, because I've condensed so much into a short space. If you do a healthcheck on what you actually do at the moment, I think you will find that you already do some of this, but it may be ad hoc, disjointed and disorganised. As with other areas, putting some thought into it and having a rationale for measuring things about your business will get you a long way forward. Just the act of being intentional about performance measurement is big progress.

The final thing I would say is that this is probably one of the areas that someone like a Finance Director would add the most value. They are skilled in pulling numbers together and in interpreting what they mean for the business. If you haven't got anyone like that in your business, then give it some thought. And it doesn't have to be full-time headcount. There are part-time options available, which are more affordable for smaller businesses - one of these options is Charis FD's own services. That's a gentle plug for my business, but I think it's appropriate. See our website for more details.

If you are worried about the cost of such a service or the cost of taking on a full-time FD, think of it in terms of the financial benefits it could bring. They would work alongside you, helping you to put in place the finance and performance management disciplines we have been outlining over the last few weeks. So I would be surprised if following all this advice with help could not help to improve your sales by more than 5%, or improve your gross margins by more than 5-10%, or your net profits by 10% - especially if you have not employed one before (either full-time or part-time). If you look at it that way, it doesn't seem so expensive. That's obviously not making any promises, but it's food for thought!

Why not contact us today?

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Until next time...

If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

This is the first in an 8-part series especially for new subscribers to the Creative Finance & Management email newsletter. Every week we will send you an article aimed at helping you think about a different aspect of the financial management of your business. This is in addition to the normal bi-weekly newsletter.

Why are we doing this? Well it's certainly not because we want you to be overloaded with spam! This email is NOT spam. You received it because you consciously signed up to receive our Creative Finance & Management newsletter. But, hey, we know that even some newsletters you consciously sign up to might as well be spam!

So why are we intent on sending you twelve emails in the first two months of your subscription? The answer is that I looked at the newsletters that were queued to go out and tried to think what it would be like to simply start getting them at a random point. It would feel like pretty random subject matter, without a framework or rationale. And I felt that it would probably be useful to give all new subscribers the same orientation to the way that Charis FD thinks about small business performance management. That way we can have confidence that all our subscribers have been given the benefit of foundational advice in all aspects of business performance management.

If you miss any of these articles, don't worry. They are on the Creative Finance & Management blog. Just look for the "New_Subscribers" tag.

These are the articles in the New Subscribers series:

1. The ingredients for success in Finance
2. Strategy and Planning
3. Business Change - implementing your strategic plans
4. Measurement and Management go together
5. Paralysis without analysis
6. Your Finance team - a valued asset
7. Stakeholder management - the importance of keeping people happy
8. Internal Control - 3 fallacies that add risk to your business

So, off we go...

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The ingredients for success in Finance

First of all, let's recognise at the outset that there are many things that can be said about making business successful. That's why I'm confident that I am unlikely to run out of subjects for the Creative Finance & Management newsletter! But after careful reflection on all that I've learnt over my 18-year career in accounting, finance and business, I believe that the financial and performance elements boil down to seven or eight things.

Now I admit that there are academics out there, as well as big management consulting firms, who have researched and pondered and discussed and head-scratched over many years, and they have written big books on topics such as these. And they have probably come up with other ways of looking at things, perhaps even better. Who knows? I am just someone who has looked at what I have learnt over the last 18 years, in my training, courses I've attended, as well as reflections on the work I've done, and pulled it all together in a coherent way.

So "take it or leave it" is what I'm saying. I have no desire to be seen as any kind of finance and management guru. I simply want to help small businesses do things better.

So what are the ingredients for financial success? All I am going to do in this article is lay out the scenario and describe the model. In the next seven articles I will explain the important parts of the model and how applying these principles can help your business to become financial stronger and more successful.

The way I look at it is like a wheel, with a hub, and a couple of other things. I call it the Business Performance Management Wheel. If you go to the Our Services page of the Charis FD website you will see this illustrated and described. There are four points around the outside of the wheel:

Strategy and Planning

Actions and Change

Performance

Performance Reporting and Review

Those elements are linked with a directional arrow, indicating that actions and change result from strategy and planning, and contribute to business performance. Then you have to review the performance of the business through regular reporting in order to feedback into more strategy and planning.

In the middle of the wheel is "Finance", which should probably be more specifically "Finance Resources". Finance resources keep the wheel turning, providing information and control.

Around the outside of the wheel are two elements:

Stakeholder management; and

Risk management and compliance.

Those are two things that provide the environment for business performance management.

I should also say that there are other dimensions. So cash/working capital is a dimension that has different implications depending on which of the elements you are thinking about. Profit is another dimension. And Performance is a generic term that includes profit, but does not exclude any measure of success in your business.

Over the next few weeks in these introductory newsletters we will take each of the seven elements in turn and outline what the key elements are in getting the business performance management wheel turning smoothly for you.

First, next week, we will look at strategy and planning. Where does strategy come from and how do you decide what your strategy should be? If you don't have strategies for your business and plans for achieving your strategic objectives, then you are leaving too much to chance and your business will underperform.

Second, we will discuss business change. Sometimes it feels like there are so many options for useful projects you could do, or things you could change, but you can't do everything all at once. So how do you know which of the options will be best to choose?

In the third week we see that measurement and management go together. If you want to be able to manage your finances, or your business performance in general, then you have to regularly review measures of performance. This is an area many small businesses need help with.

Fourthly, we talk about the "paralysis without analysis". A lot of big companies talk about "analysis paralysis", meaning they have so many figures, so much management information, so much analysis of figures, that they don't know how to digest it all. Smaller businesses are often paralysed by the opposite problem. They don't know what to analyse and have very little management information and modelling. What things are most useful? Where should you start?

Fifth, we'll talk about finance resources. Finance resources is the term I use to encompass finance and accounting people, as well as systems, processes (and perhaps even cash!). Your finance resources are there to support you in managing your business to optimum performance, providing information and control, as well as expert advice. So that fifth article will tell you more about what you should expect from finance resources and how to get the most out of them.

Sixthly, stakeholder management gets a mention. Stakeholders are anyone who has any interest in your business. Shareholders and investors are the people we normally think of first, but the list gets longer the more you think about it. There are a host of people and entities that should get your attention as stakeholders in the business, and good relationships with them will smooth the way for growth.

Finally, we snooze through 700 words on internal control. I'm joking! It's very important! But a lot of people see internal control as something boring and tedious. So we'll consider three fallacies that add risk to your business in the realm of internal control.

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Until next time...

If at any stage you want to talk to us, we're quite happy to give you a call to talk more about your business and the challenges you face. And you may be eligible for a free Finance Strategy Review session. To set that up either email us at enquiries@charisfd.com, remembering to leave your phone number and email address; or go to our website and complete the contact form.

Thanks again for subscribing to Creative Finance & Management. We hope you find it helpful.

© Charis Business Consulting Limited 2009

When Finance departments need to build bridges

The Marketing Director of a business I worked for once said in leading a seminar, words to the effect that, “functions like Finance, HR and IT are just overhead costs. They don’t add value. They don’t bring in new business or sell anything, and they don’t produce anything.” I didn’t respond at the time, but I remember being quite offended. I felt put down, as if he was saying that I was no value to the business. I was, at the time, I have to say, fairly naïve – this was my first job outside of public practice. What follows here are some of my reflections on the relationships between the Finance function and the other parts of a business, from working in more than ten different companies over thirteen years since then.


“Business Partner” – a misleading phrase

One thing that has mildly irritated me occasionally over the years is the use of the term “business partner” to describe aspects of functions that support and control the main activities of a business (which are providing goods or services to customers). In my experience, Finance and HR use the term a lot. I even use the phrase myself, because I know what people mean by it!

Normally, being a “business partner” simply means that the function or the individual is trusted to be involved in high level strategic decision making. This is as distinct from the mundane provision of information and operation of transaction or control processes.

I think the thing that irritates me about the term (albeit only mildly) is the misunderstanding it generates. This misunderstanding can be exposed by a few exaggerated statements:

- Some functions are not doing business, so they can only partner the business, or maybe just cost money. They don’t make or sell the product or deliver the service, so they are less important. So there are people you employ in your business that are not part of your business, but if you like them enough you may let them partner you in your business.

- Doing business is all about making the decisions, rather than the mundane processing and controlling. I, the CEO, and my board, are the business, because we make the decisions about the business. Business partners help me make decisions about my business. The other people in the functions are just recording, supporting, controlling and doing. The other people are not really part of the business. They just do jobs.

My view is: We are all the business, not a business partner. We all need each other. Not just the people making the big decisions. Not just the people making and selling and providing.

We all need to recognize the value of each other’s contribution to the success of the business. There is a passage in The Bible that speaks in this way about the church. It likens the church to a body. No one part of the body can call itself the body, but the body would not be a whole body without each part. Each part has its role and place, and importance, in the overall function of the body. The church is the body. So every member of the church has a gift and calling from God that contributes to the overall function and goal of the church. We cannot do without each other.

So it is with business I believe. We are all parts of the business, and without every part functioning properly and together the business will fail. This is my fundamental mindset when I deal with relationships in business. Each function and person must support each other in achieving the goal of the business – e.g. more customers, more sales, more profit, lower costs, a better brand, happy shareholders, stable cashflow, improved communities, etc.

So when managing a Finance team I encourage them to see themselves as helping the business to achieve its goals first, then in all their cross-functional relationships if they can help their colleagues it will ensure we are acting as one.

On the other hand when I speak with my colleagues in Ops, Customer Services, Marketing, HR, IT, and so on, I make sure they know what I am there for. Basically we are on the same side. I may have to challenge their spending or their performance against sales targets, question why they have not collected cash from customers quickly enough, set hard budgets, cut costs, and do many things they may not like. But if they know fundamentally that I do this, and Finance does this, because we are following our remit to help the business succeed – then it becomes more a question of asking for their help in achieving our objectives, whilst offering our help in achieving theirs.


Different personalities and skills suit different roles

Character differences produce a lot of friction. But it is possible to recognize that and get better at working together. Clearly Myers-Briggs, Insights, Belbin and the multitude of personality assessments demonstrate this clearly. But it is really self evident.

You get many different personalities in a team. And indeed everyone is different. But you also get certain personalities gravitating to certain roles and functions. I believe certain personality traits go with certain skills, although this is a generalisation that does not always work.

For example, an analytical person may gravitate to the Finance and IT areas, where there is a degree of set process, logic and numerical certainty. On the other hand, a sociable person may gravitate to areas that deal with people – HR, sales or marketing.

And each different business will require slightly different shades of characters within the different functions.

Recognising the strengths and weaknesses of certain character styles in different situations really helps to get people working well together. Instead of looking down on the marketing or sales person for the way they can’t understand the figures, or act unpredictably, we "analytics" can both help them with that weakness and seek their help when we need slightly more expansive and unstructured thinking. Working together creatively leads to competitive advantage.


Finance is sometimes seen as interfering

“What do Finance know about selling? So how can they give me these ridiculous targets?”

“What do Finance know about making our product? So how can they ask us to do it more efficiently?”

“Why do Finance ask us to fill in useless information on our transaction screens? They are just wasting our time.”

“Why do Finance always need an authorising signature on every bit of paper? They are the reason we are not as efficient as we could be.”

Finance people will be familiar with these and other similar accusations. How do we respond? How should we respond? Because one of the main things (though certainly not the only thing) a business is trying to do is to make money for its shareholders, Finance will always be in a central position and get its fingers into a lot of pies. And that can sometimes be seen as interfering in things we know nothing about.

The point I want to get across is that with every such complaint comes an opportunity for dialogue. That’s DIALOGUE! Not talking, not arguing our case, but constructive two-way dialogue.

But before I say something more about dialogue between Finance and other areas, I want to clear something up.

We Finance professionals are trained in Finance, normally first of all as accountants, and then analysts and financial managers. We are not (normally) trained in manufacturing, engineering, C++ programming or human resource management! So when we are accused that we don’t know these things, we should not try to make out that we do! We recognize there are things that we know and things that we don’t, things we are good at and things we are not.

But the next point is equally true – 99% of the time we don’t need to know either! For example, I may not know much about C++ or .net frameworks or web design, but when I challenge the IT department for employing contractors to develop an application, I don’t need to know all that. The thing I may need to know is what the application is for and how it will help the business (financially or non-financially). If they can’t tell me that, or their statement of benefits falls apart under scrutiny, then I have a right, as someone responsible for financial success, to ask them to stop. What we need to know is what is relevant to our remit as financial custodians.

But my main point is DIALOGUE. Every interaction with our colleagues, especially when we are challenged, is an opportunity to 1. Listen; 2. Understand; 3. Think; 4.Explain; 5. Change; and 6. Move on in working together (perhaps into a feedback loop so that the whole dialogue process continues).

1. Listen – Just ask them to tell you more, and then shut up and listen carefully. Finance does not have a monopoly on the truth. We don’t know everything. We need to learn. It also may be true that nobody understands perfectly the way the business works. Businesses are complex, they are made up of imperfect human beings, using machines made by human beings and computer programs written by imperfect human beings! Things never work 100% perfectly, and since we are not perfect we may in fact be the cause of the particular imperfection! This is your opportunity to learn about something in the business, and may turn into an opportunity to help.

2. Understand – Ask questions to get an understanding of the issue. Look for cause and effect. Ask who does what and when. Ask questions to help your colleague understand the issue they are raising. They may not fully appreciate what they are highlighting. You can help them simply by asking questions.

3. Think – Don’t just jump in with a suggested solution. Give it some thought. Go away and draw diagrams, process maps or play with spreadsheets if you have to. Ask other colleagues their opinion if you need to.

4. Explain – Ensure that your colleagues are aware of why you need information, or need things to be done in a certain way. What are the business consequences of them failing to follow procedures? Will we lose money? Will we pollute valuable information sources? Will we be less efficient? Get everyone on the same page. They may start to see how they can do things differently to achieve the desired result. There’s more likelihood of a win-win outcome if you understand each other’s perspective.

5. Change – If you need to. Being ready to modify things to ensure you can both achieve better results shows that you really believe you are both on the same side. It shows you appreciate their difficulties as well as your own requirements.

6. Move on in working together – if you have gone through this active dialogue then you will hopefully have solved a problem at the same time as making a friend and powerful ally. They will be both more ready to help you if you need something in the future, and willing to talk openly and less confrontationally about problems in the future. Keep the door open. Offer to review what you’ve agreed.


Final thoughts

Finance sometimes does not portray itself well. If you rely on Finance for anything it is to provide information on how the business is doing, and to make sure that transactions are managed and controlled efficiently and effectively. You rely on them to be able to analyse and tell you whether something will lose or make money. But sometimes we don’t do our job properly and lose respect and trust.

In those cases, in my experience, you have to be open, especially at a management team level. Explain what you are trying to achieve for the business, and how it will help. Share with your colleagues the problems you are having. Ask for help. There may be someone in another team that is good at process analysis, or good at Visual Basic macros, or good at training, or experienced in restructuring or integration. You would help them if they needed your help, wouldn’t you? And finally, keep sharing – share your successes and your problems. When you understand someone’s problems, share their successes and get involved in helping, you become more sympathetic. So get people on your side, because in reality they are already.

Finally, sometimes people in other functions don’t realize their actions have financial consequences. E.g. lack of detail in transactions leads to errors which leads to loss or time wasted. E.g. delays in dealing with Finance queries can lead to losses if it becomes too late to go back to customers to clear up errors.

Don’t just beat people up for doing the wrong thing and call them stupid behind their back. Go back to the dialogue outlined above, and educate them. I have found that if people realize the consequences of their actions, they are more likely to take care over doing things right. Point out where things are going wrong, and then start to listen to their side… then you’ve started a dialogue.


Conclusion

A business without Finance at the heart will be risking loss through errors, inefficiency or even fraud, and will risk making the wrong decisions through not understanding financial information. But Finance is not the business, and neither is it merely a business partner. We need to recognize the roles, remits, strengths, weaknesses and personalities at play across the whole business. We should value the diversity and work together to succeed in business through trust and open dialogue.

What should Finance do better to make relationships work? In short, better dialogue. You have two ears and one mouth – use them in that proportion! Be always more ready to listen than to speak. And communicate always with the assumption (whether or not there is evidence for it) that you are all on the same side, working for the success of the business.