Creating a finance first culture – top tips for CFOs
Digital transformation brings many benefits. One of the biggest is enabling different departments to work closer together, and understand their contribution to the business.
But this increased cross-functional working requires improved communication and understanding. It’s up to the Finance department to help everyone in the business understand how their contributions and actions can affect the organization’s bottom line – positively and negatively.
We call this awareness – and the positive changes in behavior that stem from it – “financial culture.” And the perfect time to implement it is as part of your digital transformation initiatives. Incorporating one change into a general program of change.
As the business evolves, finance must evolve too
Advancing your peoples’ understanding of their impact on company finances will be critical for professional services companies as pressures to drive cost and operational efficiencies rise.
To do it requires big changes from the Finance department – and a big commitment from the CFO. A concerted effort to cement and extend their role as a business partner. And the ability to secure a commitment to continual process optimization from other department heads.
Good financial culture requires incremental improvement to every part of operations. In fact, it’s at the level of ops and sales teams that financial culture is at its most powerful. Because of this, the CFO must be involved at every stage of the sales cycle.
Getting your managers on board
Few managers have a good understanding of how delays in planning, delivery, order-signing, or even simple non-compliance can affect cashflow.
The CFO must, therefore, play a role as both coach and facilitator. Monitoring performance to alert managers to the effects of their teams’ activities, and advancing the importance of cashflow and the importance of the correct technology choices in achieving business success.
Doing this means adopting 3 key success factors for the Finance department.
3 key steps towards a finance-first culture
- Train non-financial managers in basic best practices
This will help their teams to begin transforming their behavior in order to eliminate costly errors and start acting in ways that support the bottom line.
- Communicate financial objectives clearly
This doesn’t just mean telling people what you expect – it means leading by example. Ensure the department is a stickler for all company processes, and work hard to make financial processes relevant to the day-to-day work of the whole organization.
- Base incentive systems on financial performance
Embedding a financial culture within any organization means making financial optimization worthwhile for every person in the business. And with clear communication, employees’ new understanding of the company’s financial reality paves the way to creating incentive systems based around that reality.
Bonus policies can be weighted to reflect team cash flow contributions where possible. And whole-company financial performance targets can be made more relevant to everyone.
Think “digital first” – but pick your tools carefully
Achieving such a wide-ranging cultural transformation of your organization will only be possible with the right kind of visibility and integration. And achieving these requires a very specific mix of digital tools.
One of the most vital is an ERP system that centralizes data from all sources – and processes across the whole company – within a single environment. This is particularly important when it comes to aligning and integrating financial and operational reporting. (After all, you won’t be able to teach your sales teams about the importance of financial culture if your forecasts aren’t well-aligned to begin with!)
Finance isn’t just the Finance department’s responsibility any more. For more help in educating your team on why this is the case, download our new e-guide: Finance First: Unlocking Innovation below.