If you were to dissect the culture of a business, and you ask various people in an organization what the real roles of each department are, you’ll find the well-known dichotomy between “front office” and “back office” operations.
Front office staff are the people who deal with customers. They might be the customer service department, the sales department, and sometimes the marketing department (depending on how involved the marketing department is in the sales cycle). Back office staff are usually the admin assistants, HR, and the killjoy of all businesses – the Finance department.
In businesses I’ve observed, Finance departments often face silent derision or disrespect. Part of it is an us-versus-them mentality that comes out of the front office staff who feel their jobs are more difficult because they deal with customers (compared to Finance, who deal with numbers). And no one from the front office sends memos to the back office saying “please spend less time crunching the numbers” but it can feel like the back office is constantly memo-ing the front office with “watch this expenditure” or “spend less on client lunches”.
Unfortunately, this view is supported by management at all levels that give Finance the nasty job of accounts receivable, the inputting-heavy job of accounts payable, and the dull job of budget forecasting. Compared to the highly creative marketing department and the edge-of-the-seat, in-the-trenches feeling of the sales department, finance is like the broccoli side dish on a plate of steak and fries.
But it doesn’t have to be this way! Finance departments shouldn’t be relegated to the back office in the hopes that their sharp pencils won’t poke a customer in the eye! Finance departments can and should play a far more important role in the organization. Here are some ideas:
POSSIBILITY 1: Finance should be more about business strategy than number prophecy. When the Finance department hounds the sales managers to get in their budgets and then turns them around for a final target budget for the year, their role is reduced to mere numerical interpreter. But what if Finance sat down with sales and talked to them about how their numbers connected to expected outcomes? And then, what if Finance sat down with the executives of the company and actually worked out a forecast that was tied to what the market was anticipating! Imagine a world where Finance’s numbers were more than just a spreadsheet that gets pulled out at every quarterly review. POSSIBILITY 2: Finance should be more about opportunity. Many sales managers have some limited view into which customers are sending business. But the view isn’t always perfect. Or complete. Finance should get involved to show how a customer is really impacting the business’ bottom line. If Finance and Sales talked to each other, Sales might be shocked to discover that their biggest client is actually less valuable than expected because of the amount of work involved in keeping them as clients, or they might discover that a seemingly profitable client isn’t profitable at all because their receivables get very, very old. Imagine a world where the Finance department can relate true business impacting information to Sales to tell them which opportunities are truly the most profitable. POSSIBILITY 3: Finance should be selling, too. When Finance gets the job of following up on accounts receivables, they can potentially do more harm than good. Finance people are highly skilled at numbers, and they might be good “people-oriented” staff, but they are rarely trained in the art of sales. However, when a Finance person, tasked with accounts receivables, gets adequate training in receivables AND customer service AND sales, their success rate at getting the receivables paid can increase, but so will their success rate at winning more business. There are so many more opportunities, too. Businesses should be using their accounts payable list as a prospecting list. They should be temporarily swapping roles between Finance and Sales for brief “see-how-the-other-side-does-it” days to enable new appreciation and new connections. Finance should sit in on sales calls to see why Sales sometimes feels like they need to bend the rules to close the deal (and Sales should shadow the work of Finance so they know what work needs to happen at the back-end if they don’t assess risk adequately during the sale).
The bottom line for businesses should not be derived from a cloistered Finance department. Instead, a business can uncover new and exciting opportunities when it makes its Finance department an integral part of the entire business.
By: Heather Villa
Archive for category Accounting
Proper and accurate maintenance of financial statistics of a business in a subsequent order is the key to quality development for both the economy as well as the reputation of the firm. However, this elementary requirement has always been considered as a lengthy, monotonous affair, which demands good amount of time and hard work. Hence, it has become more or less a necessity to hire an expertise team for sorting out the finance problems of a company. However, unfortunately availing this assistance is not as easy as it appears and to solve this issue, the firms are now moving towards to numerous efficient finance accounting outsourcing companies.
Finance accounting outsourcing will allow you to save a lot on your time as well as efforts. Moreover, you will also get the opportunity of focusing more on your other important business sectors such as marketing, promotion and etc. Even economically, the option of getting finance accounting outsourcing seems quite profitable as these outsource financial professionals’ quote affordable charges, that are any day less than the amount of salary one pays to his in- house team of professionals. In fact, this is quite an impressive reason for all business owners to go for the outsourced services as after all, business is all about earning profits and not encountering losses. Moreover, with accounting outsourcing services, you are assured of receiving the finest quality of work in specified duration.
It is absolutely true that a single incorrect transaction entry or calculation mistake can hamper the corporate relationships, crucial financial decisions and final statement of the concerned business. However, by taking the help of an efficient finance accounting outsourcing firm, you ensure the possibility of making no mistakes in the finance management. These outsourcing firms are well recruited with several experienced and qualified accountants, who know each and every detail about this field. They understand the crucial fact that maintaining accounts is an important task for any any business, irrespective of its size. Moreover, business owners can also take advice from these experts on the issues of funds management, cost effectiveness etc, whenever required. This entire procedure of acquiring outsourcing facilities is executed through the help of online services, where the client also gets the opportunity of maintaining a direct communication with these professionals through the same source.
Taking the assistance of finance accounting outsourcing has been considered as the most intelligent way of improving the efficiency of any business firm. As excessive workload can hamper the growth and development of your business, it is important for you to get associated with a reliable service provider, who can take the responsibility of managing all your financial tasks. Hence, for this purpose, you just have browse through the World Wide Web to gather qualitative information about the various vendors offering this facility. In fact, you can also refer to your colleagues and friends, who are already counting profit percentage with the added support of external finance accountants. Hence, do not get worried with your messy finance department any more and ensure an intelligent hand of help with finance accounting outsourcing services.
By: Michelle Barkley
Managing money is not always about cost cutting. It requires analytical approaches that will indicate which part of the expenses should be minimized or totally eradicated. As such, there has to be measurements in managing money; and in terms of report, this is translated into what is called finance metrics. One cannot just simply decide that a certain process or machine be removed as it is expensive. Decisions based on assumptions are more likely to cause financial damage than assistance or resolution.
There are many aspects in managing finance. There are several Key Performance Indicators or KPIs that need to be incorporated in the report when finances are measured. One of these is job costing. Whenever there are projects that has cost, especially for manufacturing, a job costing analysis should be made. It is in this principle or light that a job costing report should be prepared so the managers will get a picture of what is transpiring. This way, they can also see if the investment is earning or if there is much potential for expansion.
Job costing shows people the total accumulated costs of a certain project, and this should include overhead expenses, too. Full costs are calculated against the revenue, and this is more often than not measured by department or division.
The first part of the job costing report is the job ledger. This should contain accounting transactions in a specific order. Normally, this contains job orders and job numbers categorized in a specific way for easy tracking. This contains revenues, costs, indirect costs, and receipts for all the jobs done for a specific project. The job ledger may be sub-categorized in different buckets to easily identify the pain areas in expenses and lost revenues. This may include current cost, purged job cost, billing cost, and invoice ledgers.
Another metric that can be used in analyzing financial status and movement is discounted cash flow. This is a method in appraising a company and its financial assets. Perhaps the downside of this approach is that it is based on the estimation of future cash out flow instead of current expenditures. However, this estimation is backed up by historical data, which is the foundation of any statistical study. Normally, discounted cash flow is only applied in investments and real estate development industries. However, its effectiveness in gaging financial performance has led it to become one of the most used tools in financial studies.
Discounted cash flow may be confusing to some. The problem is that this is not based on simple addition and subtraction. There are a lot of financial formulas that need to be used because one has to factor in the value of treasury notes and the span of time that has elapsed since the assets were purchased.
In general, people who want to manage their finances should consult an expert in finance management, whether this is personal or corporate finance. It is always best to consult experts when developing finance metrics, to be sure that the things being measured are ultimately aligned with the goals of the company.
By: Sam Miller