The evolving role of finance

Historically, organisations relied on the finance leader and finance function to prepare financial information for internal and external decision-making.

As the business climate became more complex and dynamic, this affected the role that a finance team plays in the business. Technological change, globalisation and the opening up of both international and national boundaries dictate that the role of the finance professional becomes broader.

Unlike in the past where the role of the finance leader was to collect numbers/data and then communicate/present the same to management, they are now part of the decision making process.
Their voice informs key decisions that were in the past left to management.

The International Federation of Accountants (IFAC), in its article ‘A Vision for the Finance Professional and the Finance Function, Sharing Knowledge, ideas, and experience (2018), notes that an effective finance leader and finance function is a key requirement for all organisations.
From an external stakeholder’s perspective, trust and confidence in an organisation is directly tied to the competence of its finance leader and finance function. The starting point for developing a vision for the finance function is to focus on the customer’s needs, including those of the board, operations and external stakeholders.

The primary responsibility of the finance leader has always been managing financial risks of the organisation to drive growth for the business. The leader is responsible for financial stewardship such as financial planning and record keeping, which ensure assets are preserved and risks are minimised.

Traditionally, the finance leader was viewed as a financial gatekeeper. Over the last decade, the finance leader’s role has shifted from number crunching to co-driving corporate strategy while focusing on long term growth. Today, finance leaders are expected to perform the following roles:

Effective communication
A finance leader’s success is directly tied to his or her ability to focus on the business fundamentals. The finance leader should bear the competence and ability to communicate, articulate and explain what the financials mean in a way that non-finance personnel would understand.

An illustration of this would be the recent changes in standards affecting financial statements. A finance leader would be expected to explain such changes to the board, management and any other party to which the changes may have a significant impact.

Create value
A finance leader carries the stewardship of both financial and non-financial performance. In summary, they are tasked with creating new value; more value; or better value. With the emergence of integrated reporting and integrated thinking, the finance leader forms a strong link between business strategy, governance, risk management, and sustainability so that the board and the organisation consider opportunities and risks in an integrated rather than isolated way.

Business partner
In relation to management and operations, the finance leader needs to understand the organisation’s business model to be an effective business partner who provides insights on financial and risk implications of decisions and their potential implications in the short and long term. In terms of ensuring control, the finance leader needs to institute effective checks and balances involving adherence to limits of authority.

Meet customer expectations
With consistent disruptions in local and global markets, customers’ expectations keep on changing. IFAC (2018) notes that a finance leader would be ultimately judged by peers on what value he/she brings more broadly to their organisation and whether they are meeting the expectations of various internal and external customers including the governing board, management, shareholders and other funders, analysts, customers and regulators.

In a bid to appropriately service customers, a finance leader and or finance team needs to appreciate and understand what customers demand from it.

For a finance leader and or finance function to boast about their effectiveness, they should asses their achievement in tandem with the organisation’s vision. This requires a team that is well-endowed with the right business and sector-specific skills, technical skills, and interpersonal and behavioural skills.

The author is a technical officer at Institute of Certified Public Accountants of Uganda.