WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
To some, this isn’t anything new; their finance functions are
iv.
The accounting profession has credibility and plays a
already there. Others who are used to the finance function
leading role in stewardship,
working in isolation, however, find it daunting. This reflects
v.
Finance is a rational, measured discipline, which
our findings that one organization’s current mandate is
brings evidence-based rigor and professional
another organization’s past. As part of our ongoing research
objectivity to decision-making.
into the future of finance, we aim to emphasize a
harmonious approach and best practice so that practitioners,
The changing role of finance: from core basic activities to
organizations and finance functions evolve to reap the
custodians of organizational value
benefits of the changing mandate.
Historically, the finance function’s mandate was to focus on
The mandate, articulated in interview and roundtable
organizational efficiencies and reduce operational costs. In
research, sees the finance function contributing more to
many organizations, this focus has heralded lean operational
organizational leadership – as a guardian of the business
processes, and now there is no more fat to trim. Technology is
model and value. This is a broader, more strategic mandate,
also at a point where machines can be left to monitor process-
where finance defines, enables and articulates how an
costing and highlight patterns of efficiency. This allows the
organization creates and preserves value. Consequently, the
finance function to refocus its energy on revenue and value
finance function changes from being a centre that simply
creation. Now, it’s time to take on the role, working with
generates products, such as reports, budgets and plans, to a
others across the organization, to drive business
function that works with its customers to provide innovative
transformation that creates shareholder value. To do this,
experiences that deliver organization-wide value. This
finance functions must build on their basic activities. And
includes engaging with external stakeholders and building
they must find new capacity and capability, so they can fulfill
new relationships in the organization’s ecosystem, to
the broader roles that interviewees in our research are
redefine the business model for the digital age.
demanding.
Parker, Van Alstyne & Choudary, note that: Finance is
shifting its focus from shareholder value and discounted
cash flows of assets owned by the firm to stakeholder value
and the role of interactions that take place outside the firm.
Defining the Changing Mandate
“Finance is playing a strategic role for an organization in
transition”.
This is what one employee at a South African telecoms
company told us during our interview research. They
explained that the future mandate for the finance function
will move away from pure reporting and instead develop
and deploy solutions for an organization.
Another interviewee explained how, through value
partnering, the finance function has evolved beyond
bookkeeping to carry out more strategic organizational
thinking. More respondents revealed that their finance
functions had been transformed so that the management
accounting
discipline in their business enables value generation.
This emerging mandate is based on a twin belief: firstly, that
the finance function has a unique end-to-end view of an
organization; and secondly, that the Chief Financial Officer
(CFO) has the business understanding to work alongside the
Chief Executive Officer (CEO) as a co-pilot.
The finance function is well-positioned to meet the changing
mandate for a number of reasons:
i.
It is uniquely situated with an overview of the
business, as every activity has a financial
consequence,
ii.
Its accounting information is trusted; it is auditable
and reconcilable with financial realities,
iii.
Management accounting already provides the
framework for performance management,
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1. BASIC FINANCE ACTIVITIES: FROM INFORMATION
TO IMPACT
Peel back the layers of the finance function and at its heart
you will find the basic activities – the function’s DNA.
Whether you are assessing finance risk, reconciling accounts
or compiling management information reports, the process
activities remain constant.
Figure 1: Basic finance activities: from information to
impact
The function’s basic activities (Figure 1) are:
Assembling information: the finance function assembles data
from a range of sources – collecting, cleaning and connecting
data into assembled information. As well as preparing
accounts and returns in prescribed formats for external
reporting, the function prepares management information in
accessible formats for managers.
Analyzing for insights: the finance function analyses both
financial and non-financial information to draw out patterns
and relevant insights for its customers. Advising to influence:
the finance function then communicates these insights and
contributes an objective, responsible perspective to influence
decision-making.
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