What is the role of the finance department today?

Historical role of the finance department: to ensure compliance with accounting and financial standards and strategic planning processes

The role of the finance department is often limited to monitoring costs, supervising accounting and creating reports, which are not always used to draw up concrete action plans.

Among the traditional missions of the finance department are:

• Compliance with accounting and financial standards and consolidation of financial data
• Ensuring the proper execution of strategic planning processes
• The profitability of the company through its ability to maximize profits
• The solvency of the company based on its ability to repay its loans and debts
• Good management of the company’s cash flow
• The coordination of all the financial actors around the company: suppliers, legal and administrative advisors, tax services…

But the role of the Finance department is not limited to keeping the company’s accounts. Its influence goes far beyond and now impacts all corporate functions.

A business partner for all company functions

Modern finance has started its digital transformation and now works with all departments of the company: human resources, marketing and sales, information systems, purchasing, and production.

Finance is now service-oriented. It works closely with other departments as a strategic partner:

• Human resources to validate the overall human resources budget and by cost center (recruitment, compensation, training, compensation & benefits…
• The information system department to define the needs and resources required to optimize information and management systems, and to manage the implementation of management tools such as ERP
• Communication to ensure the reliability of financial information
• Marketing and sales to monitor margins, profitability by product line and marketing budget
• Trade to define and monitor credit policy and business results
• Purchasing with a centralization of orders and support in negotiating with suppliers
• General services in a negotiation and cost reduction approach

Production to analyze acquisition and production costs But beyond the operational aspect, the finance department plays a major role in supporting management in its decision-making.

A strategic partner to CEOs and the Board of Directors

Headed by the Chief Financial Officer (CFO), the finance department supports the company’s general management in making management decisions and presenting financial statements.

Given the mass of information that the company must produce today and that is made available to the public, the financial department carries out a work of selection, consolidation, analysis and presentation of financial data in order to :

• Drawing up the company’s budget and plan, in accordance with the strategic choices of the shareholders and general management
• To report on the financial situation to the General Management, the Board of Directors, the supervisory authorities and the auditors, in compliance with legal obligations
• Provide profitability and financial risk simulations as a decision aid for major investment projects

However, this role of supporting the governing bodies is not simply a matter of financial reporting.

CFOs can also provide insight on strategic issues to improve corporate profitability and drive shareholder value.

To this end, the finance department intervenes to :

• Optimize the management of capital sources and their use, with a view to profitability and risk control
• To ensure relations with the providers of funds, whether they be shareholders, banks or the financial market
• Manage strategic projects: external growth, mergers, asset disposals, change management, etc.

Is the finance department becoming a technology prescriber?

Over time, the finance department has positioned itself as a partner for all the company’s players, from operations to management, in order to help better analyze value creation and support growth.

Add to that the growing impact of data and its increasing volume, and you can see why finance departments are pushing to implement financial solutions that are more relevant to their challenges and more efficient through technology.

A study conducted by Oracle and Accenture,
shows that the CFO has become a prescriber of new technologies.

Two salient points emerge from this study:

• Cloud technologies are very useful for budgeting, planning and forecasting
• The need for sophisticated analytics, modern applications and collaborative tools using social, mobile and cloud technologies to fulfill their strategic mission

Also read on the topic of digital transformation of finance functions:

• What is the role of the finance department today?
• 5 obstacles to the digital transformation of finance functions
• The finance function, an actor of change in the digital transformation of the company
• Predictive analytics to unlock value and detect growth opportunities
• Better managing talent to overcome the obstacles to digital transformation in the finance function
• Improve financial processes with automation and RPA
• Provide users with real-time data with data visualization
• Advanced financial analysis to improve decision support
• Identify the business processes in the finance function that would benefit most from digitization
• Security at the heart of the company's financial transformation
• From a Finance IS to a Finance Data System