As a consequence of the effects of globalization, innovation in new technologies, and increased digitization, businesses in numerous industrial sectors are undergoing fundamental transformations. These developments not only provide a plethora of chances to assist the company to fly to greater heights, but they also bring a number of obstacles to the business model.
They are changing customer behavior, putting more pressure on current markets, and affecting financial performance. In these difficult circumstances, the finance department is being asked to assist lead the firm in the correct way and increasing profitability.
Accountants, sometimes known as bean counters, are now expected to assist corporate growth objectives and help expand the beans inside their firms. The current finance department has developed from a “simple numbers” back-office duty to a “strategic partnering” front-office one that provides deeper insights and clear guidance for converting data into successful actions for people on the front lines of the business.
Unlike in the past, when the finance professional spent his day behind the scenes, hooked to his computer, creating and reporting the figures, today’s finance professional is active in the business, connecting with other organizational functions and helping to drive business performance. There’s a joke about an accountant who is “lost” without a spreadsheet.
This might have been true in the past, but not now. The modern bean grower is a thinker, motivator, leader, team player, and change agent who fully knows the drivers of business success and promotes improvements in terms of new revenue and value-producing possibilities.
It goes without saying that the finance department is in charge of the company’s profit and loss. During an economic downturn, when cost containment is crucial, the finance expert is relied upon to assist in identifying areas where the firm may cut back to increase overall profitability. In good times, finance assists senior management in identifying and pursuing new possibilities. In today’s ever-changing corporate landscape, the adage is “disrupt or be disrupted.” The company must change with the times.
The finance function has the challenge of delivering more with less. As a result, many firms have embarked on ad hoc cost-cutting projects in the hopes of improving their bottom line. Unfortunately, cost containment alone is insufficient or ineffective to enable the business to achieve the desired results. Costs can only be reduced to a certain extent. This is due to the fact that each cost-cutting program eventually approaches a threshold of declining returns, at which time the firm must look for new methods to improve profitability. To increase its impact on firm profitability, the finance department must:
Recognize the Business Performance Drivers
To be good bean growers, accountants must go beyond statistics and get a grasp of the company’s products and services, as well as how they impact the business’s profitability. This requires finance teams to look up from their financial statistics and have a greater understanding of the business itself. Instead of focusing just on where the firm has previously failed, finance should give strategic insights, competitive information, and analysis to assist the senior management team to make effective decisions.
Finance, for example, should be able to give data, measurements, and analysis that aid in the transfer of the function’s understanding of the drivers of profitability to others throughout the business, in order to guarantee that profitability evolves into a habit.
By enabling transparency, standardizing business-wide customer data in a sales performance management solution changes sales efficiency.
Assist in Identifying New Paths to Profitability
When it comes to profitability improvement initiatives, the bottom line is frequently prioritized. As previously said, removing fat from the bottom line works to a certain amount. Cost-cutting is a quick cure, but it is not sustainable in the long run, especially if the firm wants to develop. Management becomes deluded and believes that by laying off workers to reduce pay expenses or deferring capital investments, they are improving the organization’s competitive position.
The exact reverse is true. In reality, cost minimization on its own can lead to inefficiency, missed opportunities, and greater operating expenses. There is nothing wrong with getting the business lean, but it must be tied to the business plan, done correctly, at the appropriate time, and for the right reasons. Attention should also be paid to the income side of the business, such as diversifying the firm, organically increasing existing business units, enhancing productivity, upgrading current product or service offerings, and making big commercial purchases.
Invest in Cutting-Edge Technology
As the amount of data created grows, there is an increasing need for finance to make sense of it, spot trends, and devise the most effective actions to help safeguard and increase corporate profits. Finance must understand which information will have the most influence on profitability, as having the proper information is crucial to boosting corporate profitability. It is also critical to get this knowledge into the hands of the proper people.
Using spreadsheets alone will not suffice. Finance must invest in and apply current Business Intelligence and Analytics technology in order to discover accurate, trustworthy, and relevant information and deliver it to the appropriate people at the right time. These cutting-edge technologies aid in the transformation of finance into a more adaptable, sensitive, and forward-thinking function.
The capacity to use technology to acquire a more complete understanding of the indicators underpinning the company’s profitability is required for the modern finance role. Learning about a firm or product is one of the finest reasons to read tech reviews. Choosing the best online paystub generator might be difficult.
Create Capabilities for Effective Pricing
The sales organization is typically compensated based on revenue generated, which can lead to the sales team being only concerned with closing the transaction at the expense of profitability. Because not all consumers are equally beneficial to the business, sales should be targeted to maximize profits. Pricing errors have a detrimental impact on the company’s overall profitability. Finance must have a thorough grasp of the company’s various client and product portfolios.
Finance will be able to understand customer costs to serve and use these costs to segment customers, fine-tune pricing, and manage profitability by directing efforts toward growing profitable product and customer combinations by performing customer profitability analysis and product profitability analysis. This cost-to-serve may therefore be used in negotiations as well as forward-looking evaluations to support successful decision-making by sales employees.
Work with the Rest of the Organization to Achieve Your Goals
Although finance is important, sustaining and growing corporate profitability is a collaborative endeavor — it should be everyone’s concern. Finance professionals must collaborate closely with their colleagues outside of finance to establish a list of actionable things that affect profitability. Working more closely with the sales organization, for example, will guarantee that sales staff have all of the knowledge and tools needed to make decisions that support profitability objectives; otherwise, they will be ill-equipped to make the best judgments.
Obtaining the C-buy-in Suite’s commitment is also crucial, as the C-Suite is involved in determining the company’s direction. Through synergies with their finance departments, the C-engagement Suite will lead to the formation of a unified aim and set of KPIs communicated with the front lines of the business. Individuals do not win; teams do.
Finance’s involvement is critical if the firm is to preserve and improve its margins. Finance contributes to substantial and demonstrable profit increases. Consider the larger picture and go beyond short remedies like cost savings. Develop a more complete awareness of your company’s whole set of profitability factors, and fully utilize modern technology capabilities to reveal the organization’s main profitability levers and issues.
Reference: https://amolife.com/infinite/how-to-collaborate-to-drive-company-strategy/
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