Transforming a finance department into a business partner at a £20m education membership organisation – case study

Virtual Finance Directors moving the Finance Department out of the back office shadows to become a true business partner

Used correctly finance business partners are an expensive but valuable resource however in reality very often end up spending much of their time in data manipulation, reconciliations and reports which are of no direct value to a business. 

Typically this is a symptom of poor systems and processes but often also due to a lack of understanding as to what activities will drive business value.

Over the last 50 years finance departments have been attempting to change their place in business from merely bean counters – paying the bills and reporting what was happened as a fait-accompli into using this information to become forward looking business decision makers and drivers of performance.  This transition continues being a challenging journey since many finance professionals are much happier just crunching numbers rather than becoming involved in commercial interpretation and performance improvement.  In recent years improvements to even the most basic of accounting software have both reduced the time finance teams need to spend in data entry whilst offering the ability to report the same information in a variety of different ways with little additional effort – that said as the quality of data improves so has the demand and expectation from other business areas.

I have been involved in rolling out varying aspects of finance department transformation in several businesses and which very often is borne out a necessity for financial information.  Typically this request originates from either a Managing Director or their Board of Directors and comes with unrealistic expectation that with additional information and their sudden new found commercial acumen, the quiet finance department will save the business!  The latter often being the biggest obstacle to overcome – whilst an effective finance business partner’s commercial acumen should be the number one competency (even above that of bean counting), none the less they are only a voice at the commercial table (albeit influential) but ultimately responsibility should rest with the commercial directors.

Several years ago I worked with a Kent based college group which had acute financial difficulties attributed to poor cost understanding and a lack of individual course profitability analysis based on actual figures.  A top level annual budget was being prepared and the finance team were posting invoices to cost centres but further analysis was limited. 

Working with each cost centre manager the budget was recalculated by each cost type and significant supplier then into which month the charge would occur.  A similar process was introduced for commercial income so turning the budget process onto its head.  Monthly meetings to discuss variances and changes to future months were introduced between budget holders and members of the finance team.

Course income was generally funded through central government grants with the amount based on varying student or course criteria.  A process for calculating the correct income allocation per course was introduced as an intense annual task.  When applied to the costs analysis above provided performance by cost centre and course.  In normal circumstances this should have provided the foundation for the finance department to become involved in discussions about curriculum development especially in respect of required course attendance numbers and trends.

Unfortunately in this situation such analysis was left too late.  The results just gave meaning to the bank balance that due to insufficient student numbers, courses themselves were either loss making or that this became the case after central management cost had been applied. 

Had the finance team become business partners sooner it might have been possible to save this organisation. However this serves to strengthen the potential valuable role finance business partnering can have to a business.

As a summary the key priorities finance heads require to develop a business partnering function are –

 

• • Strong and accurate data (which is input in a way that no further reconciliation or sub analysis is required before it can be used for performance reporting)

• • Finance employees require up skilling in negotiation and influence to underpin their likely analytic ability.

• • An understanding of Board priority as to where and what suitable analysis and general business support will add value – volume of financial reports is not a guarantee of accepted value.