The key to turning your accounting department into a strategic asset in your company is to, well – think strategically! You have to toss out the old world view of accounting and put your strategic hat on for a minute.
In my last post, Your CFO's role in helping you create credibility and trust with lenders and investors, I shared the foundation for evaluating your accounting function. I discussed the three strategic areas where your CFO must be performing well in order to turn the accounting function into a real strategic asset.
The Two Objectives
In this post I want to back up just a bit and talk about the only two objectives of your accounting function.
Everything we do in accounting (and in the CFO role) fits into these two objectives. Not many CFOs think this way… and that's the opportunity. When you think more strategically about the accounting function as a whole, you open up the ability to turn this function into a real asset. An asset that becomes an important part of how you make your company a big financial success.
The first objective is to help you improve financial results.
Every month your management team and others are out there executing the business plan, trying to grow the company, attempting to attract new customers, and working hard to take good care of existing customers.
What they need is fast and accurate feedback about whether they are getting the financial results they are striving for. The worst thing that could happen is everyone is out there working the plan every day - but not creating the desired financial result. That happens in a surprising number of companies because the owner decides (consciously or unconsciously) to just wing it or fly by the seat of their pants when it comes to putting actionable financial information in management's hands.
You want your CFO, and the accounting department as a whole, focused on providing really useful and insightful information to your leadership team so you can hold everyone accountable for improving financial results.
If something is not working, you need to know that quickly so you can make the necessary changes to your strategy or tactics out in the field. You can't let months go by before you finally figure out something isn't working.
The other objective is to attract capital.
From a CFOs perspective, I like to look at this objective by considering the people and institutions that can help us financially as my customers. That includes existing lenders, shareholders/owners, the Board of Directors, and our leadership team. It could even include various regulatory bodies. Basically, everyone who has a vested interest in our current and future financial success.
Obviously, lenders and investors love to see improving results. So our focus on that priority pays off here too. As you successfully improve results (and demonstrate your focus and tools for making that happen), it becomes easier to attract capital. Lenders and investors see that the leadership team knows how to make money. They see their own investment in the company performing well.
And they also value and appreciate insightful and accurate financial information. It's important to remember that most of them are financially oriented people. They respect a professional approach to financial reporting that helps them monitor the key drivers of the company's performance. They know the difference between sloppy financial management and one that is tight and serious minded.
The two objectives work hand-in-hand to create confidence and credibility in the minds of those who will help ensure you have access to the capital you need to grow.
Strong Accounting Helps Make it Happen
Accomplishing those two objectives means you have to have a strong accounting and financial function within your company. You need an accounting function that is firing on all cylinders to help you take your company to the next level.
Thinking about the larger strategy of what your CFO and your accounting department are there to accomplish is the starting point. It means you need to "begin with the end in mind", as Stephen Covey would say.
A strong accounting function will make your life easier and help you win financially in the game of business.
Go for it.