This article on how accounting and finance team add value to a business is written as an addendum to an article about accounting and finance department not being a cost centre anymore. Without wasting much time, I will go ahead to state and briefly explain how modern accounting and finance team add value to any kind of business – especially small and medium scale businesses.
How accounting and finance team add value
Accounting and Finance departments help their company make most important decisions: like how money is spent and other resources allocated. Below are eight ways accounting and finance team helps companies add value.
- Efficiency Reporting: one of the importances of accounting is to guarantee historical reports that will lead to informed economic decisions. Efficient and prompt reporting is no doubt one of the currencies of the digital age. In fact, no one adds more value to a modern day business than that person who provides timely and efficient information in the right format.
- Cost Avoidance: several economic downturns have over time shown that most of the financial crisis would have actually been avoided if certain costs that were avoidable had not been incurred. The modern nature of accounting and finance department makes developing and implementing cost avoidance strategy one of the main functions of accounting and finance department. Accounting and finance department staff use their training on cost estimation, due diligence and negotiation to anticipate avoidable costs from the beginning and work out strategies with the management that will ensure successful implementation of the agreed strategy.
- Identifying Fraud and Risk: nothing destroys value more than fraud and unmanaged risks. A core duty of finance people is to identify frauds and risks at the nib before it escalates into something unmanageable. Risk management adds value by ensuring that values are not destroyed. There is a saying that a person cannot become rich by throwing away what they gather.
- Profitability and Growth Analysis: an unprofitable and stagnant venture is a sure recipe for disaster. Through profitability and growth analysis, finance and accounting department bring out insights that would be useful to the management is ensuring that a business concern is not only profitable but also growing.
- Cost / Expense Reduction: you are simply increasing expenses if you are not reducing them and this is synonymous to destroying value however you look at it. Please note that cost avoidance and cost reduction are similar but not exactly the same. We reduce costs from already agreed projects while we avoid costs by out rightly refusing to get committed from the beginning.
- Investment appraisal: monies will be thrown at all sorts of ventures all in the name of investments if not for the fact that perceived opportunities are further analysed in the lights of prevailing circumstances. Through different rigorous investment appraisal processes, the shafts are sieved out of the main grains.
- Revenue Forecasting: virtually everyone will be successful if we all have our crystal ball to tell us what the future holds for us. But unfortunately, we don’t have the privilege of having those crystal balls. However, an attempt can be made to understand what the future will look like. Having the ability to do that correctly adds value to a company and that is where the accounting and finance come in. with the plethora of big data and machine learning tools now in circulation, revenue forecasting should be second nature to accounting and finance team.
- Cash Flow Management: one of the most difficult tasks often faced by small businesses is how to manage shortage of cash problem. Without cash, even the most profitable business will sick before you know it. Proper cash flow management scheme adds value by taking advantage of things like; working capital management technique to release funds into operational areas of a business.
Bringing it all together
Accounting and finance departments make their organization’s most important decisions: how they spend their time and allocate resources.
Businesses rely on the information coming from the accounting and finance department to make analysis and reporting more efficient, get more insights and value out of their financial data, and increase their organization’s focus on its strategies and objectives. That means lower costs, more revenue, and a better bottom line. To be able to be all the above to a company, accountants must disruptive.