Transforming finance: a CIMA forum has warned business leaders that a failure to change their finance functions could harm their competitiveness.

AuthorSimons, Peter
PositionTechnical matters

The CIMA Improving Decision Making in Organisations Forum is so named because its members recognise that management accounting has a broad role to play in supporting decision-making across organisations. As global markets give companies around the world access to similar resources, and as increasing competition causes business processes to converge on similar standards, decision-making remains the crucial link in the value chain leading to superior returns.

The forum's viewpoint is supported by the distinguished academic Thomas Davenport in Harvard Business Review ("The coming commoditization of processes", June 2005). He also suggests that this convergence of standards will lead to the further outsourcing of non-core business processes.

Diageo is an example of a global company that has applied this logic. It has a keen understanding that its brands create shareholder value. Brand management is, therefore, the basis of Diageo's success. It has outsourced many other processes-including accounts--that might once have been considered core activities.

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The world's best-performing firms have already seized the opportunities presented by finance transformation to make their accounting functions more efficient. But they have also developed accounting professionals to operate as business partners, helping to improve decision-making across the organisation.

The long-discussed finance transformation is already a reality for these companies, giving them a significant competitive advantage.

The blueprint for improving the efficiency of the finance function is relatively clear, but developing effective business partners to provide decision support is a greater challenge. It requires a change management programme, starting with a shared vision of the future role of the function.

The forum contends that any company not transforming its finance function to become more efficient and effective in supporting decision-making could be jeopardising its competitive position. This opinion is supported by a number of studies. For example, research by Accenture has shown a correlation of over 70 per cent between businesses with high performance and the excellence of their finance functions. And a study by the Economist Intelligence Unit for KPMG has found that, relative to their peers, top-performing companies' finance departments place more emphasis on decision support.

Diagram 1 illustrates the decision-making process as discussed by the...

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