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Transforming Your Finance Team into Strategic Business Partners
January 3, 2025
Historically, mid-market finance departments have concentrated on accounting functions, administrative processes, and transactional operations. These manual, labor-intensive tasks often required large finance teams just to maintain smooth daily operations. Today, technology enables organizations to automate routine tasks such as invoicing, reconciliations, and data entry. While some might fear this automation could diminish the role of CFOs and finance departments, top-performing organizations have demonstrated the opposite. As finance teams transition from operational tasks to strategic advisory roles, their impact on the company’s bottom line has only grown.
In this installment of our series 6 Pillars of Top Performing Finance Functions, we’ll explore how top performers have redefined the roles of CFOs and finance departments, and how mid-market companies can effectively implement these transformative changes.
How Top Performers Deploy In-House Teams
Top-performing companies in the mid-market have shifted the focus of their in-house teams from traditional transactional activities towards a more strategic way of operating. These companies have successfully reallocated a significant portion of their full-time equivalents towards decision support services. In fact, top performers have completely flipped the traditional pyramid of finance functions.
The traditional finance and accounting median performer organization uses around 60% of its resources on transaction processing and 30% on financial reporting. This means that the average company only has 10% of its finance resources left over for business decision support.
Top performers have managed to both reduce overall full-time equivalents, through technology and outsourcing, and to shift team priorities. At top-performing organizations, 60% of in-house finance team time is spent on decision support. Only 25% and 15% of resources are spent on reporting and control and transaction processing, respectively.
This change in resource allocation comes with profound strategic benefits. By decreasing their reliance on human capital for routine tasks, top companies have effectively increased their operational efficiency. Areas such as Record-to-Report (R2R), Procure-to-Pay (P2P) and Order-to-Cash (O2C) are now operated with 60% fewer resources compared to lower performers. Top performers have actually reduced the number of FTEs required for finance services by almost 47% across all finance functions.
Top performers have also reduced the number of managers by 30% by streamlining management structures and increasing spans of control. This speeds up decision-making processes and reduces costs.
Here’s how mid-market CFOs can take advantage of these strategies to transform their own organizations.
Shift Transaction Processing away from In-House Teams
One of the first steps to transforming the role of the finance team is to streamline and outsource manual and labor-intensive processes.
Utilize Technology
Advancements in technology have drastically reduced the need for manual work in many finance-related tasks. Automation software is often used to handle repetitive tasks like data entry. However, the opportunities for automation are extensive, encompassing a wide range of financial operations.
Robotic process automation (RPA) can transform the P2P, O2C and R2R cycles. In the P2P cycle, automation can manage everything from the uploading of master data to the indexing of invoices and vendor reconciliation. For O2C, RPAs streamline processes from the initial contract entry and invoice creation to managing customer reconciliations and accounts receivable reporting. In the R2R process, RPAs facilitate efficient journal creation, including accruals and more complex tasks like intercompany reconciliations and month-end reporting.
If your organization still does significant amounts of work in spreadsheets, then it may be time to move to a purpose-built solution. The right ERP system will integrate various functions like accounting, procurement and human resources into a single, unified system. This integration provides real-time data access, making it easier for finance teams to generate accurate reports quickly, forecast future trends and make informed decisions. Cloud-based accounting software allows finance teams to access financial data securely from anywhere, facilitating remote work and collaboration. Cloud solutions are typically easier to update and maintain compared to traditional software, ensuring that the finance team always has access to the latest features and security enhancements.
Take Advantage of Outsourcing
Another way to shift transaction processing away from in-house teams is to take advantage of outsourcing. Top performers actually spend 53% more on outsourcing services than their median counterparts. However, this increased expenditure on outsourcing has resulted in overall people costs that are 50% lower than those of median performers. Outsourcing transactional tasks to third-party service providers who are experts in these areas allows these top performers to reallocate internal resources towards higher-value tasks — those that require more complex analysis, strategic foresight and decision-making capabilities. In fact, outsource partners can even help implement leading technology for automation, as discussed above, with little to no additional investment costs for you – which can be a huge win for growing mid-market companies.
Outsourcing is not limited to simple transactional activities; it is also expanding into areas that require judgment and decision-making. While companies can outsource basic transactional functions like vendor payments, invoice processing and reconciliations, with the right partner organizations can also outsource some judgment-based tasks such as dispute resolution and P&L analysis. Outsourcing more judgment-based activities allows companies not only to reduce costs but also to tap into specialized knowledge and expertise that may not exist within their own walls.
Ongoing Training For In-House Teams
As finance departments move out of accounting into strategy, it becomes more important for team members to have a good understanding of how the business operates beyond just the numbers. This means a firm grasp of the market dynamics, knowing what drives the company’s profitability, and how different departments interact to contribute to the bottom line. Business acumen is what turns finance teams into trusted strategic partners who can influence decision-making and drive business improvements. CFOs can put an emphasis on this by investing in ongoing training for in-house finance team members.
Where possible, offer or sponsor courses in strategic management, operations and corporate finance to equip your finance department with the necessary skills to understand and contribute to business strategy effectively.
Team members can attend industry-specific seminars and workshops to provide them with insights into current market trends and challenges. Encouraging team members to attend industry conferences, participate in cross-functional projects or pursue advanced certifications can pay dividends in the long run.
Adaptability is becoming an indispensable trait. The business environment is changing rapidly, especially in the mid-market, and finance professionals need to be agile and ready to pivot strategies as market conditions evolve. This means being open to new ideas, embracing innovative technologies and continuously seeking ways to improve processes.
How CFOs Can Move Finance into Strategy
To truly transform the finance department into a trusted partner of the organization, CFOs must weave finance into the company’s overarching strategy. This means moving beyond the traditional confines and actively participating in decision-making. Many modern CFOs, especially those who have been in the job longer, will have accumulated significant expertise in navigating turbulent economic waters. This experience equips them with a valuable perspective on balancing risk and opportunity.
Consider the current business landscape — economic volatility, heightened competition and shifting regulatory requirements demand more from finance leaders than ever before. This means that those CFOs who can make the leap into strategic finance will be more and more valuable. Companies need solid advice from finance departments that can anticipate challenges and suggest the right counter-strategies. Here are some tips for CFOs looking to increase their input into business strategy.
Foster Cross-Functional Collaboration
Breaking down silos within an organization is crucial for fostering innovation and ensuring that everyone is working towards common goals. Finance teams often have a bird’s-eye view of the company, given their access to financial data across departments. However, to become true strategic partners, they need to engage more deeply with other teams.
This means moving beyond the numbers and building genuine relationships with colleagues in marketing, operations, sales and other areas. By understanding the challenges and opportunities these teams face, finance professionals can offer more relevant insights and support.
Communication plays a vital role here. Finance leaders are finding success by adopting the common language of the organization or department rather than relying solely on “finance speak.” For instance, instead of pointing out that a particular initiative will increase expenses, a CFO might ask how it will improve efficiency or enhance customer satisfaction. This approach fosters more productive conversations and helps other teams see finance as an ally rather than a gatekeeper.
Develop and Monitor KPIs
Finance should collaborate with other departments to develop and continuously monitor Key Performance Indicators (KPIs) that align with the company’s strategic objectives. This cross-functional collaboration helps ensure that KPIs are comprehensive and reflect both financial and operational performance metrics.
Conducting regular KPI review sessions with the cross-functional leadership team allows the company to collectively measure and discuss its progress against strategic goals. These reviews should be thorough and involve stakeholders from relevant departments to ensure a comprehensive evaluation of both financial and operational performance.
If the strategic goals of the company are shifted, then KPIs must be shifted accordingly. Finance teams need to maintain flexibility in their strategic planning processes, allowing for quick adjustments in response to external market shifts or internal performance feedback.
Leverage Data
High-performing finance teams are shifting their focus to predictive analysis, using real-time data to forecast. Modern finance departments need to be able to gather, analyze and utilize data to assess performance, identify trends and support strategic decisions. Proper data management helps finance teams discover ways to cut costs, increase revenue and lower risks.
By adopting advanced analytics tools, finance teams can assess potential risks and identify opportunities before they become apparent to competitors. This proactive approach allows companies to stay ahead of market shifts and the competition. The insights from finance’s data analysis can then guide inventory management, marketing campaigns and resource allocation, ensuring the company is prepared for what’s coming next.
One of the first steps to data analysis is setting up a data collection and evaluation system that integrates well and can process the specific data types that the company uses. Finance teams must learn how to use these tools and understand the data they produce. This may involve scheduled training sessions and ongoing support to ensure team members are proficient with new features and best practices. Establishing clear data governance policies ensures data accuracy, availability and security.
Build Trust and Credibility Across the Organization
For finance teams to be seen as strategic partners, they need to build trust with other departments. This requires finance to be transparent, deliver reliable insights and have a genuine commitment to supporting the company’s broader goals.
One effective way to build this trust is by acting as an educational resource. By (politely) demystifying financial concepts and helping non-finance colleagues understand the impact of “the numbers”, finance teams can foster a more financially literate organization. This not only enhances collaboration but also leads to better decision-making across the board.
Final Thoughts
With routine tasks automated or outsourced, finance teams can shift their focus to more strategic activities. This shift allows them to use their expertise where it adds more value. As top-performing finance functions have demonstrated, taking advantage of this opportunity can be a game-changer in the mid-market. When CFOs and their departments move into strategic roles, they can become catalysts for change, innovation and growth.
If anything in this article piqued your interest as something you would like to implement at your organization but you aren’t sure where to start, or maybe it only highlighted something you already know is a challenge in your organization, let’s have a conversation about it. I help clients every day outline plans to tackle these areas and would love to be of assistance to you as well. You can complete this form and just indicate “I would like to talk with Brock about his article on finance as a strategic business partner”.
In case you missed it, here are the first three articles in this series, “How Streamlined Processes Save Your Mid-Market Company Millions”, “How to Achieve Low Error Rates in Your Finance Function” and “From Variance Analysis to Strategic Planning: How Integrated Business Planning Can Drive Growth”.
