From profit to purpose: Changing the way finance measures value and performance
Sep 24, 2020
The traditional number-crunching accountant, poring over historical data and churning out financial reports is fast becoming a thing of the past as businesses need a broader outlook than just the bottom line.
Our new report ‘Finance Insights – Reimagined’, conducted in partnership with the ACCA, shows how the Finance function can become a proactive and forward-looking strategic business partner, focusing on purpose as well as profit. But to achieve this, finance professionals must gather and interpret data on business performance beyond just financial returns.
Looking beyond financial capital
In addition to core financial and accounting responsibilities, finance professionals will increasingly need to recognise the role that ‘softer’ intellectual, human, social and natural forms of capital play in ensuring success for their organisations.
Our report explores the Six Capitals of Integrated Reporting, as a framework for this broader performance agenda. They are: financial; human; intellectual; manufactured; natural; and social & relationship capital. We consider the need for increased involvement by Finance in understanding and driving value across these forms of capital. For example:
- Intellectual capital is no longer just patents and copyrights. It is also data on customer preferences and behaviours gained through mobile, cloud and AI applications. This is a valuable commodity. The finance business partner who understands this data and can use the insights gained to drive effective decision making will be ahead of the game.
- Recognising and measuring the social and environmental impact of an organisation is also increasingly important - for customers, employees and investors. The social responsibility of a business is not always easily measurable but the message the organisation sends out can have a quantifiable impact.
- When it comes to natural capital, understanding an organisation’s impact on the environment and resilience against climate change is essential for future planning. Armed with knowledge of how the organisation may be affected by natural events, finance professionals can think creatively to make the most of opportunities that arise and discover new ways to mitigate risk.
Tech innovations fuel data-driven insight and creativity
As the themes of emerging technology, digital innovation and automation disrupt and challenge Finance, huge amounts of non-financial data, metrics and KPIs are becoming available from which to generate insights. However, while this can hugely extend Finance's capabilities, it is only an enabler. The change challenge is broader and involves re-imagining the purpose and role of the business partner.
Finance professionals must play a key role in optimising business processes to exploit the collection of financial and non-financial data, help generate insight that has commercial impact and drive performance against organisational purpose, rather than just profit.
For example, using emerging technology to get up-to-the-minute data on manufacturing processes or the lifecycle of products driving profitability, can enable more agile decision-making. Smart factories and optimised supply chains will provide live data and the ability of finance professionals to respond quickly will be critical.
Forward-thinking finance business partners must embrace this tech-led transformation. By becoming more digitally savvy and taking advantage of greater automation and the wealth of new information available, they can create a more proactive function that helps the organisation deliver on purpose and profit.
Download ‘Finance Insights – Reimagined’ for more in-depth analysis on the changing role of the finance business partner, or get in touch with us.