What’s the number one thing a finance professional can benefit from? If you can only choose one word what would it be? We’ve made our selection!
Wherever there’s variance in a company it’s a chance for someone to explain and possibly improve company performance. If there’s no variance e.g. your actuals are always equal to your budget/forecast/target, then what questions would you ask and more importantly what answers can you expect? If you ask someone “why did your actuals meet the budget?” you can’t expect anything else than “that’s what you asked me to deliver and expected of me wasn’t it?”. Without variance, at least on the surface, it would seem there’s very little opportunity to improve.
As an example, take Maersk Line with thousands of combinations of corridors i.e. transportation from A to B and thousands of customers on each combination, there’s bound to be a significant amount of variance. You will probably see the same thing in your company. As a finance professional, the first thing you need to answer is “what happened”. Most likely the system will tell you that. There’s a variance on the corridor from ABC to XYZ. Next question becomes a little trickier “why did it happen”. You will often need to go and ask around or pick it up during meetings with the frontline teams to explain why the variance is there. The last question and this is where the good finance teams are separated from the great ones, is “what can we do about it”. If you, based on insights gained from the analysis, can bring real actionable options to the table you will have justified your seat at that table. Then the frontline will start to respect you and make sure to always bring you along to important meetings and hear you out when important decisions are made. Without respect and trust, you might as well crawl back into the dark corner you came from.
One of our recipes for success in Finance is quite simple although just like making a soufflé it can be quite difficult to execute. Below are the steps to take and they can be used in all companies in most situations.
- Find the variance (what happened)
- Understand the variance (why did it happen)
- Suggest actions aimed at minimizing the variance (what can we do about it)
This you can execute repeatedly because variance will keep popping up especially if your company is a slave to the budget. Your budget is always outdated even when it’s just been approved. By minimizing variances, there’s a lot of value you can add to the company bottom-line and while you will need to collaborate with the frontline teams you oversee the process. You can facilitate everything and ultimately be highlighted as one of the main contributors to the success of the company. So, what are you waiting for?
What’s your recipe for success in Finance? Are you chasing variances or doing something completely different?