BO FOGED | ANDERS LIU-LINDBERG | HENRIETTE FYNSK

CREATE VALUE AS A

F I N A N C E B U S I N E S S PA RT N E R

THE BUSINESS
Business understanding

THE CUSTOMER
Customer focus

THE PARTNER
Partnership mindset

Transfor m i n g t h e
f inance f un ction i nt o a pro f i t ce nt re

B U S I N E S S PA R T N E R I N G I N S T I T U T E
EDITED BY ANDREW CODD
Create value as a Finance Business Partner

1st edition 2018

Authors: Bo Foged, Anders Liu-Lindberg & Henriette Fynsk

Translated by Clem Luxford

Edited by Andrew Codd
Graphic layout by Majbritt Andersen

Printing: CreateSpace
ISBN-13: 978-1724850744

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Copyright 2018 Bo Foged

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The authors
Bo Foged
Bo is the Group Chief Financial Officer (CFO) and
Chief Operating Officer (COO) at ATP. Before
that he was CEO at BankInvest and has held vari-
ous other posts both inside and outside the finance
function. Professionally Bo has more than 20 years
of practical commercial experience and has played
a leading role in finance transformation projects at ATP, BankInvest, Carnegie Bank, The
World Bank, Nycomed and Accenture. He originally graduated with a Masters of Science
(MSc) in Business Economics and Auditing and started his career as an auditor with PwC.
Over the past 25 years Bo has lectured part-time in subjects such as financial accounting,
management accounting, credit assessment, strategy and process management for various
undergraduate and postgraduate degrees in Business Administration and Economics. He
has also written two textbooks and was one of the initiators and teachers of the Danish
Association of Lawyers and Economists (DJØF) Certificated Controller Programme (CCP).

Anders Liu-Lindberg
As Head of Global Finance PMO, Anders is respon-
sible for driving functional excellence in the finance
function at Maersk Transport & Logistics. This
involves, amongst other things, designing, building
and running talent training programmes for finance
business partners. He has previously worked as a
finance business partner and ran various transformation projects in the finance functions at
Maersk Line and Maersk Drilling. He graduated with a Masters of Science (MSc) in Finance
and Accounting and his entire career has been at A.P. Moller-Maersk in various financial posts.

Henriette Fynsk
Henriette works as a Head of Department at
ATP. Professionally, she has many years of pra-
ctical experience with finance transformation
projects in, amongst others, ATP, BankInvest
and as a consultant at PwC. She has also run
many projects and tasks that transverse both the
finance function and the business where the business partner’s value mindset and competencies
have been practised. Henriette Fynsk graduated with a Masters of Science (MSc) in Management
Accounting, and she has since supplemented her expertise by completing executive level courses
including a Graduate Diploma in Business Administration in External Accounting and Financing.
Table of contents
Business Partnering Institute (BPI) 3
Table of contents 4
Preface 9

PART 1 The goal 17

1 The finance function’s burning platform 19
1.1 The CFO’s vision for the finance function 20
1.2 Motives for behavioural change 23
1.2.1 Global motivation factors 24
1.2.2 Local motivation factors 25
1.2.3 Personal motivation factors 26
1.3 The value creation journey starts with self-directed questions 27
1.4 Summary 28

2 The finance function’s roles, tasks and organisation 29

2.1 The finance function’s purpose and generic roles 30
2.1.1 Role substance and role balance 41
2.2 The finance function’s tasks 43
2.3 Organisation of the finance function. 45
2.4 Summary 46

3 Value creation – the higher purpose 47

3.1 The choice of value creation definition 48
3.2 A formula for value creation in commercial companies 51
3.2.1 The free cash flow to equity owners (numerator) 55
3.2.2 Equity owners’ return requirements (denominator) 73
3.2.3 Are all shareholder value initiatives value-creating? 86
3.3 Direct and indirect value creation in the value chain 86
3.4 Value creation in non-commercial companies 91
3.5 Transforming the finance function into a profit centre – an ambition metaphor 91
3.5.1 Finance must grow a profit centre mindset 94
3.6 Summary 95

4 Understanding the business partner’s

stakeholders and their decision-making process 97
4.1 Potential conflicts of interest about goals and morals 99
4.2 Equity owners are generally risk-averse 102
4.3 Directors and managers are – or should be – merchants 103
4.4 Decision-making styles and decision-making behaviour 104
4.5 Summary 115

PART 2 The means 117

5 The business partner 119
5.1 Basic skills and core competencies 120
5.2 The business partner’s value mindset and core competencies 123
5.3 Implementation of core competencies 125
5.4 The customer and customer focus 128
5.4.1 Who are the finance function’s customers? 129
5.4.2 Why is customer focus important? 134
5.4.3 What is customer focus? 136
5.4.4 How do you improve customer focus? 149
5.5 The business and business understanding 182
5.5.1 Why is business understanding important? 183
5.5.2 What is business understanding? 185
5.5.3 How do you get business understanding? 213
5.6 The partner and partnership mindset 226
5.6.1 Why is a partnership mindset important? 227
5.6.2 What is meant by a partnership mindset? 228
5.6.3 How do you get a partnership mindset? 232
5.7 Business partners at different levels of decision-making 252
5.7.1 The operational business partner 256
5.7.2 The tactical business partner 257
5.7.3 The strategic business partner 258
5.8 The company’s scale and importance for the business partner 267
5.9 Summary 269

PART 3 The path 273

6 The business partner’s value creation through the value chain 275
6.1 The starting point of the value creation process 276
6.2 Start from the inside and create the settings 278
6.3 The most immediate and close opportunities lay in the value chain 281
6.4 Most actions will end up with a journal entry 282
6.4.1 Shareholder optimisation 285
6.4.2 Customer optimisation 288
6.4.3 Product optimisation 297
6.4.4 Procesoptimering 309
6.4.5 Resource optimisation 324
6.4.6 Supplier optimisation 342
6.5 Summary 348

7 The business partner’s general precepts 351

7.1 Focus and prioritise value-creating activities 352
7.2 Get close to the heart 352
7.3 Be a proactive role model 353
7.4 Deliver at the right time and with the right quality 354
7.5 Give progress reports and communicate proactively 355
7.6 Create completeness, structure and correlation 355
7.7 Quickly get to the point and the recommendation 356
7.8 Be a team player and avoid the Teflon syndrome 357
7.9 Deliver 100% and avoid Star Wars projects 357
7.10 Bring management options into play 358
7.11 “Usually” is dead - understanding lives 359
7.12 Be a problem solver 360
7.13 Summary 361

8 The business partner in the finance function’s strategy work 363

8.1 The finance function’s strategy model 364
8.2 The finance function’s mission 367
8.3 The finance function’s value mindset and core competence set 367
8.4 The finance function’s vision 368
8.5 The finance function’s strategy 370
8.6 The finance function’s strategy map 372
8.7 The finance function’s strategic goals 375
8.8 The finance function’s strategic initiatives 377
8.9 Personal goals in the finance function 379
8.10 Launch and communication of the strategy 381
8.11 Follow-up on the strategic goals 382
8.12 Summary 384

9 Management considerations for the

implementation of the business partner concept 385
9.1 Take stock of the situation 387
9.2 Start with why 387
9.3 Seek managerial support for the change journey 389
9.4 Define clear and concrete strategic goals 391
9.5 Appoint cultural bearers 393
9.6 Adjust to the company’s vision and strategy 395
9.7 Select the method of approach 396
9.8 Set tactical and operational goals and prioritise 398
9.9 Competency implementation sequence 398
9.10 Translate to different organisational levels 403
9.11 This is how to close “The knowing-doing gap” 404
9.12 Create small successes, make them visible and celebrate them 406
9.13 Communicate, follow-up and communicate 406
9.14 The long hard haul 407
9.15 Summary 408

10 Bibliography 410
 CHAPTER 2

THE FINANCE
F U N C T I O N ’ S RO L E S , TA S K S
A N D O RG A N I S AT I O N

To be a business partner in the finance function is very much all about specific daily
behaviours. Let us therefore briefly describe the finance function’s overall framework, which
also makes up the framework for the business partner’s work.

To help with this, we will look at the different purposes and roles that the finance function
should attempt to fulfill within the business.
2.1 The finance function’s purpose and generic roles
There are three fundamental purposes and generic roles within internal and external
accounting that the finance function should fill:

ADVISING
Role 3

COMPLIANCE CONTROL
Role 1 Role 2

Figure 4 – The finance function’s three key roles.

The three roles are respectively about:

1. To assist the business to monitor, identify, observe, document and report on external
statutory requirements, etc9. This will be in the form of annual reports, tax returns,
Value Added Tax (VAT) and other local sales tax statements, statistical data submis-
sions, etc., to the company’s various stakeholders (Role 1 - The compliance role).
2. Assist the business with controlling and driving10 the achievement of the company’s
vision, strategy, critical success factors and goals, etc. (Role 2 - The control role).

9 The definition goes slightly wider than purely statutory requirements, in that there can also be talk of complying with certain
standards & principles, for example, accounting and auditing standards. However, what is crucial here is that the rules are
mandatory and constitute a kind of licence to operate in a given industry and so must be complied with.
10 Not necessarily directly, but indirectly, for example, via the control and performance evaluation systems that are designed for
management. It is important here to keep an eye on the motivational element.

30 | CHAPTER 2
 3. To assist the business through the provision of fact-based knowledge for idea
generation, analysis, evaluation, decision support and implementation of better and
more value-adding decisions than their competitors (Role 3 - The adviser role).

In the third role (adviser role), the term “value-adding decisions” are understood to occur at
the operational, tactical and strategic levels and so contribute towards value creation within
the company, and these areas are defined in more detail in Chapter 3.

For all three roles, it means that the finance function as a team must be able to fill and
support these effectively at the strategic, tactical and operational levels. In practice, this
is done by having finance employees represented to varying extents at all three levels of deci-
sion making. For example, a shared service centre will primarily perform compliance and
control tasks with a clear goal that it must be done efficiently and competitively, but it may
also advise customers about the use of the systems that are supported in their daily lives.

Nevertheless, the model can be a good starting point for all employees to assess whether the
team and the individual bring all three roles into play in daily life and gets them balanced
properly. In these considerations, it is worth noting that the business may tend to experien-
ce the adviser role as more value-adding than the compliance role, because, as a general rule,
the adviser role comes across as being more on-hand and directly solving the implications of
customers’ problems, and so has the appearance of being more visible.

In the following section we will review the content of the three roles. We take the time
to describe the control role in a little more detail as in our practical experience its value
creation potential is underestimated. Next, we will look at thorough illustrations of each
roles’ interdependencies and the balance between them.

The compliance role

The compliance role includes compliance with the statutory requirements and thereby
securing the company's “licence to operate”. Requirements are set by public authorities
such as the Local Business Authorities, Local & State Tax authorities, Statistics Bureaus,
the Central Banks and Financial Supervisory Authorities, etc. Tasks include, for example,
registration and preparation of accounting, assessing taxation and informational docu-
mentation requirements, etc. The outputs are annual reports, tax returns, transfer pricing
documentation, sales tax and payroll statements, etc., which are primarily used in the
company’s management process but which may also be relevant in the decision-making
process (e.g. if tax is an element in the forecasting and evaluation process). The compliance
role differs from the control role in that the former is defined by and based on the statutory
legal requirements and standards that a given company must satisfy in order to operate
legally. Nevertheless, there should be an attempt to make the solutions in this area as busi-
ness-orientated and commercially practicable as possible. On the other hand, the control

CHAPTER 2 | 31
role is more ‘needs driven’ in that it is more orientated towards controlling the performance
of activities towards satisfying the needs of management or other stakeholders. The com-
pliance role forms the foundation for the other roles, because if statutory requirements are
not under control, then the finance function will not have the necessary time or credibility
to fill the two other roles. On a more practical level, we must not forget that it is precisely
the statutory accounting requirements that ensure a large part of the finance function’s basic
data input.

The challenge with the compliance role is to find the appropriate balance of the scope and
solution of such tasks in relation to the applicable statutory requirements and the company’s
ambitions in this area. It may even be possible to get some useful business solutions out of
the compliance requirements; however, the overall goal is to operate the area efficiently.

The control role

One of the control role’s main purposes is to follow up on previous decisions, which
at its highest level may simply be about whether the company follows the its strategy.
Alternatively, it may be whether a given investment decision has delivered the expected
return. Ultimately, the aim is to evaluate previous decisions by documenting actual results,
capturing value creation problems or perceived risks in an early warning alert, inspiring
new and better activity initiatives, as well as helping to strengthen the ability to budget and
forecast more effectively.

The control role can also be put into play in relation to the control and incentive systems
used in the performance evaluation and rewarding of employees. This area is mainly
considered to be more at home within the HR function, but the finance function has many
obvious skills that can contribute additional value, one that comes immediately to mind,
could be in relation to successfully designing financial and non-financial measurement
systems that motivate and monitor employees’ behaviour and results. Similarly, the
motivating effects of performance control and monitoring could also be extended to those
suppliers and customers with whom the company would like to encourage more mutually
productive behaviour across their own value chain (e.g. implementing proven models for
performance-based remuneration of consultants or customer loyalty programmes).

Therefore, the control role is a range of tasks involving elements of monitoring, follow-up,
communication and motivation, which combine to help ensure that the company stays
on the strategic management path that has been laid out. Therefore, the control role is the
foundation in the company’s management process, and can, in practice, take the form of
everything from: operational accounting and travel reimbursement controls; to tactical
budget follow-ups and performance evaluations; or be even more strategic, holistic and
non-financial like the balanced scorecard controls associated with the various dimensions
regarding results, customers, processes and employees. The outputs of the control role are

32 | CHAPTER 2
also varied and can come in the form of ongoing bank reconciliations, monthly budget
and risk follow-up, quarterly balanced scorecard statements for management, biannual
key performance indicator calculations on the company’s earnings and capital adaptability,
as well as operational and financial risks, etc. The overarching idea is to ensure that the
company’s activities are well defined and aligned with the company’s overall aim.

The controls can also contain up to three characteristics: being preventative, quality
supporting or discovery enhancing. Preventative controls are the time that is invested in the
training and instruction of employees, for example, in the use of a travel reimbursement
system. Quality support controls are the time invested in processes, administrative procedu-
res and relevant measurement systems. The discovery enhancing controls are the time that is
used to identify and correct the errors that are uncovered both internally and externally.

Once established controls can be either followed tightly or loosely. The former is partly
about the detail level (is it operated on a line-by-line principle?), the frequency (it is daily,
weekly or monthly?) and partly about scope (the total number of controls a person is
affected by). The choice of the level of monitoring can be different from person-to-person
and across organisations, which is why when they are being established their importance
must be weighed up against the relative impacts on motivation and efficiency.

The control role is usually retrospective but may also have forward-looking elements (e.g.
when estimates are compared with budgets, or when performance evaluation systems must
be designed and implemented). The behaviour of organisations can be influenced and
controls can be attempted in a multitude of ways, some of the common ones are through
the use of instruments such as contracts of employment, internal policies, procedures,
guidelines, incentive programmes, performance evaluations and feedback, reporting broken
down by responsibilities with clear goals, etc.

The finance function’s place in the control environment

The finance function’s control role is a sub-element within the company’s overall control
environment, and it should therefore be viewed in conjunction with this. It is referred to in
the scientific literature as “the three lines of defence”.

CHAPTER 2 | 33
 BOARD/AUDIT COMMITTEE

EXECUTIVE BOARD AND SENIOR MANAGEMENT

Risk appetite

EXTERNAL AUDIT
1st line of defence 2nd line of defence 3rd line of defence

REGULATORS
Risk strategy
• Management controls • Financial control • Internal audit
in the business areas/ • Risk management - Audit of administra-
Management
model
Risk departments • Security, incl. IT tive procedures and
- Carries consequences • Quality assurance internal controls
Execution of losses caused by • Compliance, etc.
financial risk capital - Assist with risk
Value creation allocation capacity, appetite
/ risk taking - Responsible for admi- allocation, policies,
nistrative procedures structures, etc.
and internal controls - Monitoring of
reporting on admini-
strative procedures
and internal controls

ADJUSTMENT BETWEEN RISK CAPACITY, RISK APPETITE AND RISK BUDGET

Figure 5 – The three lines of defence – ECIIA/FERMA Guidance on the 8th EU Company Law
Directive, Article 41.

According to the model, finance employees and management should have an overview of
the controls carried out on the front line (first line of defence), in other control units, such
as finance, risk management and compliance (second line of defence) and in any internal
audit (third line of defence). Thereby ensuring coordination and completeness with a view
to achieving an adequate control environment.

Depending on the situation, the work procedures can have the character of top-down or
bottom-up controls, but both with a value-creating aim, refer to Chapter 3.

Top-down controls consist of analytical procedures or audit systems that make the numbers
more probable through key performance indicators. For example, the improvement of
a debtor’s turnover rate can help to make receivables more probable. System technical
controls may be about verifying that systems or administrative procedures are capturing,
securing and producing the right figures.

Bottom-up controls are based on sampling methods that partly test the substance and partly
about the system controls being effective. Since each of these methods have their advantages

34 | CHAPTER 2
and disadvantages, it may be more beneficial in practice to combine them. It is also worth
noting that when commenting on many well-known corporate scandals audit experts
have often identified the lack of analytical controls as being a key component of why such
behaviour was not revealed any earlier.

The adviser role

The adviser role is primarily oriented towards being forward-looking and providing
fact-based knowledge, identifying and analysing opportunities/risks to help the business
make more value-adding decisions. This should be done continuously and ad hoc, for
example, through the preparation of cost-benefit analyses, impact forecasts, scenario
planning, budgets, simulation models, sensitivity analyses, risk assessments and analyses of
other non-financial data.

The decision-making process includes the collection and evaluation of historical data on the
selected analysis area, idea generation targeted at the specific decision-making situation, as
well as providing and evaluating suitable alternatives, including suggesting recommendati-
ons that have been prioritised with reference to the company’s identified goals. Decisions
can be large as well as small and deal with all stages of the value chain. They might range
from what products the company should invest in the pricing of raw materials for produc-
tion processes, equipment and outsourcing. Common to all value-adding decisions is that
financial forecasts, as well as opportunity and risk assessments, form an essential part of
the decision-making basis. For a business partner in the finance function, faith, intuition
and gut feeling are poor substitutes for facts and data-driven analysis processes. This must
be further followed up by good decision-making processes, which should focus on the key
issues and try to maximise the opportunities and minimise the risks for the business (e.g. by
trying to eliminate decision-makers’ cognitive bias, which we describe later in more detail).

Since the other two roles have the character of being backwards-looking, it is within the
adviser role that the finance function has the opportunity to become a trusted, holistic,
proactive and forward-looking sparring partner for the business. The good news for the
business partner is that, in this context, the need for this type of advice is increasing.
Technological developments mean that companies find themselves in ever quickening sands
of change which should they wish to emerge successfully from, gives rise to a need for
everybody to be a fully integrated and interdependent part of the business model.

The challenge for balancing both the control and adviser roles are in getting the deliverables
calibrated and properly dimensioned in relation to the customer’s real needs regarding value
creation, and on the other hand knowing when to use your independence to put your foot
down. If the rule of law and internal guidelines are followed, these roles can be successfully
managed when considered against where’s the best opportunity for value creation.

CHAPTER 2 | 35
The interaction between roles
The three roles and their mutual interaction can be illustrated through the following
bathtub metaphor. The compliance role is about ensuring that the bath is suitably and
legally installed, for instance, by complying with the statutory requirements for wet rooms.
The control role is about continuously evaluating how effective your business is at getting
the water level (value creation) to rise, for example, by checking the bath for leaks and
sealing them, as well as motivating the business to do the same. And finally, the adviser role
is there to seek out and analyse opportunities proactively, understand their implications and
then arrive at recommendations for how to get more water out of the taps so that the water
level rises, as well as to regularly follow up to ensure that this is indeed happening.

VALUE CREATION

Figure 6 – Compliance, control and the adviser role illustrated using a bathtub metaphor.

The roles’ relationship to two classic management processes

In the field of financial management, the business partner’s generic roles and toolbox of
skills support two key management processes. Partly the management process itself which,
if based on a clear mission and vision aims to monitor and motivate employees to follow
the company’s strategic path that has been laid out before them. And also, partly the
decision-making process which aims to provide information and knowledge that enables
the business to plan and make better decisions.

36 | CHAPTER 2
 MANAGEMENT PROCESS DECISION-MAKING PROCESS

COMPLIANCE, CONTROL AND ADVISER ROLES TRANSVERSE BOTH PROCESSES

Mission
Why we exist

Values
What we believe Strategic
Feedback

decisions

Vision
What we want to be

Strategy
Our action plan
Mutual
adaptation Tactical Decisions
decisions Selection process
Budget
Action plan Operational Prognosis
implementaion decisions Evaluation process
Feedback

Accounts Idea formulation

Creativity process

Observation
Budget Control Learning process

Figure 7 – The business partner must support both the management and decision-making process.

The three generic roles transverse the two management processes, although the compliance
and control roles are more dominant in the management process, the adviser role is more
prevalent in the decision-making process. The model illustrates how roles are connected in a
circular process starting in the upper-left corner of the control process with the mission, fol-
lowed by the company’s values and vision. The strategy is the company’s action plan for how
the vision can be achieved, the budget11 is the financial and risk-related assessment on how
much value the strategy is expected to create, and the accounts represent the corresponding
recording and evaluation of the transactions. Parts of the latter (annual accounts) are subject to
many statutory requirements that sees the compliance role brought more into play. When

11 Here the total budget corresponds to the result, balance sheet, cash flow and risk budget.

CHAPTER 2 | 37
individual budgets and accounts are later compared in a budgetary control12, the control role
takes centre stage. These observations are used in a subsequent process of development to
come up with new ideas that assess the risk and return trade-offs through different scenarios,
forecasts and sensitivities before a final decision can be taken. With all of this, collectively
known as the decision-making process, the business partner’s primary task is to advise the
relevant parts of the business (the adviser role) so that, to put it simply, they feel they have
been helped to make better decisions. Decision-making support is crucial because a company’s
value creation can be seen as a direct function of how good it is at making decisions under
uncertainty. And any of these decisions that are subsequently taken and implemented operati-
onally is a by-product of the general management process where there is continuous decision
control by means of financial and non-financial performance evaluations (the control role).

Another, simpler and more practical way to illustrate the roles is through the following model.

Position Strategic options Vision

Higher

1. Diversification strategy To Be
VALUE CREATION

2. Focus strategy

3. Cost leader strategy

As Is
Strategic options
Lower

Strategic fluctuation tolerances

Present TIME Future

Figure 8 – The strategic journey from As Is to To Be.

12 The thinking here is primarily of cash flow and risk budget controls, but it can also be Balanced Scorecard controls and the
equivalent. Benchmarking is also an alternative to the more classic budgetary control.

38 | CHAPTER 2
Most companies in some shape or form are usually taking continuous stock of their strategic
position (e.g. through SWOT analyses, reiterating their vision and making strategic choices in
order to realise the vision). In the example above, it is about helping management to choose
between different strategies based on a given situation that will help the company achieve
its vision to be “the world’s leader in their industry”. An important element of it, called the
“decision-making process”, is about impact and risk assessment calculations for the various
strategic options that are ultimately trying to answer: which of the three business strategies
is it best to follow for the sake of the shareholders? And in helping answer this question the
finance function can use its analytical capabilities and wear its adviser role hat.

Let us assume that the company chooses to follow option 2 - the focus strategy. Then for the
finance function it is about building an effective management measurement system (like a GPS
navigation system), which can continuously tell management about the relative success of tho-
se financial and non-financial indicators that are critical to business performance and whether
they are still on the pre-determined strategic path or instead, within the accepted fluctuation
tolerances as defined in their business plan to reach the goal within the specified period. This
is usually done in practice through financial controlling, which continuously calibrates the
actual “fuel consumption” and also business controlling, which regularly measures whether the
expected business milestones are reached along the way and makes appropriate recommendati-
ons and solutions if this does not happen. Here the control role is brought into play.

If during the strategic journey the company comes to deviate significantly from the strategic
path or loses speed, then it is the finance function’s job to make management aware of this
(via an early warning alert). Then there may be a new decision situation where you must
choose between various alternative courses of action. The finance function must once again
go in and analyse, as well as calculate the relative impacts of the various options so as to
improve the likelihood that the best choices are being continuously taken (adviser role).

Decisions can also be of a more tactical or operational nature, such as choices between
individual products or opting out of specific distribution channels, etc. All decisions
however have the common feature that they must increase shareholder value or satisfy some
other stakeholder needs.

Along the way, the finance function must collect and summarise all relevant financial data
that needs to be used to prepare various types of external reporting. The annual report
and its components are the most prominent, but income and sales tax returns, plus other
statutory reporting statements to various authorities also fall under this category. The
compliance role is brought into play for this purpose.

Both the adviser and control roles are usually handled by business controllers or higher
ranked employees, while the compliance role is dealt with by financial controllers. Operati-

CHAPTER 2 | 39
onal controls such as those relating to invoice and travel reimbursement are typically left to
accounting assistants and bookkeepers.

The goal is to attempt to undertake each of the three roles in all parts of the finance functi-
on, albeit to different degrees, so as to limit any potential destruction to shareholder value
that might occur, or put differently, improve shareholder value creation and this is not only
a management responsibility. The competent bookkeeper is also expected to fill the three
roles in their daily work, even though the balance is significantly different from that of the
business partner. For them, the compliance role is just about understanding what statutory
requirements are to be complied with regarding the processing of supplier invoices. It can
be anything from the content requirements for invoices to the processing of any sales tax
on them. The control role is about having secure, efficient and stable operations via the
proper configuration of access and user rights in the invoice processing system, control
of subscription rights and certification levels relating to invoice approvals, document
workflow, compliance with contractual payment deadlines, etc. The adviser’s role is to assist
any customers with supplier invoicing queries, advise on any system improvements and
implement user-friendly and efficient application systems, etc.

Therefore, we also believe that the three-business partner roles are transferable and can
be usefully applied to all organisational levels even though some of the core competency
requirements will be different across strategic, tactical and operational levels.

The role's hierarchy and prioritising

3. DEVELOPMENT
The adviser role

2. SECURE, EFFICIENT AND STABLE OPERATIONS

The control role

1. COMPLIANCE WITH STATUTORY REQUIREMENTS

The compliance role

Figure 9 – The role is hierarchically structured. Task categorisation and prioritisation should follow
the progression in the figure.

It can be tempting for the business partner to use their primary working time on advising
since a large part of managerial recognition is often reaped here. However, even though

40 | CHAPTER 2
development of advisory activities should be a high priority, it must never be at the expense
of compliance with statutory requirements and the maintenance of secure, efficient and
stable operations. Otherwise the finance function would be simply kicking the can down
the road by creating a major clean-up task for itself sooner or later, because development
activities would be brought to a halt to improve compliance and/or controls. The reason is
that often after development projects there needs to be a period for operational maturation
and bedding in, so in the longer-run time must be set aside for scheduled preventive
maintenance on any valuable process, and so, over time there will always be a need for a
sustainable balance between operation and development.

On this basis, the above simple model can serve as a guide for the distribution of tasks and
the utilisation of time within the finance function.

2.1.1 Role substance and role balance

It is not always easy to find the right balance between roles when there are also business
needs that must be met. In our experience, some employees in the finance function will
find reassurance from focusing mainly on the compliance role and/or on manageable
control tasks. The reason for their choice of prioritisation varies but not uncommonly it is
rooted in them having a limited business understanding. To put it bluntly, it is easier for
them to check whether a parking ticket is attached to the travel expenses instead of assessing
whether the company has received the correct proceeds from an earn-out agreement.

The challenges in filling the adviser role, even when the business has a clear need for it,
has meant that many business areas have “taken it in house” and that the business partner
must therefore seek to retake it. In other words, sales, marketing and production are often
unfamiliar with seeking the advice of the finance function’s business partner, which is why
the business partner must actively sell their advice rather than just waiting in the wings for
someone to ask about their input because they do not need it immediately.

Let us stress that we do not disagree that some staff should be given more weight on one
role over another. We are not blind to the fact that the organisational level has implications
for the substantive value of how good the role balance can be. Maybe giving advice to
others is just that bit more natural for people who have climbed further up the hierarchy.
However, it must not be an excuse for the business partner to close their eyes to the
potential that lies in offering the business more substance and a better-balanced performan-
ce outcome. Regardless of which organisational levels employees find themselves on, they
will usually have a professional speciality area that the business needs advice on, either in
the form of application-orientated advice or advice relating to the choice between various
alternative courses of action.

CHAPTER 2 | 41
It is also worth noting here that outputs from the compliance and control roles will be
better if the finance employees are involved in the relevant decision-making processes and
have tried to advise customers since it quite naturally provides a stronger business under-
standing and is better aligned to customers’ needs 13.

Organisational level affects the balance between the roles

The balance between the roles and the organisational level is often connected and is illustrated
below. The higher the organisational level, the more prevalent the adviser role. In practice,
development happens in such a way that the role balance shifts over time from being more
compliance-weighted at the bottom of the organisation to being more adviser-heavy at the top.

Regardless of what level you are on it might be an interesting exercise to categorise your
various activities for each of the three roles and then reflect on whether the role balance is
correct for now and into the future. If not, then there should be a plan put in place and
actioned upon for how this is to be ensured going forward.

A3
CFO

C1 C2
Finance /
Accounting
Manager

A3 Controllers
(finance + business)

C1 C2

Accounting assistants
(pay, reconciliations etc.)

A3
Bookkeepers
C1 C2 (debtors, creditors, travel
reimbursements etc.)

Figure 10 – Evolution of and balance between roles at various organisational levels. C1 refers to the
compliance role, C2 to the control role and A3 to the adviser role.

13 We distinguish between “external customers” as those who buy the company’s products and services and simply “customers” as
those who use the business partner’s services. The explanation is elaborated in the book’s preface.

42 | CHAPTER 2
2.2 The finance function’s tasks
There are many ways to divide the finance function’s tasks, one of which is in the figure below.
Task types
Higher
VALUE CREATION

Decision support

Control

Reporting
Lower

Transaction processing

Figure 11 – The finance function’s task types – PWC’s CFO – Architect of the Corporation’s future.

Transaction processing
This task area covers the posting of vouchers, accruals, travel accounts, payroll runs, payments,
maintenance of master data information in ERP systems, basic balance sheet and income
statement reconciliations, consolidation of subsidiaries, follow-up on debtors and creditors,
etc. The aim is to ensure quality data and record entry so that reporting can be made later
on, extended controls carried out, as well as follow-ups and further decisions can be made
on correct and fact-based data. The basic challenge with these types of task is that there are
so many of them. Most people who have sat within the day-to-day operations of the finance
function will recognise how many half and full days can be gobbled up by an unstoppable
stream of multiple queries regarding payroll, payables and receivables data. It is not a job that
disappears so the challenge is to streamline it. Automation through robotics, Lean Accounting
techniques, offshoring to shared service centres or outsourcing to third-party suppliers can
help lessen the load. Whatever you choose, it is of course crucial that changes to quality do
not jeopardise the effectiveness of controls. Because if we do not have “control of our own
house” we do not have the legitimacy and justification to give input to others on theirs. The
reasoning is obvious – why should a business involve the finance function in strategic ventures
if it does not even have control of its fundamentals, such as data entry and salary payments?

CHAPTER 2 | 43
Reporting
The tasks here cover the types of reporting that the finance function is responsible for
preparing, and these can be anything from internal monthly and quarterly management
reports to external financial 6-monthly and full-year statements, recurring risk reports,
statutory statements and tax returns, etc. The aim is to cover the ongoing finance informa-
tion needs of various stakeholders. Broken down further reporting tasks can range from
the extraction and preparation of data to the commenting, sending and presentation of
reported observations.

Control
These activities are generally about checking the finances, risks and performance of the
business, following-up on previous decisions, as well as the ongoing transaction compliance
with any applicable laws, policies and guidelines. The list is long: Budget controls, standard
cost controls, risk controls, system controls, as well as any balancing controls. It is also
about whether the organisation is performing, is there appropriate value being created for
shareholders and how appropriate are the risks that are being taken, etc.

Decision support
The last task type is “decision support” which is about helping the business to obtain the
knowledge to take value-adding decisions at each of the operational, tactical and strategic
levels. It requires analytical power to look at the business area’s performance, line function
efficiency, product profitability, development opportunities, in- and outsourcing decisions,
etc. These forward-looking analyses should be optimised for risk and opportunity and
include documented and prioritised recommendations to make it easier for the business to
take better and more considered choices. The ultimate aim is to be able to create more value
with a lower relative risk than your competitors.

In our opinion, however, the business partner must not only support the decisions being made
but also influence and proactively drive their effectiveness, which if you look at it another way,
is really about taking responsibility for the company’s overall performance and value creation.

44 | CHAPTER 2
2.3 Organisation of the finance function.
The finance function can be organised in many ways and its individual functions can
have different names depending on the company. Below is an illustrated example of a
functional organisation.
CFO

Finance/Accounting Manager
Other areas eg.:
Bookkeepers • Treasury
Accounting Controllers Finance Business • Tax
(debtors,
assistants (annual reports, Partners • Mergers & Acquistitions
creditors, travel
(pay, reconciliations monthly reports (business analysis, • Business Intelligence
reimbursements
etc.) etc.) optimisation • Data Warehouse
etc.)
initiatives etc.)

Primarily operations Primarily customer facing Mix of the previous

Figure 12 – Organisation of the finance function.

In smaller companies, it will most often be the same person who performs many functions.
In larger companies, there can also be functions such as treasury, tax, Mergers & Acquisitions
(M&A), Business Intelligence (BI) and Data-warehousing (DWH) specialists. Some functions
can even be outsourced or offshored.

Bookkeepers and accounting assistants carry out the typical transaction processing duties,
controller function, reporting and control tasks in relation to financial matters.

Organisationally the business partner will mainly cover the adviser and control roles by
providing knowledge and assisting the business in taking more value-adding decisions, as well as
verifying the achievement of the business’s goals. The areas will be varied and include planning,
budgeting, forecasting, performance measurement and management, investment evaluations,
supply chain analyses, cost and risk management, capital structure and dividend policy analyses,
project financial management, M&A, etc. The financial controller will most often cover the
compliance role through delivering outputs for external reporting, such as annual reports, tax
returns, statutory statements, consolidated accounts and other regulatory requirements.

The business partner can be leveraged across roles; however, it will always be easiest to align it to
functions where there is a need to directly support and advise management in decision-making
situations and ensure continuous controls regarding the fulfilment of strategic business goals.

CHAPTER 2 | 45
These are typically at the CFO, finance manager, accounting manager and business partner
levels. Each role can of course be defined more broadly. However, there is no doubt that the
business partner, as subsequently described, shall spread their wings in order to continuously
demonstrate their value proposition and help to ensure that nothing is overlooked in the
different functional chairs across the finance department.

2.4 Summary
• The finance function’s three key roles
- The compliance role
- The control role
- The adviser role
• The correlation of the roles with management’s control and decision-making processes
• The role’s hierarchy, substance and balance
• The finance function’s task types
- Decision support
- Control, including decision control and performance evaluation
- Reporting
- Transaction processing
• The finance function’s traditional organisation and the business partner’s roles at different
organisational levels

46 | CHAPTER 2