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Health checkWhat is the role of the Finance function?
Traditionally, in many businesses, the role of the Finance function has been to be in the background keeping track of the money – payroll, payables, receivables and the relationship with the bank – controlling costs and budgets – and reporting on all of this. Top management is usually demanding more and better data produced faster - more consistency, more control – and looks to the Finance function to meet these requirements. This leads to the introduction of bigger and “better” computer systems – new ERP systems - led by the Finance function.
If this was a valid solution to their problems then these organisations that have invested millions in new ERP and CRM technology would not only get a great return on their investment but would also be out performing their competition. Any independent look at the pay back on such systems does not bear this out. Why?
Getting the Finance function to focus on greater and greater details and more and more data does not give valid information for better business decisions. [The role of Accounting is to track the money and record history].
The role of Finance should be providing timely and good enough information as a basis for better decision making. The Finance function should provide judgements on:
- The performance of the system as a whole
- Investment in equipment and facilities
- Make / buy alternatives
- Profit centres - cost centres - sub-systems
- Product / service viability
The Finance function needs to understand the flaws and distortions that are caused in these decisions by using traditional costing – absorption costing – Activity Based Costing and marginal costing approaches. Methods that track their roots back to the Industrial Revolution. The world has changed and Throughput Accounting is the new logical way to make better decisions that relate to value – not just cost.
Our clients who have changed their paradigm on “cost” and “value” have;
- Focused on products and offerings that create more value
- Revised their approach to buying from outside
- Postponed or cancelled investments that were not going to create additional value
- Increased their bottom line
To find out how we can help you to use Throughput Accounting to get better results contact us.
