Finance teams are constantly tasked with maintaining a healthy balance between effective operations and ensuring strategic growth. This is a skill many finance leaders have had to flex over the course of the pandemic when operating models were put to the test and growth dropped slightly on the priority list.
As a result, it forced finance teams to become better strategic partners within the company to build a greater understanding of the needs and requirements elsewhere in the business.
Speaking to Financial Director, Praveen Telang, a strategic finance adviser who has sat on a committee at Age UK, shares how the charity responded to the pandemic to protect its balance sheet and how finance teams can become better strategic partners to the business to ensure budget plans align with the company’s wider objectives.
During the pandemic, finance teams worked tirelessly to protect their company’s cashflows and manage risk. Could you explain the methodology you took as a member of the Strategic Finance Committee at Age UK to respond to the pandemic and protect the charity’s balance sheet?
One of the first responses to the pandemic-led lockdowns was to draw down on the reserves accumulated for these rainy days, so as to protect the most mission-critical operations of the charity. The finances of Age UK, Britain’s 16th largest charity by revenue, are and were very well managed even leading-up to the pandemic in a well thought out and documented policy, especially pertaining to the reserves portfolio.
A good reserves policy not only explains to stakeholders why an organization is holding a particular level of reserve funds, but also provides confidence that finances are being well managed, and signals overall resilience. If reserves are too high, money is tied up when it could be spent on value enhancing activities. If too low, then there is a risk to the viability of the organization.
Other measures included rationalizing discretionary costs and utilizing most government support packages like furlough schemes and grants.
Most finance teams are doing their best to navigate the ongoing uncertainty in the world. How can senior finance leaders become better strategic partners within a business and ensure their budget plans align with the company’s wider objectives?
While finance teams are involved in a variety of day-to-day activities like accounting, compliance, funding, risk etc; there tends to be an overarching perception about finance departments being a ‘policing function’.
The best way to counter this as a finance leader and steer the narrative towards strategic partnership, is to develop a sound understanding of the business model of your organization – be it profit or non-profit. By this I mean, developing an understanding of the vision, mission and the strategy to deliver the mission. Examining at a deeper level what the main drivers of revenues and costs are across various business segments. Understanding at an organizational level, the value being offered to the targeted segments of stakeholders and the main drivers of that value. Once this is internalized by finance leaders and their teams, it’s easy to be on the same page with other departments like Marketing and HR and become strategic partners.
The other important thing to mention here is for finance to become champions of data-driven decision making at an organizational level.
Many finance functions are undergoing some kind of digital transformation. However, not all companies have the capacity to accelerate their plans in the same way as others can as they juggle resources. How can companies ensure their digital transformation strategy is effective and successful in the long run?
The long run is nothing else but a series of successful short runs. The most significant digital transformation for any finance function has to be data driven. It’s not that businesses and departments have not been leveraging data hitherto. Electronic spreadsheets and MS Excel have been around a long time. The problem has been that data analysis happened in silos across departments and there was no “organization-wide” data culture.
If data is the new competitive advantage, then it has to start with simple, low hanging fruit and easy wins first. At its core data can describe, prescribe and predict outcomes. Add Artificial Intelligence and various degrees of automation can be achieved. However the main ingredient for all this to happen is of course data, which needs to be captured and stored at an organizational level with as much richness and dimension as possible.
A good place to start for finance teams is to develop at least a basic understanding of data architecture and be able to generate meaningful descriptive analysis at scale. Once this is achieved further progress could be made by putting data to predictive and prescriptive use.
We’re seeing a lot of companies invest more into their marketing strategies and use non-traditional channels to market themselves. How can finance and marketing become better strategic partners within a business?
Once again, this boils down to developing a sound understanding of business models by finance. For example, a consumer focussed initiative in a highly competitive segment of a market will require more marketing firepower than for a b2b initiative within the same industry. A basic understanding of the marketing mix, targeting and positioning can go a long way in developing a strategic partnership with marketing and deliver better marketing ROI.
In fact, the same is true in terms of understanding the fundamental drivers of success for other departments like HR or IT to become effective strategic partners.
CFOs must ensure that compliance with regulations does not negatively impact the ability of finance to be a strategic partner in facilitating successful outcomes across the business. Where is the balance between ensuring efficient operations versus strategic growth?
The balance or equilibrium is never static. In a dynamic process, efficient operations of today would have been guided by a sound strategy from yesterday and so on. The proof of the pudding lies in automating repetitive tasks like error detection, bookkeeping etc. using data-driven digital transformation as explained earlier.
If this is successfully achieved, the equilibrium will naturally shift towards focussing on futuristic trends like sustainability, diversity and inclusion, mental health and resilience and maybe artificial intelligence at a level where you are deploying deep neural networks to do a lot of thinking for you.
You have a very unconditional background whereby you started your career in the Indian Navy and have since gone on to work in the bond market and as the CEO of a skincare brand. How has that helped you in your role as a strategic adviser to Age UK?
With a first degree in electronics engineering, I spent the early years of my career onboard several warships of the Indian Navy, specializing in military equipment like radars, sonars and torpedoes. My early experiences taught me the importance of adaptability and the ability to embrace change with an open mind.
Pursuit of an MBA stoked the love for finance, landed me an investment strategist’s job in the London bond markets and the opportunity to acquire the Chartered Financial Analyst qualification. This is how my love for economics surfaced and I ended up doing an MSc in Economics.
Overall, I’d say that a curious mind led me to accumulate a varied set of experiences and a diverse body of knowledge, all of which are extremely valuable in developing a big-picture mindset that’s useful in solving strategic problems in business and finance.