Magazine article Financial Management (UK)

Editor's Letter

Magazine article Financial Management (UK)

Editor's Letter

Article excerpt

What is the role of finance in an organisation? Is it to check and double check the figures and to ensure that there's enough cash in the bank? Is it to drive strategy and support products and initiatives with financial and business planning? According to Andrew Higginson, finance director of Tesco, the real power of finance is to create a virtual reality world in which employees work, where all the right things are measured. "Everyone wants to be a success," he told delegates at the third Management Accounting Change Workshop in Siena last month. "But it is the business that decides what successful behaviour is."

Management accountants have always preferred finance departments to take a lead in strategy and planning, rather than just participating in backward-looking financial management. But supporting initiatives with business plans is only one side of the story. "If you focus on sales, you'll find that managers continually reduce prices in order to drive sales up. They achieve their targets, but you'll end up with a devalued brand and business failure," Higginson said. It is up to financial managers to ensure that the right key performance indicators are used, he argued.

This is just one example of an area where finance can lead strategy and make a significant difference to the bottom line. Another is sponsorship, which can cost millions, yet is too often left entirely to the marketing department. Does your firm really measure the return on its investment? …

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