Tim Richardson

Melbourne, Australia

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Transforming Finance at an SME: Establishing a culture of innovation, change and development

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A modern finance function should be more than a scorekeeper: we read that everywhere. Well, it's true, and it's true at small companies as well. Transforming finance at a Small to Medium sized Enterprise (SME) has specific challenges. The Finance team is smaller, the IT infrastructure is less sophisticated and the management team may not be driving Finance to do more. If management does want more from Finance, they are often unable to express a coherent view of what they want. Culture challenges such as a reluctance to share information come into play, and there may be strong resistance to change. This is the fourth part of a series which begins here.

Team management of a transformation

This series of articles is to give ideas how to reposition Finance to be a driver of an SME's performance. This needs the finance function to change and do new things.

Leadership is getting a group of people working more effectively than they would otherwise. A leader Improves the personal contribution of each member of team, through motivation and personal development. A leader also makes sure that the team is working together, and doing the right thing: co-ordination. The reason why a 1 watt laser is so much more powerful than a 100W light bulb is that a laser beam is 'coherent':  the waves all move together.

There are a different ways to co-ordinate a team: the traditional military model, called "command and control", relies an a superior issuing commands, and the subordinates being disciplined through months of training to carry out those orders quickly and without hesitation. Command and control doesn't work very well in civilian life. People like to know why they're doing something, the like autonomy and ownership, and a good business needs people willing and able to take initiatives. As well, an SME can't afford the support staff: the American army spends more than $1m a year supporting a solider.

In an SME, you can simultaneously co-ordinate and motivate a team  by consistently communicating the key objectives of management and helping people understand how they can contribute. Often, you need to tell people what their contribution needs to be, but if you tell them why they are doing it, you often won't need to tell them how to do it. A key measure of your success is how your people prioritise their tasks. If you have communicated successfully, they will prioritise well without your intervention.

At our weekly team meeting, we quickly review priorities for the week. Sometimes I start, but not always; it's good to hear what the rest of the team think priorities are. I don't like more than three or four priorities each. These become minuted and reviewed the next week. 


Innovation, process improvement and ways of working

At my weekly team meetings (strictly 30 minutes at most), I ask everyone to nominate one innovation they will carry out in the week. This means we have a continual focus on small improvements. Over time, these build up. This is kaizen for finance.

With my professional IT background, I know the importance and difficulty of documentation. Written manuals and procedures are a very good idea, but they require a lot of attention to update. In fact, large projects employ "librarians" to keep this up to date. A small team struggles. However, I've found that a small SME team can keep a wiki up to date very easily, and enthusiastically. Wikis are informal, changes are directly visible and they are easy to edit. There are some fantastic open source wikis which are easy to set up and free. Microsoft Sharepoint also offers basic wiki functionality, but the version we have only works with Internet Explorer and the functionality is very limited; open source solutions are much better (our IT team uses trac). Here is an article about wikis from one of my favourite blogs

Learning from mistakes

Mistakes happen, and they particularly happen when people are trying to do new things, or trying to do old things in new ways. A mistake by his or her team is tricky for a Finance leader. Firstly, the Finance team is expected to be extremely reliable and accurate; mistakes can be more embarrassing then for other functions. Secondly, mistakes often have cash consequences for the business.

When you are transforming your finance team and the contribution it makes to the business, you will be making a lot of changes, and trying new things. Finance is no longer the conservative record keeping function it was. Inevitably, there is much more potential for error. To keep confidence during a transformation project, it's very helpful to have strong ways of dealing with mistakes.

A mistake is always due to a poor decision by a human; a disaster is several mistakes happening together. But since humans make mistake, we need to build some robustness in the way we work: mistakes that get through the control system often indicate poor systems or training. Good people make mistakes; help them avoid repeating the mistake. I steer for a culture where mistakes are treated impersonally and rationally, but by a process that explores personal responsibility as well as other root causes and improvement opportunities. If you have people who don't care about making mistakes, then you've got a serious problem and you need to fix that first. Assuming you have a motivated team working together, then you have people who hate making mistakes. A process that tries to discover why a mistake happened is very often going to find weaknesses in systems, training or prioritisation. The leader's contribution is to help fix those problems.

Below is form similar to one kept on our wiki. It's completed after a significant mistake, including by me. It's partially inspired by the typical bug report system of an open source project. The example is fictitious.


Title Non-booking of invoice
One line description Some invoices were not booked and therefore not paid
Who detected the problem? (the person who informed Finance of the problem) Purchasing
When was the problem detected? When attempting to order stock, the supplier told us we where on credit hold
Who did if affect?


Management Team member>

Who owns correction of the problem? Person's name
What should have happened? Invoices should be booked as soon as they are received by finance (but put on hold pending authorisation)
What did happen? The invoices were sent to approval before being booked, and the approver forgot to return the invoice.
Root cause of the problem?
Every error is finally human error. So saying "human error" is not very helpful. Root causes can be traced by to controls and checking, better training, more personal ownership.
The paper-based approval process is vulnerable to lost paperwork or delays in processing

Corrections to be made personally (by problem owner)
Describe improvements the problem owner can make using his or her own abilities and resources

Book invoices but put them on hold so there is a record.

Support requests
Improvement suggestions to be delivered by others (eg system changes)

Ideally, a workflow-based approval flow, using scanned paper documents and integrated with our email system.

How could the error repeat?
Even after making the improvements above, imagine ways that the error could re-occur.

By simply booking invoices and putting them on hold, we still need the discipline of regularly reviewing invoices on hold


next article: People skills, team building and putting it together


About the author

Tim Richardson is an experienced finance professional who differentiates himself by his versatility, his IT and system skills, and his people skills.He has an enormous range of leadership experience gained in the FMCG sector, online B2C, manufacturing and international supply chains, and he has worked in emerging Asia, mature Western Europe and transforming Central and Eastern Europe. His qualifications span the communication strengths of an Arts degree, the analytical skills of a Computer Science major and the professional skills of a Masters degree in Finance. His has built teams of all kinds of talent mix and lead them through change, and has a strong record in recruiting and developing people. His practical IT skills and systems background is very strong in maximising the value of information spread throughout the organisation, and his ability to help experienced management focus on the issues and consequences of decisions enables him to add value very quickly. He is currently enjoying his CFO role with an Australian SME with a major international online presence.

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Last Updated on Thursday, 23 December 2010 20:52