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Three trends in corporate finance your financial director should know

Doing finance in today’s corporate world means facing an environment that is quite different from the corporates of past decades. As such, today’s financial director needs to gear up for the specific challenges they will face. Their choices are now more informed than ever before, having access to more information than in previous generations. As a financial director navigates his or her responsibilities, he or she needs to be aware of the nuances of modern day corporate finance.

To better understand their world, here are three trends in corporate finance your financial director should know.

1. More demand for a higher volume of information.

Improved telecommunications and IT capability have increased the demand for information flow. In bygone eras, there was a disconnect between the request for information and the arrival of that information. It might have taken days or weeks to generate financial reports from a static system that was drawing from often slightly outdated data. Today, those delays are no longer accepted. Companies expect a seamless flow between the request for information and its output. Financial directors are expected to draw on recent, relevant data to suit the varying needs of the business. The historical delays in the generation of information are no longer relevant or tolerated. The instant society now demands high availability of financial information in double quick time.

2. Traditional cost reduction strategies have been replaced with a drive for effectiveness.

In the old days, financial directors approached the task of reducing costs using traditional methods in the workplace. Much of corporate finance would be about contemplating which of these options to take – for example, would the company cut down overhead costs, or reduce personnel costs through limiting headcount, or pulling back in the so-called optional areas such as training spend? Today, the bean-counting approach has been replaced by a shift in focus. Instead of looking where to slash costs, financial directors are now focusing on how to make a company’s cost base effective. The emphasis is not so much on getting rid of costs as it is on making the costs that do exist, count. Today’s corporate finance emphasizes making sure that not a cent was spent unnecessarily, frivolously or in a misguided fashion.

3. Macro measurement has been replaced with micro measurement.

Corporate finance today pays attention to the little stuff that tells a big picture. It draws on increased data surrounding customer behavior. This is the information that helps a business better understand its core value generation activities, which in turn enable greater profit generation from customers. What is the company doing to generate revenue? And where can the company scale up efficiency to execute those activities at greater profit levels? For example, your business may sell gardening products to the end user. Corporate finance today would drill down into the details about the sales. What kinds of products are sold in what volumes at what times of the month? These little details added up overall paint a picture about where the business is going, and provide clues as to how to become more efficient. Once you know the details about your sales, you know the best levels of inventory to carry, when to run sales on products, and to what sector of the market. And tracking your business activity at a highly detailed level gives you an idea of exactly what is costing too much or bringing in too little margin, so troubleshooting becomes a focused and efficient task.

Corporate finance today relies on being able to access and understand the rich amounts of data available to finance executives. It requires being able to source, navigate and interpret these resources. If you need someone who can do this successfully, The Finance Team has your answer. One of our highly qualified and experienced professionals can provide your company with the assistance you need for the time that you need it.

Image credit: http://blog.lesroches.edu/


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