We Need More BUSINESS In Business Finance

Finance people are generally speaking quite smart people… when it comes to Finance but when it comes to Business Finance and finance business partnering there’s this other element called BUSINESS. No matter how smart you are at Finance you cannot be good at Business Finance without knowing about the business. In fact, it’s not just about knowing the business but even more so about understanding it.

The difference between “knowing” and “understanding”

To some that might be a subtle difference but to someone in the finance function trying to partner with the frontline managers it’s the difference between success and failure. Let’s examine that statement closer by first expanding on what the two words “knowing” and “understanding” mean.

Knowing: ‘Knowing,’ or the act of knowing, which is called ‘knowledge,’ is defined as ‘the expertise and skill acquired by an individual through his experiences and education.’ It includes facts and information about certain things of which you are certain about. It involves the basic recall of data which have been previously presented.

Understanding: ‘Understanding’ is processed in the brain. It is defined as ‘a psychological process related to a person, object, situation, or messages which require an individual to think and use concepts to deal with.’ Also called ‘intellection,’ understanding involves conceptualization and association.

Building upon above the difference between the two is described as.

It [understanding] is the awareness of the connection between pieces of information that are presented and has a deeper level than knowing and, in fact, is essential in order to put knowledge to good use.

Now it starts to make sense, right? Understanding is a deeper level than knowing where you process and connect pieces of knowledge to put that knowledge to use. A finance professional might know about what the business is and what it does without understanding how the business does it. Last week I told you a story about a drilling rig so let’s try and stay in the world of drilling to look at the difference from a practical point of view. I know that a drilling business is about having a drilling rig that works for an oil company to drill wells where oil or gas can hopefully be found. I also know a lot of lingo like a jack-up rig, a semisubmersible or a drillship. Do I, however, understand how they operate and what are the differences between them? If I do I can start to inquire deeper into each of them where I will first get to know more about their features and operations in order to further my understanding of how they operate. It’s not until I understand how they operate I can truly start to partner with the business. I might be able to fake it for a while by speaking the same lingo as the frontline managers but eventually, I will be called out on my lack of understanding.

What can you do to start understanding the business?

So what can you actually do to increase your understanding of the business to become a more effective business partner? Here are five practical tips that you can start to work on right away.

• Take a job in the frontline for a while and walk a couple of miles in your business partner’s shoe. That will right away enable you to start insightful conversations, deliver recommendations and create a business impact.
• Sit next to your business partner at least for a couple of days a week. Then you get a chance to pick up on what’s happening in the frontline on a daily/weekly basis plus it gives you a chance to build a closer relationship with your stakeholder.
• Go visit customers and vendors together with your business partner so you understand their pain points. This will help you create a shared language with your business partner and understand the challenges (s)he faces every day.
• Shadow your business partner for a day to get insights into what (s)he’s actually doing on a daily basis. It will also help your relationship building.
• Invite your business partner into your (daily/weekly/monthly) finance meeting to talk about how (s)he sees Finance helping the business.

I invite you to try at least one of these tips and if you’re already well under way with many of them well then just stay the course. Otherwise, how can you expect to build an understanding of the business?

What happens when Finance understands the business?

When you have developed an in-depth understanding of the business and are almost as good as your business partner doing his or her job then you’re ready to accelerate value creation for your business partner. You will have a common language and can find shared solutions. You will have built a trustful relationship meaning that your business partner trusts your insights and recommendations when it comes down to making the decision. Furthermore, you’ll be able to base your recommendations on insights into actual business developments rather than just what the numbers tell you. It’s the combination of the numbers and business understanding that will be Finance’ most important competitive advantage over the coming years. Do this well and ultimately you will be able to help the business create more value which is also the topic I have set out to explore all year.

So let me know what you think? Do you know about the business or do you actually understand it? What initiatives have you taken recently to get closer to your business partners? As always let me know what you think by liking, sharing and commenting on the article.

For previous posts in my series about How Finance People Can Be More Successful please see below.

Bad Numbers Are Killing Good Finance People

What Accountants Must Do To Stay Alive

Creative Accountants Are No Longer Banned

Don’t Measure Finance’s Value Creation

Finance Needs To Clean Up Its Menu

To Add Value Finance Must Become Storytellers

I also encourage you to take a tour of my old posts on finance transformation and finance business partnering and in particular “Introducing The Finance Transformation Nine Box”. You should also join my Finance Business Partner Forum where we will continue to discuss this topic and you can even follow me on Twitter.

How To Speak Finance In A Non-Finance World

Don’t Explain Yesterday, Predict Tomorrow

Variance Is Finance’s Best Friend

Why Accountants Are An Endangered Species

Financial Analyst vs. Finance Business Partner

Case Study: Becoming A Finance Business Partner

5 Ways For Finance To Seize The Day In 2016

The CFOs Roadmap To Transforming Finance

I’m A Finance Business Partner, To Whom?

Anders Liu-Lindberg is the Senior Finance Business Partner for Maersk Line North Europe and is working with the transformation of Finance and business on a daily basis. I have participated in several transformation processes among others helping Maersk Drilling to go Beyond Budgeting and transformed a finance team from Bean-counters to Business Partners. I would love the chance to collaborate with you on your own transformation processes to help you stay out of disruption. If you are looking for more advice on how to get the most of LinkedIn I also have a few tips to share as well as if you want help in your job search. Don’t be shy! Let’s get in touch and start helping each other.