It is time to put aside traditional and sometimes negative perceptions of accountants and see them as integral to the development and growth of businesses.
That is the assessment of the Chartered Institute of Management Accountants (CIMA) which has a growing membership and presence in Australia and a desire to do away with some of the accountant stereotypes and generate more positive and accurate perceptions.
According to CIMA chief executive, Penny McLoughlin, the objective is to have management accountants perceived less as score-keepers and more as business partners.
“Accountants can be seen as the inquisitor, and that can stifle innovation,” McLoughlin said in a recent interview. “That needs to change. They shouldn’t be saying ‘no’, but asking ‘how?’. They should not be asking finance questions, but business questions.”
McLoughlin’s comments reflect the findings of recent research sponsored by CIMA based on interviews with global finance leaders.
That report, published earlier this year, assessed the five key areas in which management accountants could support a more innovative business.
1. Create an innovation mindset
Finance needs to transform itself into a business partner that can help innovation teams succeed.
Change starts at the top: a CEO must set the vision, but a CFO has a vital role in setting the framework in which innovation can thrive.
For a business to learn, sometimes senior managers need to accept that individual projects may fail if the overall strategy is to succeed. This can be anathema to finance professionals steeped in the art of risk mitigation.
Promoting an innovative culture throughout the organisation, where thinking goes beyond the
status quo, can deliver tangible results and enhance competitive advantage.
2. Nurture creativity
There can be a clash of cultures between those responsible for coming up with ideas and the finance professionals who are the guardians of financial integrity and rigour.
Distrust is exacerbated when early-stage ideas are prematurely tested against traditional financial
metrics, before an idea or project can evolve.
More sympathetic approaches can help, such as the creation of ring-fenced budgets with more relaxed criteria for early-stage innovations.
Above all, finance must work in an environment where uncertainty is part and parcel of the process.
3. Prepare the path to profit
Innovation is not an end in itself. Finding the path to profits when an innovation moves towards implementation is a core requisite capability of management accountants.
Building cashflow models, advising on financing approaches, understanding costs and allocating resources are just some of the many ways in which management accountants can bring rigour to the process of commercialising ideas.
Finance can also be a valuable partner of innovation teams, for example, by helping build a more robust business case to gain further backing.
4. Match metrics to the stage of development
Companies must beware of the dangers of trying to apply the firm metrics used in business operations to early stage innovation. A phased, or staged, process gives an innovative idea room to breathe, and limits downside financial risk, while also providing organisations with a structured approach to evaluating innovations.
Finance can add immense value by creating the “stage gates” for innovation, through which each idea can be challenged and refined to prepare it for the next stage of investment.
5. Take a balanced view on risk across the innovation portfolio
Companies increasingly employ a portfolio of strategies to drive innovation, reflecting the discipline’s multi-faceted nature. Management accountants should seek to create an opportunity framework that promotes clarity, transparency and discipline across the total portfolio of innovation projects.
Companies that excel in this realm of portfolio management are often the most successful businesses in the world, even if in reality a lot of the ideas they bring to market are bought in from outside.
