Stuart Bilbrough says expecting added value should apply to every aspect of the business, including from outsourced and external suppliers

This article follows three that I wrote for Interest.co.nz that discussed the steps for lifting a Finance function towards “adding value.”

This article takes a step further and asks to what extent should we be expecting external parties that support a Finance function, and a business in general, be providing added value.

For the first illustration I provide a personal example of where I experienced a value broke down.

It’s not Finance related and in fact my car. I use this example to provide context to our expectations of receiving that value added service in business.

I then dig into some examples related to the services provided to a business and in particular where the touch point is Finance.

It starts with the value received from functions outsourced and then a more specific example of the external auditors.

Should we be expecting added value from our external auditors or are they a necessary evil we want out of our hair as quickly as possible?

Value is best defined by the Collins Dictionary as, among other things; “the desirability of something, often in terms of usefulness and exchangeability” and to be valued is defined as “to hold (someone or something) in high regard”.

We know if a Finance team struggles to add value it will not be perceived as useful by the business it supports.

That is not a desirable reputation for any Finance team in any organisation. So should this be the same for those external parties that support it?

Another way of looking at adding value is good old fashioned valued “customer service.”

It is important to assume through this article that other functions within a well operated and competitive company should also provide value. This is the likes of marketing, sales, business development, HR and so on. The value adding expectation goes beyond Finance.

External parties that support the organisation will generally be suppliers, banks, supervisory bodies, external auditors to name a few. Are they too adding value?

I am the Chief Financial Officer at Radius Care Limited, an aged care provider with its head office based in Auckland. Over the past couple of years the company and its senior managers have developed an expectation of our external providers to add more than just the service or product paid for.

At a recent annual company conference our Property and Procurement Manager, Steven Heesen, presented and specifically referred to our suppliers needing to add value or we shouldn’t be dealing with them.

This is not to be confused with kickbacks or rebates by suppliers that they may view as adding value. The expectation goes beyond a fleeting gratuity.  It is how they interact with the business to assist in meeting the company’s goals and keeping it ahead of the competition. It is providing ideas and innovations where that skill does not reside within Radius.

A Mechanics Customer Service Analogy

Let’s use an analogy outside of Finance to illustrate where value breaks down and by association customer service.

I have a very practical family wagon manufactured by a well-known company across the Tasman. It’s a Ford. It gets me to work, my kids to school and gobbles up the weekly shopping without a hitch and the same for a tank of gas.

A couple of months ago I was heading for work when all hell breaks loose under my car. Bang, crunch, metal on metal, I limped back home and called the Automobile Association. They quickly responded, agreed something was amiss and then called for a tow to the closest Ford service centre.

By this time I’d found a less comfortable alternate way to work. In Auckland it’s called public transport and I want even start on customer service there!! At work I phoned to check the car had arrived and each time was put through to the service department and an answer phone. Each time I left a message including a request to complete a 15,000 km service which was now due.

It wasn’t until mid-afternoon that Ford called and said they’d found a stone stuck where it shouldn’t be, they’d removed it and I could come and pick it up. I asked again if they could give it a service a little annoyed Ford hadn’t noticed it was due and that a good five hours after leaving the first voice message they’d obviously not cleared the message. The lady at the end of the phone said okay and I could pick my car up the following day. She then mentioned my front tyres were worn and could probably do with replacing.

Okay I thought, “Does “probably” mean I’ve another six months? Or does “probably” mean if I drive the car with tyres like they are I was about to put my life, my children’s and the generations to follow in deep and dire risk?” Nothing, not even “…. and by the way we can do you a great deal on a set of Firestones?”

The point I’m making here is that at no time did Ford try to add a little value to my experience with them. There was nothing proactive about the service. It was a pure vanilla fix and nothing else even when Ford could have made more money from that value added advice.

I had an expectation for a service level that I did not get from the mechanic and through having a choice of which mechanic I use can easily change. So why wouldn’t this be the same for a product or service provider that didn’t provide customer service and added value where I work?

External Service and Product Providers to Finance

In Bean Soup – Beyond Bean Counting – Steps for Lifting a Finance Function Skill Set Towards ‘Adding Value’ I provide a number of examples of where Finance can add value. This includes guidelines for preparing professional and insightful analytics and the forward looking value Finance can provide through any financial planning process. This type of financial decision support is now an expectation for most businesses and no longer a “nice to have.”

There are a number of external parties that provide support to the Finance function and by association contribute to Finance’s success. Are they lifting their game too?

If these external parties lack the vision a business has for its value adding Finance function then there is likely to be a problem. As a minimum opportunity to enhance a Finance function’s value to a business will be missed. It becomes critical to identify this and either fix through setting expectations or shifting provider.

Examples of these external parties include banks, external auditors and software providers. There are many more that the organisation depends on.

In many SME Finance team’s peripheral functions may reside outside of the core team. This may be the case where a full-time equivalent isn’t practical so the position is outsourced.

Examples may include IT, payroll and expert advice like tax. At Radius Care both tax and IT is outsourced.

Using tax as an example the value received over and above tax return preparation and filing includes reminders of impending provisional tax payments, tax updates including sessions for more detailed education and an opportunity to network. I also know I can call and ask a quick question without fear of an invoice. They are types of added value. Our tax advisors are part of the Radius team and contributors to the overall success of the business.

Let’s Pick on the External Auditors

I’ll now focus on an external audit. It is an area where I have seen great value added and where I have also experienced a total lack of it.

I started by career in audit at ‘PW’ a few years before the ‘C’, in Christchurch.

I remember my audit manager, Sian Ruth, saying that in preparation for the post audit management letter that this was a chance to add value. To the client an audit is more often than not viewed as a necessary evil. While on the audit we looked for opportunities to help a client improve their control environment and procedural consistency. This took the audit review from “necessary evil” to something our audit clients valued.

Sian also made me aware that in the report it wasn’t just about highlighting weaknesses; it was also an opportunity to mention strengths too. Often an audit is completed quickly and with a minimum of fuss due to a well-run and controlled Finance function. Yet nothing is mentioned by the auditors and the recognition so richly deserved for a year’s hard work completely missed.

For many SME’s the audit may not be required for regulatory purposes or provided as a public document rather more mundane reasons for banks or a requirement of a private investor shareholder agreement. Some get an audit completed as a means of sanitising the numbers in preparation for future PE or IPO. The only tangible outcome ends up being a two page unqualified audit report and a very large bill for services.

Since PW most of the companies to which I have headed the Finance function have required an independent audit. I have experienced both good support and value and quite the opposite.

I set my expectation based on what I provided as an auditor those years ago. Where an external audit hasn’t aligned with the general companywide expectation of adding value the issue is discussed with the engagement partner and if not resolved I have moved to another provider. I’ve learnt that expectations need to be discussed and understood from the start.

If Finance is expected to add value then this should also extend to those that support Finance. If you are not feeling as though you’re getting that added value and good old fashioned customer service, then for goodness sake change and change quickly!!

Depending on the size and complexity of your organisation it is a relatively painless exercise.

Don’t look at that first year of the auditors trying to understand your business with annoyance rather a fresh set of eyes that should be embraced.

We’ve recently changed our external auditors for the reasons above. The first external audit with them is now complete and we’ve received some good ideas about how to further improve the control environment, a better way to quickly complete the statutory accounts and already planning for next year. The relationship is building well.

Take away:

1. A Finance team adding value is the same as providing good ol’ customer service like we all expect today. The same should be expected of those supporting Finance.

2. Challenge those parts of Finance that have been outsourced. This includes payroll, IT and expert advisors. Challenges those external parties like banks, external auditors and software providers. What added value are they providing?

3. Don’t be afraid to change. If you are not getting added value, good ol’ customer service, then change as it will impact any push to improve the perception of Finance in general to the business. When changing set expectations early.

The mileage of my Ford is getting up and I’ve been looking at new Fords. May be instead of putting up with mediocre service I should just go and buy a Holden!!