Welcome back to the five pillars of financial control, and today we’re going to be talking about number three, value creation. Once again, we sit down with our panel of experts, Caroline Adams, Former Senior Finance Manager, Debenhams, Sam Ryan, Global Process Owner P2P, ITV and Paul Sutton, Head of Financial Compliance, UCLH NHS Foundation Trust, and talk about how value creation is an important part of successful financial control and how we generate value at every level of the business.
Obviously, being able to create value is an important part of a successful financial control system, so let’s look at what our experts had to say on the matter.
Adding Value in Procurement
So, we will kick this one off by going to Paul, who speaks about adding value to procurement. His approach is grounded in the idea that you can add either value to the initial procurement process or the renegotiation of assets.
His reasoning on the subject is quite effective, and looks like this in that he says, “if we are paying all of our invoices for procurement within the contract terms, then there’s no need for anybody to spend time and resources chasing up these contracts, which helps to create value.“
Ultimately, Paul puts an emphasis on looking at things in a very end-to-end basis, and it’s an approach which really does do well.
It’s safe to say that Caroline takes a slightly different approach to value creation and puts an emphasis on creation through reporting.
Her take on it is knowing where to begin, saying that “reporting needs to be over the top so you know we’re going to go in, you know where you’re going to focus, whether that is working capital or cost reduction, and just using data insights to make smart choices”.
This reporting offers businesses early access to data that can help them track whether or not they’re creating value and serve as a warning system for other things. It’s a very multifaceted approach, but it’s one that has many practical benefits at the same time. It just serves as an additional control; it’s incredibly helpful for business.
Plugging Smaller Gaps
Ultimately, Sam takes a unique approach as well. Her belief is that it is necessary to plant the smaller gaps by introducing policies that help to prevent issues. So, she talks about this at length by referencing a past situation of hers, saying that “we’ve implemented travel desks and small order desks, which are places where people can stop by and get help with their day-to-day processes, and by doing this, we’ve been able to really put a lead on erroneous spending. by building these policies into systems, that’s an area we can always improve in, capital management.”
Sam makes a very sensible point that, like a balloon that’s been poked full of holes, there are often tiny gaps where spending gets out of control, which means the value can be created by successfully plugging those gaps, and building policies into everyday systems that effectively help to manage the flow of capital.
Sometimes, in order to successfully create value, you have to address where a company is bleeding money, and preventing false spending and correcting bad habits is often a great way to create value internally, without having to go anywhere else, which helps a lot with financial control because the internal system is so well polished.
Creating value within a company can be one of the hardest things to do because you have to look at both external and internal policies. There are many people that believe you can create value externally through your interactions with suppliers or general procurement practices, but there are also equally valid lines of thinking which suggest you can create value internally by stopping unnecessary spending and tightening up the way capital is used.
The thing is, both ideas are completely valid, and our experts have presented a rather balanced take on them. There is no right or wrong answer because there’s no right or wrong way to do things; there’s simply what works in the situation.
Creating value externally is always a good idea, but at the same time, it can also be worth focusing internally, working out where you need to try and tighten up value creation, and then using that as a framework to make sensible decisions. Look at how spending takes place inside the company, and you’ll start to see that maybe things could be improved. It can take a bit of time at first, but it’s worth it to get right in the long run.