Blog Archive

In my previous article ‘What finance should be, but rarely is‘, I set the scene of how CFOs need to transform the Finance function. Finance needs to redefine itself as a business partner that creates real customer value in a volatile and digital world. One of the key challenges in that transformation journey is the definition of new metrics that represent the value of the company. Traditionally, Finance looks at the return on shareholders’ equity to determine the value of the company. Based on a business plan for the next 3 to 5 years and financial data from the past, a financial projection is made of a free cash flow model that should more or less represent the value of the company.

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If Finance still wants its place at the boardroom table, it should reinvent itself and give substance to the promise of becoming a true business partner. Although a growing number of CFOs are well aware of the challenges that the finance function is facing, in reality, nothing much changes. Meanwhile, the clock is ticking. In this era of digital transformation, companies, across industries, are being forced to shift faster and grow smarter in many different ways. New business models arise, new market entrants – often with a more low-weight cost structure – move quickly and disrupt businesses faster than ever before. To survive in this highly volatile and uncertain environment, businesses have to reinvent themselves to deliver customer value that really matters. And Finance is no exception to this rule.

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