The Finance Silo
What is one of the biggest obstacles that an organization can face?
THE FINANCE SILO.
SILO
[ˈsīlō]
NOUN
a tower or pit on a farm used to store grain.
an underground chamber in which a guided missile is kept ready for firing.
a system, process, department, etc. that operates in isolation from others.
So often, the finance department of a company is regarded as a mythical creature, who only come out of hiding every once in a while to prod other departments for their budget submissions, their forecasts and their “numbers” (whatever those may be).
I’ve sometimes felt as if my job as a corporate accountant was actually professional nag. In any organization, the finance department should be producing the analytics to inform sound business decisions. Finance is also responsible for maintaining good standing with external auditors and any other authorities who may govern over the business. The ‘non-finance’ departments in the organization are critical to the finance department producing the most accurate analytics possible.
I once had a very honest non-finance employee tell me, upon picking up my phone call, “I’m always so scared when anyone from accounting calls me.” As a Type A perfectionist with people pleasing tendencies, this shook me to my very core. I was new to the organization at the time, so I knew not to take this feedback personally but I appreciated it just the same, and have thought about it often throughout my career.
That employee was the only person to say they were scared when I called, but once I was made aware that this was a thing, I realized that other people were scared too. It wasn’t specific to that organization, but rather a general trend that I have observed. The biggest fears came out when I would set up a meeting to discuss the financials with a particular department. There was always nervousness on their part but this wasn’t because they were doing anything wrong. It was always that they were doing things for finance and either weren’t confident they were doing it correctly, or that they didn’t understand why they were doing it.
I would always take these opportunities to break it down for them in non-finance speak and usually afterwards they would feel very relieved and say that they didn’t know why accounting had always made them nervous, because they get it now. I love that 'aha!’ moment when it clicks. Unfortunately, there are many companies that do not prioritize this ‘aha!’ moment for non-finance staff. It might even be more appropriate to say that these companies don’t even realize that it’s a problem that those feeding numbers to the accounting department have little understanding of the upstream effects of their data.
This is very dangerous thinking, and could cost your business dearly.
A tongue-in-cheek definition of an Accountant, from the internet.
Let’s break this down a little bit. As much as this is supposed to be a joke, it is the unfortunate truth about a lot of the work that accountants do. They are doing the absolute best they can with the inputs they receive from the rest of the organization, which are limited in quality.
The saying “garbage in, garbage out” definitely applies to accounting.
You can have the most slick accounting software in the world with reports ready at the click of a button, but if the people responsible for producing the data going into the system are:
1. not prioritizing it,
and/or
2. not understanding its upstream effects,
Your reports and analytics are not going to properly inform business decisions.
What is the root problem here?
Lack of education and knowledge sharing with non-finance staff.
From the perspective of the non-finance employees, all they know is that they have to send finance numbers daily/weekly/monthly or else they’ll have finance people breathing down their neck. Whether or not the numbers are accurate is not as important to them as ensuring finance doesn’t do any follow-up, so they report a rosy picture and send it off to accounting. They may not realize (for example) that having your actual inventory not tie in to your recorded inventory does not just affect your ability to fulfil orders. This can cause a company to fail an audit, which can have catastrophic effects on the business.
They don’t know what they don’t know.
If you have been nodding your head to any of this, and I think it will resonate with both finance and non-finance staff, what can you do?
Step 1: Acknowledge you have a Finance silo problem.
The first step of solving a problem is acknowledging that a problem exists, so congratulations on taking that first step.
Step 2: Identify the gaps in your current organization.
If you are a finance employee, you need to look at all of the inputs into your department and identify where the gaps are. Do you get daily reports in detail from one department with detailed explanations for any out-of-the-ordinary activity, and yet have other departments who you constantly must chase for numbers and then when you do get the numbers they make little sense? That’s is a gap.
Another example would be departments that report the same numbers period after period, so much so that you have yourself thinking it’s a bit odd. Trust your gut, you likely have a gap there.
Once all of your gaps have been identified, you are ready for…
Step 3: Determine the worst case scenario arising from each gap.
This step is to prioritize your highest risk areas. Get a bit doomsday here, what is the worst that could happen if the reporting from the identified gap area were to cease. If it just means you run out of printer paper for a month, its not the end of the world. If it means that your inventory can become materially misstated, you will want to address it right away.
Prioritize your gaps from highest risk to lowest risk, and aim to do the next steps with each department or employee in that order.
Step 4: Create a safe place for open dialogue.
This step is probably the hardest. You need to set up a workshop attended by both finance and the other department, in an attempt to break the silo. You must create an environment where the non-finance employees feel comfortable enough to speak openly and candidly, without fear of repercussion, about what they like and don’t like about the current processes.
An icebreaker you could use would be: “OK, so do you dislike the XYZ reporting as much as I do?”
Encourage open dialogue around the things they’re asked to do on a regular basis for finance. Encourage them to share anything about the process that they don’t understand or don’t see the importance of. Your job is to facilitate an open forum where they can complain pretty much, and get all of their frustrations out in the open. This is actually surprisingly easy to get them to do, believe it or not.
Oftentimes, there are things being reported by them that aren’t actually used anymore by the finance team. It might have been asked of them years ago by a previous employee and they just never stopped doing it because no one told them to. Get them to discuss the processes they must undergo to obtain the information needed by finance and anything that isn’t valuable - discontinue it.
Let them know that the way things are currently being done doesn’t work for you either, and you need their help coming up with a solution that will work better for all parties. You should clearly explain which numbers you need from a finance perspective, and why they are important.
An example: “If we don’t get the inventory counts right, we could fail an audit.” If you get a blank look after saying this, you might want to dive in deeper and explain what an audit is and the implications to the business if one is failed. Break it down into non-finance speak and aim to have them understanding the importance of what they do.
Step 5: Figure out a better way.
With this new education, the employees are then encouraged to brainstorm ways to get the information to finance in a more efficient way. They likely will have amazing ideas, because no one knows what they do on a daily basis better than they do. Once they know what is most important to you and can put it into a ‘bigger picture’ perspective, they’ll have great ideas. Oftentimes the frequency of reporting can be amended. If they are doing counts daily, but you are only inputting them once per week, perhaps they only need to do counts once per week?
Of course every situation is different. The goal here is to come up with a solution that is win-win for the finance and non-finance staff. Less work is always popular, but so is understanding how important their job is and how critical they are to you doing your job properly.
Hopefully this session will not only increase the financial literacy in other departments, but it will also help tear down the finance silo. If you have done this correctly, the employees will leave the session feeling empowered, listened to, and best of all - feeling like finance is on their side.
This won’t work for us because…
Whether the workloads of your current staff preclude these types of activities, or the interpersonal relationships between finance and the other departments have degraded to such a point that this would not be a successful endeavor, you might need outside help to get this process underway.
Everyone can appreciate a neutral third party at times, and this might be one of those situations.
Still have questions or need support? Click here to reach out!
I LOVE banishing the “finance scaries” by teaching entrepreneurs in an easy-to-understand way. If you’re reading this, you might benefit from my FREE Financial Health Check, which will assess how you’re doing with the financial management of your business, and provide you with customized resources that will hopefully resonate with you.