What is financial maturity in financial performance management and why is it important?
Improving your financial processes begins with understanding your current position and looking ahead to where you want to be. But amidst the hustle of daily tasks, recognizing areas for improvement or automation can be challenging. Let's explore the concept of financial maturity and how assessing it can transform your business.
What is financial maturity in financial performance management?
Financial maturity measures the sophistication of your finance processes. The process of measuring financial maturity involves looking at your finance processes on a sliding scale and assigning your current approach to the appropriate category.
For example, if you manage your budget in spreadsheets, this is commonly categorized as a “low” level of financial maturity. This is because spreadsheets are a static tool that are hard to scale as your company and your financial data grows. Other processes, such as budgeting using a Financial Performance Platform, are considered more mature, as they can “provide access to common databases, manage data scenarios and related workflows and ensure transparency.”
The time is takes you to finish your budget, reports, or plans also dictates your level of maturity. Quicker decision-making and plan adjustments reflect a higher level of maturity. According to Gartner, mature finance functions can answer the "why" behind the numbers by integrating data from multiple systems, instead of merely presenting the results.
When evaluating your financial maturity in financial performance management, consider these five areas:
- Skills: Do you have the necessary skills to achieve your desired level of maturity, build relationships with other departments, drive automation with systems thinking, and provide foresight through planning and analysis.
- Technology: Do you have the appropriate systems to store and analyze data, and automate key functions?
- Relationships: Do you have cross-functional connections to collaborate with? Collaboration is crucial for realizing the potential of a modern finance function.
- Position: How is finance valued within the business? As a strategic partner or a functional resource? Going beyond historical data to look at future trends is key to establishing greater value.
- Process: Do you have the fundamentals automated to minimize risk and maximize available resources? Creative minds should not be wasted on repeatable tasks but rather applied to planning and analysis.
How does financial maturity impact my growth?
Your level of financial maturity can influence your company’s growth. If you’ve been in business for a while and are still using spreadsheets to manage your core finance processes, your growth may be stagnating.
The most financially mature organizations have the processes and technology at their disposal to make agile decisions around investments, controlling and optimizing costs, and improving performance on critical activities.
As a result, higher levels of maturity encourage collaboration with other departments and increase finance’s influence over the organization.
What is a financial maturity model in financial performance management?
A financial maturity model measures your current finance processes against industry standards and best practices, and identifies the opportunities and risks associated with your current state.
Keep in mind that maturity measures can change over time, as new technology emerges and can transform your finance processes further.
Using a financial maturity model can help you:
- Assess your company’s financial health and determine how to best scale your processes.
- Get visibility into and control over key financial metrics.
- Unify your data to reduce risk, boost your company performance, and optimize costs.
How do I know if my financial performance processes are mature?
By evaluating your financial maturity, you can develop a baseline for your current processes, and better position your business for success in the face of disruption. With an understanding of which processes need improvement, and how technology can elevate your contributions, you can create a roadmap for finance transformation.
Take our Financial Performance Assessment to determine your financial maturity level. This five-part assessment will measure the current state of your finance processes and give you tailored insights on how you can take your finance function to the next level.
