Why Your Finance Team Should Be Working Closely With Your Operations
- Alexander
- Mar 14
- 2 min read
Updated: Apr 22
"Our finance team can tell me exactly how much we're spending on inventory, but they can't help me figure out why we keep running into stockouts or why our carrying costs are so high."
If this sounds familiar, then there is a clear disconnect between finance and operations in your company.
Beyond being just an inconvenience, this may be holding your business back from reaching its full potential. When your finance team operates in isolation from operations, you're missing out on opportunities for optimization, cost reduction, and strategic growth.
The Traditional Gap Between Finance and Operations
Traditionally, finance and operations have existed in separate worlds:
Finance focuses on reporting historical performance, managing budgets, and ensuring compliance. They speak the language of margins, ratios, and return on investment.
Operations concentrates on the day-to-day running of the business—managing inventory, optimizing processes, and ensuring efficient delivery of products or services. They talk about lead times, capacity utilization, and workflow efficiency.
This separation creates blind spots that can seriously impact your business performance.
The Power of Integration
When finance truly understands operations, and operations understands finance, magic happens.
Here's what this integration looks like in practice:
1. Inventory Management That Makes Sense
Instead of just tracking inventory value, an integrated finance team:
Analyzes carrying costs against operational needs
Works with operations to optimize order quantities
Helps balance working capital requirements with operational efficiency
Creates meaningful KPIs that drive better decision-making
2. Process Improvement with Real ROI
Rather than simply monitoring labor costs, an integrated approach:
Identifies high-cost activities that need optimization
Quantifies the financial impact of operational changes
Helps prioritize improvement initiatives based on financial return
Measures and validates the results of process changes
3. Strategic Decision-Making
Beyond just providing historical data, integrated finance teams:
Provide financial context for operational decisions
Help evaluate make-vs-buy decisions
Assess the financial implications of different operational strategies
Support capacity planning with robust financial analysis
How to Bridge the Gap
Creating this integration doesn't happen overnight, but here are key steps to start the process:
Ensure your finance team understands the operational side of your business:
Have them spend time on the shop floor or in the warehouse
Include them in operational meetings
Encourage them to learn about your processes and challenges
Create shared metrics that matter:
Develop KPIs that combine financial and operational measures
Ensure both teams understand how their actions impact these metrics
Regular joint reviews of performance
Encourage collaboration in planning and problem-solving:
Include both teams in strategic planning
Create cross-functional teams for major initiatives
Encourage regular communication between departments
Invest in the right expertise:
Look for finance professionals who understand operations
Provide training to help both teams speak each other's language
Consider bringing in expertise that can bridge both worlds
You can't afford to have your finance and operations teams working in silos. The businesses that create strong connections between these two functions see:
More efficient operations
Better cash flow management
Improved profitability
Faster problem resolution
More informed strategic decisions
When finance truly understands operations, they become powerful partners in your company's success.
Alexander Savage
Looking to bridge the gap between finance and operations in your business? Let's talk about how strategic financial leadership can transform your business performance. Contact us to learn more.
