Improve Communications Between Finance and Operations: Shared Facts, Better Decisions

Why Finance And Ops Misalign

If I could, I would make it mandatory for operations and finance and accounting to sit in the same room routinely to walk through the daily issues. If we could figure out how to help these entities talk more openly about what each other needs, then organizations could solve a multitude of problems. Let's walk through a quick example of what we typically see. A quarterly performance review starts with a margin mix. The operations team points to a shift in customer demand. FP&A sees a different product mix. Accounting is still checking whether freight and discounts were recorded consistently. Each team has a piece of the story, but the decision can't wait for three separate explanations. Let's work to improve communication. Please enjoy the episode.

Welcome And Episode Roadmap

Welcome to the Finance Leader Podcast where leadership is bigger than the numbers. I am your host, Stephen McLain. This is the podcast for developing leaders in finance and accounting. Please consider following me on Twitter, Facebook, Instagram, and LinkedIn. My usernames and the links are in this episode's show notes. You can also follow Finance Leader Academy on LinkedIn. Thank you. This is episode number one sixty and I will be talking about how operations and finance can improve communication with each other and I will highlight the following topics. Number one, set clearer communication expectations across operations, FP&A, and accounting. Number two, turn team performance reviews into shared problem solving conversations. And three, keep KPIs relevant as conditions change. Management consultant and author Peter Drucker said the most important thing in communication

Build Shared Facts And Definitions

is hearing what isn't said. Now as a finance professional, I have always believed in improving communication throughout the organization. I believe in partnering with other teams to figure out the pain points that each team deals with on a daily basis. When you understand what they are trying to solve, you can help them assess and measure it. So you make a recommendation with data to help guide to an ideal solution. Before teams can discuss why performance changed or decide what to do next, they need to agree on the information they are using. Shared facts are measures with clear definitions, known sources, consistent timing, and an understood level of reliability. They do not require every team to use the same system. They require agreement on which source is authoritative for each measure and how the information is prepared. For each important financial or operating measure, teams should be able to identify its source system, definition, data owner, reporting period, and any transformations applied before it appears in a report. Timing matters. For example, orders received, orders shipped, and orders invoiced can all be valid measures, but they describe different events. Comparing orders received for one period with revenue recognized in another can produce a misleading explanation unless the difference is understood. Now last week I shared episode number one fifty nine, how FP&A helps hospitality leaders make better daily decisions. We dig into what hospitality FP&A should look like when the business needs real-time decisions on staffing, purchasing, pricing, capacity, and guest service, not just reporting after the fact. If you've ever stared at labor is unfavorable and still didn't know what to do next, this is built for you. So please listen. If you have not already, please enjoy.

Partner With Operations Beyond Reporting

Operations team members often do not know the wide range of data that you may have, so it's critical that we partner with them. It's part of our core responsibilities. Now some finance professionals may push back on what I am saying here because it may cause extra work. Helping operations make better decisions so the organization as a whole improves should be what we are doing every single day. A KPI should help the organization assess progress toward an important outcome or understand a driver that influences that outcome. For each key measure, operations, FP&A, and accounting should agree on its purpose, definition, data source, reporting frequency, owner, target, and the decisions it is meant to inform. That includes practical details such as the unit of measure, the population included, the reporting period, and any exclusions. For example, on time delivery needs a shared definition of what counts as on time and which deliveries are included. Without that agreement, two teams can report different results while both believe they are using the right number. How do you see your role in FP&A or in accounting? Do you focus only on reporting or do you go a little further so you participate in the decision making process? Do you pull the data that matters and then teach, coach, and mentor operations or another team and how that data can help them see the problem a little differently? I have to admit that I have slipped lately by not asking about your goals for this year. How are we doing regarding our goal accomplishment? I need to look also and review my own progress. I think you all know my stance on goal setting. I may be a little obsessed on goal setting and accomplishment, and I think that's okay as long as you don't drop what is going on in your personal life. Do not forget the special people in your life. Now I want to share that McLean Solutions helps organizations align senior leaders, operational teams, FP&A, and accounting around shared KPIs, useful performance reviews, and better business decisions. Please reach out so we can help you. The links are in the show notes. When I was a member of FP&A, I would always partner with the teams I supported. I wanted to know everything about the metrics I was responsible for analyzing and reporting on. I wanted to know all of the implications and every variable. How were my metrics and KPIs going to affect the business every month? So I worked with the leadership who delivered on those metrics so I knew what was happening every month, not to only report, but also to shape better decisions.

Set Clear Cross-Functional Expectations

Now let's talk about how operations and finance can improve communication with each other. Number one, set clearer communication expectations across operations, FP&A, and accounting. Now what causes more friction in your organization? Is it late information, different definitions, or surprised explanations during a review? Now why cross-functional communication breaks down? The first thing I want to look at is teams often work on different timelines and use different language. Operations sees demand, staffing, capacity, quality, and customer constraints, while accounting provides controlled, consistent actuals and helps explain how transactions are recorded, while FP&A connects financial results to operating drivers, forward looking implications, and also choices. Now let's build trust around shared facts. I had mentioned that earlier. Trust starts with agreement on what the numbers mean and when they are ready. We want to define key measures, data sources, timing, and owners. We want to agree how actuals, forecasts, and operational drivers will be compared. And we want to call out known limitations or changes in data quality. We want to surface unexpected results early before the formal review. We want to involve accounting when decisions change transaction coding, cost capture, controls, or measurement. Also, accounting's contribution is not limited to closing the books. Accounting helps establish reliable, consistent information that the other teams can use with confidence. Now use one conversation structure across the functions. Use a simple four-part approach for decision and performance discussions. The first one is about shared facts. What do the verified results and operating measures show? Then we want to talk about operating explanation. What changed in demand, mix, staffing, capacity, pricing, or execution? And then next is the business implication. What does that mean for margin, cash, service, risk, or the forecast? And then we want to agree on the next step. What decision or action is needed? Who owns it? And when will the team check the result? Now that's critical. I'm going to say it one more time. That fourth step is to agree on the next step. What decision or action is needed? Who owns it? And when will the team check the result? The point is to make the conversation understandable across functions, with each team adding its knowledge before a decision is made.

Make Reviews Real Problem Solving

Number two, turn team performance reviews into shared problem solving conversations. Now what question could a leader ask that would help the team understand a miss before jumping to an explanation? Now what we want to do is we want to develop a review process that helps teams learn and act rather than assign blame. We want to send a concise preread with the agreed measures and relevant comparisons. We want to separate the verified result from the discussion of causes, distinguish recurring drivers from one time effects, identify which factors the team can control, influence, or only monitor, and then end with a small number of actions, owners, and review dates. I want to encourage leaders to make room for both good and poor results. When people can explain misses without defensiveness, the review is more likely to uncover what should be repeated, corrected, or forecast differently.

Keep KPIs Useful As Conditions Shift

three, keep KPIs relevant as conditions change. A KPI that was useful under last year's strategy or market conditions may no longer guide the right decisions, suggests that teams periodically ask, does the measure still connect to a strategic outcome or decision? Does it show a result, an early driver, or both? Can the team influence it? Are the definition, source, and reporting cadence still reliable? Has a change in customer mix, cost, capacity, technology, or business model weakened its usefulness? And could optimizing this measure harm another important outcome? Now I suggest that you use four choices for the review keep, adjust, add, or retire. When a definition or target changes, document when the change takes effect and preserve enough history to understand performance over time. Pair important measures with guardrails, for example, productivity alongside quality or customer service. Now for action today, select one KPI that the team will question or misunderstand or rarely use to make a decision. In their next cross-functional review, ask, can we agree on what this measure means and whether the underlying data is reliable? What operating conditions or actions are driving it? And then what decision should it inform now? Then agree whether to keep, adjust, add a companion measure, or retire it, and then name the owner and review date.

Action Steps And Closing Takeaways

Please subscribe to the podcast on the platform you are currently listening to, and also subscribe to my weekly email. When you subscribe to the email, you will receive a free guide about developing your finance leadership. It's filled with many tips and strategies to grow your leadership. Thank you. Today I talked about how operations and finance can improve communication with each other, and I highlighted the following points. Number one, set clearer communication expectations across operations, FP&A, and accounting. Number two, turn team performance reviews into shared problem solving conversations. And three, keep KPIs relevant as conditions change. Now as we close, remember that strong communication among operations, FP&A, and accounting depends on more than sharing a report. The teams need a common understanding of what the measures mean, confidence in the underlying information, and a clear connection between performance and the decisions leaders need to make. Operational leaders bring context about customers, capacity, staffing, execution, and emerging constraints. Accounting helps ensure that actual results are recorded consistently and that changes to processes or data capture are understood. FP&A connects those results to operating drivers, financial outcomes, forecasts, and available choices. The value comes from bringing those perspectives together early enough to act. Now, next episode I will talk about the challenges with forecasting in the restaurant industry. I hope you enjoyed the Finance Leader podcast. If this episode helped you today, please share with a colleague and leave a review. Please check out FinanceLeaderAcademy.com for more resources and for ways that I can help you and your team. And now go lead your team and I'll see you next time. Thank you.