Can a SWOT analysis be used to evaluate a finance function?

What is a SWOT analysis?
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an appreciation of a business’s greatest strengths, weaknesses, opportunities, and threats.

Businesses can prepare one as a part of their strategic plan or even to assess an individual product, project or a department.

Once the SWOT results have been identified and prioritised, they can be used to develop short-term and long-term strategies. The key to this exercise is in using the results to maximize the positive influences on the business and minimize the negative ones. The strategies developed should regularly monitored against actual performance.

How can the technique be developed for a finance function?
I give a brief example of a SWOT analysis for a fictional business here:

Team – experienced team who know the systems and staff well.
Cashflow – business is cash rich and able to obtain volume discounts and pay on time.
Monthly and quarterly reporting is being met – VAT, Intrastat, Payroll, Pensions etc

No budgets in place for budget holders and costs are escalating.
Poor monthly management information (MI), resulting in poor decision making.

No qualified member of the finance team resulting in a reliance on external accountants.

Developing better MI will reveal opportunities to improve profits and decision making.
Implementing budgets would improve cost control (and engagement) by giving targets to budget holders.
Bringing in an external finance interim would improve quality and timeliness of reporting.

HMRC chasing prior year accounts, could be fined and open to costly investigation.
Having no MI and budget is a breach of lender covenants and could result in Legal action.
With no budgetary control, costs are rising.

What potential strategies could come out of this?
Using strengths to realise opportunities –
Staff who know the business work with budget holders to improve cost control. But this would require budgets to be put in place.
Using strengths to mitigate threats –
Use cash strength to pay external Accountants a one-off fee to prepare historic accounts. But this is often an expensive and poor solution for monthly MI.
Using opportunities to reduce weaknesses –
Use cash resources to employ a qualified finance interim to develop MI to better understand how the business is performing and improve decision making.
Minimising weaknesses to mitigate threats –
Develop MI and budgets to avoid action by lenders over breached covenants.

Although a SWOT analysis can be carried out internally, an external experienced Finance Interim can help you assess the business from an external perspective bringing their knowledge of opportunities and threats perhaps not foreseen internally.
Once the pathway has been identified and agreed, they can help this be achieved whether this be through rolling up their sleeves and doing the work, developing reports, training or recruiting staff.
As expectations will be set out in the pathway, you will be able to monitor progress towards the strategies and be in control at all times.

If you would like to discuss how Finance Interim can help then please get in touch.
Kevin Thomas is a Chartered Accountant and owner of Finance Interim Ltd

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