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Despite having little in common on the surface, Finance teams and Human Resources teams often work together to achieve common goals and make daily life at the company run smoothly.
You’d think that these two departments would be total opposites: one side entirely numbers-focused and the other human-focused. Yet there’s quite a bit of crossover between the two, so it benefits all parties to nurture a good working relationship.
But what if you could take it one step further? And not just focus on a good relationship, but become true business partners? After all, a company needs both happy employees and a healthy balance sheet in order to function well.
This article will discuss how to cultivate efficient processes between HR and Finance departments, and is inspired by a webinar held between Spendesk and our friends at Personio.
We highly recommend you watch the excellent webinar in its entirety here: Boost Efficiency: Streamline your HR and Finance Processes.
Why is the collaboration between HR and Finance so important?
The Finance team is in a unique position because they work with every team in the company. In order to keep an eye on the organisation’s finances and manage the company budget, Finance team members must stay in regular communication with department leaders throughout the business.
No matter which method they choose for their budgeting (top-down or bottom-up, rolling forecast, etc.), the Finance team needs input and data from Marketing, Sales, Operations, Customer Success, Leadership, and of course Human Resources in order to complete monthly reporting and to keep the company finances in check.
The reason why the HR-Finance relationship is so important is because they jointly deal with a company’s most important asset: its people. People are represented as “payroll” on the P&L sheet, which most companies cite as their single largest cost. And payroll involves both HR and Finance.
The key benefits of efficient HR and finance processes
Of course there are many reasons why efficient processes between HR and Finance teams are beneficial, but we’ll focus on just a couple here.
Better workforce planning
A huge majority of a company’s costs are salary-related costs. Both HR and Finance teams are involved in salary and payroll tasks. Finance on the numbers side, and HR on the employee side.
This is where it’s crucial to collaborate. The People team gives the right insights to Finance, who can then track internal movement, raises, departures, etc. and the associated costs.
Finance needs to provide a good level of visibility to the People team so they can make the right decisions, such as knowing how much to offer a candidate, packages for new hires, or whether or not to backfill a role, for example.
Salary is a large part of the company’s P&L statement, so sharing accurate data between Finance and HR is imperative. Bad information or bad communication between Finance and HR could have a drastic impact on company finances.
Added strategic value
Having the right processes, data, and systems in place naturally adds value. Both teams need to be able to add strategic value to business leaders. And historically they’ve both been seen as a cost center, there to smooth day-to-day operations of the business but not driving growth or adding to revenue.
It’s never too soon for Finance or HR teams to start thinking about how to add value, especially given the macroeconomic climate we’re in. If both teams equip leaders with the right information early, they add value to the bottom line by keeping costs in control.
Essentially, the closer HR and Finance collaborate, the better placed your leaders will be to discuss these numbers with stakeholders.
Strengthen the strategic business partnership between HR and Finance
Business partnering is an excellent way for the Finance team to get closer to other teams and provide value.
Finance business partners are part of the business routines, fully involved in every decision that may have a financial impact on the company. They are there to help teams with the tricky financial parts of their jobs, and save time and stress for non-finance employees.
The Finance team has to strike the right balance between being a good business partner (not slowing down decision making or acting as a blocker) but also being the guardians of company finances.
HR teams are often viewed as blockers due to little knowledge around finance and not being “commercial” enough. HR must make a big effort to quantify the ROI of their programs (cultural, wellness, training programs), or deep dive on the cost of recruitment.
However, these activities may not come naturally to many HR professionals. This is where the Finance business partner comes in. By collaborating with the Finance team, the HR team can move away from being seen as a blocker and instead add value.
Finance should bring stakeholders into the fold
Leaders especially will benefit from better processes between HR and Finance. The Finance business partner should be the person with whom employees and leaders feel comfortable asking all sorts of questions related to finances.
An embedded finance business partner’s role is twofold: a conduit between Finance and business and in-house finance coach for business leaders. Leaders aren’t automatically finance-savvy, and there may be a steep learning curve. Importantly, decisions they make turn into business costs.
Finance team members can educate via transparency. At the department level, they should share financial data with each department leader. It’s a good first step to make sure leaders understand every item.
Finance can also show the costs of all potential decisions by sharing figures in a very granular way. If Finance is transparent with the forecast, leaders will see how new hires or other changes impact the outcome of the forecast. Everyone will feel more in control and empowered by this transparency.
This is especially important for the People team, who spend lots of time and energy on recruitment, payroll, hiring, onboarding, and offboarding employees. All of these have a cost, and the better informed the team is about potential financial impacts of their decisions, the healthier the company will be financially.
How do better HR and Finance processes improve the employee experience?
HR-Finance collaboration ensures that the People team can make faster and better decisions thanks to the available financial data at their disposal. From the employee growth journey, to relocations, and even to salary benchmarking, these decisions are made more confidently and accurately when Human Resources and Finance work closely together.
On a more philosophical note, efficient HR-Finance collaboration ensures overall company health and job security. If these two teams don’t work well together, and they’re not providing the right information to leaders, you can end up in a place where the business is on unstable ground. Nobody wants to get to that point.
Change outdated perspectives of the HR and Finance functions
Out with the old, in with the new!
The former image of the Finance team was a negative one, the “bad cops” of the company who would chase you down for receipts or automatically nix any extra budget requests.
Now, Finance is seen as a department of educators: partnering with every team to inform and support.
The same goes for Human Resources teams, who weren’t always seen as growth drivers.
Now, with a better understanding of financials and with a collaborative relationship with Finance, HR can make better decisions with the company’s bottom line in mind.
Close collaboration and efficient processes between HR and Finance is a win-win for everybody.
New: Integrate your HR and Finance tools
Take it a step further and make the collaboration between HR and Finance even more efficient! Now you can integrate your spend management tool with your preferred HR tool. Spendesk ensures a seamless integration with your company's HR system, streamlining payroll, employee onboarding and offboarding, employee records, and more. Learn more about our spend management/HR integrations and see if yours is compatible with Spendesk here.
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