Finance transformation is a term that is defined as, “the finance’s ability to change its perceptions, effectiveness and efficiency to its internal and external customers.”
The three main components of finance transformations are:
Now this term became popular lately because of the various corporate scandals which caused investors to shy away from investing in corporations and other activities. This hesitance of the investors to invest in companies only added to the fuel of the economic crisis which had reached global proportions and is only now slowly seeing a light at the end of the tunnel.
Because of the distrust of the investors regarding where their hard earned money are going to, companies started to go through a finance transformation where intelligent cost reduction played a bigger role rather than the previous top line growth that cost many companies to lose money on their top executives who opted to retire early when the going went rough.
Now, the trend is to make the corporate executives and other managers go through a transformation of performance and transparency. Not only did most companies lower the basic salaries and bonuses of the top executives, but they increased the budget on the operations of the companies for the sole purpose of gaining more profits. This lowered the risk factor of the companies and increased the opportunities for investors and customers.
These companies are now more transparent in their financial forecasts and allowed the budget to be limited to the operations rather than the bonuses and salaries of top executives. Because of the transparency, more investors are interested in investing once more. Those companies whose executives were given exorbitant salaries, bonuses and other perks immediately saw their investors pull out their cash, which resulted to the companies failing to operate.