Finance function : leveraging a source of competitive advantage for selected South African companies in KwaZulu-Natal

Abstract

As a result of current business trends, South African companies are being forced to examine changes in the finance function. The purpose of this research is to establish and examine the paradigm shift in the finance functions of selected South African companies in KwaZulu-Natal, and to develop a measuring tool to determine the degree to which these functions are evolving to be more in line with a value adding paradigm. A mixed methods approach was used in this study, with qualitative analysis supported by some quantitative analysis. A case study approach was adopted, and non-probability sampling using the purposive method was applied to select eleven respondents. The data was gathered by means of both a questionnaire and follow up interviews. The data has been analysed using a combination of both descriptive and inferential statistics, and qualitative analysis. It was found that the majority of respondents were not measuring the cost of, nor were they focused on reducing the resources allocated to the finance function. In addition, the major portion of finance function resources remain focused on the accounting processing roles of the finance function. However, an increasing emphasis on the decision support and strategy formulation roles was discovered. A measuring tool was developed and applied to the finance functions of respondents. This brought the researcher to the conclusion that the finance functions of respondents could not be confirmed as value adding business units. It was recommended that finance function resources be mapped according to the various roles identified. The measuring tool could then be applied to reveal potential areas of change that would result in the finance function transforming into a value adding business unit. Future research into an appropriate finance function performance measurement system, and the impact on the training of accountants of the changing finance function paradigm, was identified.