Nathanael Powrie, EVP Data Analytics recently participated in a CFO Magazine webcast titled “How finance leaders improve planning by improving visibility into performance.” During the broadcast, Nate and his co-panelists discussed how the CFO’s role is rapidly evolving, beyond the traditional domain of reporting on financial data, to taking an active role in the company’s strategic decisions.
Attendees acknowledged this shift almost universally, with 50.8 percent strongly agreeing and 40.7 percent agreeing that, at their companies, the role of CFO is evolving from reporting financial data, to informing and contributing to the company’s strategic decisions.
We’re seeing CFOs and other finance leaders expand their roles beyond basic reporting, and CFO’s backgrounds are much more diverse. More specifically, these skill sets are changing to accommodate the digital shift and other disruptors to enable a more tech-focused transformation, with an active role in improving company performance. Investor relationships are also changing, with investors looking for a compelling story about the vision and goals of the company rather than just a reporting of numbers.
It is also worth noting that CFOs no longer operate in a vacuum; they must work more proactively with the Chief Marketing Officer, Chief Revenue Officer and other C-level executives in defining more growth-oriented KPIs. Going beyond those traditional quantitative KPIs, the CFO is now reporting on things like how the company is penetrating the marketplace, how it is servicing the customer and other KPIs which illuminate the organization’s strategic priorities.
Towards that goal of going beyond numbers-driven KPIs, an interesting fact from The Association of International Certified Professional Accountants is that, while in the 1970s over 80 percent of a company’s market value was traced through financial statements, today, less than 15 percent is tracked through the bottom-line numbers. In addition, organizations are now shifting the focus from financial balance sheet only metrics, to shareholder value creation and other stakeholder value considerations.
KPIs today are as much an art as they are a science and the numbers themselves are not as important as the trends they illuminate. Financial analytics, when viewed in this more expansive light, can drive value outside of the narrowly-defined financial arena into areas including procurement, operations, logistics and sales and marketing. Finance must collaborate with its business partners in order to gain the access and understanding required to deliver the value companies expect.
A second polling question during the webinar asked attendees to rate their agreement with the statement, “Your finance team currently has all the resources and tools it requires to maintain visibility into your company’s overall performance.” Interestingly, only 8.1 percent strongly agreed, with 45.2 agreeing and 32.3 percent disagreeing. This is especially interesting as more technological advances improve the CFO’s ability to gather and analyze data and KPIs. There is more transactional data than ever, and many still struggle to understand the information overload that results. Investing in the right technology is paramount to success. CFOs must remain up to date on the latest technological advancements and need to make a commitment to using data in real time to make intelligent and informed decisions. Digital disruptors like robotic process automation and machine learning can help make tiny adjustments with big repercussions for automating unskilled tasks.
There remain barriers that still hinder the CFO’s visibility into performance; one of the biggest pain points is talent shortage in the digital space. Most companies still do not have the capability for agile decision making. In the CFO’s domain, this means adopting more innovative processes, moving away from the annual capital budget process to one that is more agile with flexible budgets and rapid decision making. Not only do new technologies and developments contribute to the evolution of the financial leader’s position, they can also promote understanding of current market challenges.
The final polling question in the webinar asked, “Within what time frame if any, does your company apply the latest advances in analytics to improve visibility into your company’s current performance and inform your company’s long-term plans?” Twenty-five percent said they are already doing so, 10 percent said they will do so this year, 5.4 percent next year, and 13.6 percent said they do not intend to do so. Surprisingly, 25.4 percent said they did not know. These responses underscore the important part the CEO plays in continuing to ramp up the organization’s use of technologies, analytics and more strategic KPIs. More centralized oversight of strategic business decision taking can be exercised by financial leaders. Harnessing advanced analytics will allow businesses to hedge against uncertainty and react more rapidly, and with greater insight, to changes in the marketplace. Leaders need to develop their teams through greater collaboration and integration with other parts of the business. The best finance teams are no longer just experts in their function; they are experts in understanding their business.
If you would like to discuss any of the topics raised in this blog, contact Nathanael Powrie for a no -obligation chat. Email: firstname.lastname@example.org
Click here to watch the full CFO Magazine Webcast
About Maine Pointe
Maine Pointe, a member of the SGS Group, is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics, operations and data analytics. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill digital supply chain to deliver the greatest value to customers and stakeholders at the lowest cost to business. We call this Total Value Optimization (TVO)™.
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