Strategy

CFOs Should Embrace Corporate Data, Not Financials Alone

Today's CFO should be working on ways to manage, interpret, socialize, and forecast business motions.

Now more than ever, the Office of the CFO is responsible for having a handle on vast quantities of data across the entire organization. No longer expected – or expecting – to simply curate accounting data, the Office of the CFO is sharpening its strategic chops. To assist the CEO and COO to strategically plan the trajectory of a business as well as accurately forecast results, the CFO must become the arbiter of CRM, ERP, R&D and other critical data pools across the organization.

In an increasingly fluid business environment, departments and C-suite offices are experiencing a great degree of crossover. The shifting nature of the Office of the CFO is evidenced by the decrease in time spent on traditional activities like closing the books. A recent survey by Intacct indicates that more than two-thirds of CFOs are spending less than 30 percent of their time on closing the books, and 43 percent are spending less than a fifth of their time on closing activities.

What are they doing instead? They are working on ways to manage, interpret, socialize, and forecast business motions. These focus areas include forecasting, investment capital, and beyond. CFOs must address corporate structure, risk mitigation, resource planning, and compensation. All of these areas represent increasing responsibility for the CFO and team. Department heads, other executives and even the Board of Directors will increasingly turn to the CFO with questions about operational data – such as if and when investments can be made across any number of areas in the organization. To do this well, the Office of the CFO must tap into all the data pools across the company in a single, integrated manner. That requires systems and processes – many of which are not part of today’s enterprise environment.

Take forecasting for example. The wealth of business data being collected today is staggeringly deep, yet the practice of forecasting remains largely an art. As the CFO becomes an increasingly strategic, rather than purely informational member of the C-suite, his/her ability to forecast and determine margins quickly will be critical for executing successful business motions. Case in point: by correlating supply chain, manufacturing and inventory data with customer demand and other market research, the CFO can more accurately make adjustments to production runs, distribution and pricing.

Consider a company that sells LEDs. The CFO can determine which products are best sellers, cross tabulate with when they sell best and then combine that information with market or partner manufacturer data showing there’s a need for more product. Maybe some distributors are selling out of green LEDs. With that data in hand, the CFO can make the strategic recommendation to push green LEDs into the market to take advantage of a short-term need yielding maximum profit. The key is that the CFO now has readily available data that allows him/her to forecast a need and take action in a short timeframe.

Another common and complex forecasting scenario is one related to inorganic growth. During M&A initiatives, the CFO must quickly get a handle on the acquired target’s data and start understanding the financial and operational position. They need to quickly identify leading indicators, understand current operational reporting, and any resource or reporting gaps. Additionally, the CFO ensures those are apparent to the CEO and/or related departments as quickly as possible.

The acquired company’s ERP is often the first stop. That historical data allows the acquirer to start reporting on the current state of the business quickly. For optimal results, it’s important to ensure a tool is in place to connect ERP information from the front to the back end. Once the current state of the business is determined, the ability to look forward is within reach.

In the acquisition example, the CFO needs to evaluate the acquired company’s data systems and ensure they can be brought into the fold quickly to allow for near-immediate forecasting; the opposite is true of a divestment. The CFO needs to rapidly untangle the combined data to ensure that the now-leaner company can forecast accurately. As the arbiter of the critical data pools across the organization the CFO can also provide strategic counsel regarding the best or most appropriate time to divest a part of the business for maximum return.

CFOs are in a perfect position to transform their office to own company data. With data ownership, the CFO’s team can empower the entire company with business-critical information far outside their traditional FP&A wheelhouse. In a business environment where leadership demands data-driven decisions, the CFO can become the key enabler. The CFO will not be classified simply as the “closer of the books”. In contrast, the CFO who tackles and owns the data (and Big Data problem) can embrace a far larger opportunity to provide strategic impact.

Kevin Mischnick is the Senior Vice President of Finance and Accounting at Magnitude Software.