Strategy

When Data Does Not Equal Information

CFOs would like their teams to spend less time on report preparation and data collection and more time on forecasting and scenario analysis.

A recent report from Adaptive Insights warns CFOs that the current pace of finance could threaten corporate agility. Today, the finance team is spending over half (53 percent) of its time on reporting and data gathering alone. SaaS applications have enabled business groups to source and drill down into their own data. But, as Jim Johnson, CFO of Adaptive Insights, points out, “data does not equal information.”

CFOs would like their teams to spend less time on report preparation and data collection and more time on forecasting and scenario analysis. “Reporting, whether it’s on actuals or forecast or planning should be quick. We shouldn’t be spending a lot of time on that,” says Johnson. “We should be spending much more time on the model that’s supporting it. The predictive analysis, the key performance indicators and the stuff that is really important for the company.”

Private companies are typically very focused on cash flow, fundraising, and making sure that they are adequately capitalized for their business. When they have an opportunity to raise money, they need to have an articulated and current view of the business. Johnson says, “Trying to explain the business to your investors or potential investors without the level of insight because you can’t articulate the business well enough or can’t turn that data into information, is a huge risk.”

Public companies are focused on the earnings conference. As a former public company CFO, it was extremely frustrating for Johnson to receive data shortly before that call, with little time to digest and analyze it. “The data should be the easy part. The judgment and the insight that you have to apply to that to get the story and the understanding behind the performance of the company, that should be the hard part.”

Johnson outlines the 3 C’s of Good Planning:

  1. Comprehensive: You need an end-to-end model. You want to understand what’s happening in sales and for that to be reflected in your financial statements and your key performance indicators.
  1. Continuous: The environment you’re operating in changes so quickly that they need to have an ongoing planning process.
  1. Collaborative: The finance organization today needs to be much more collaborative with the business people than it’s been in the past. The Cloud is a collaborative tool, allowing for multiple people to access the same information and look at things in parallel.

Johnson explains that the desire and need to make the change to a more insightful and modern way of planning is obvious, but it takes strong leadership. “It is a little bit surprising to me that we haven’t made more progress in this area. It’s a great time to be a finance leader and one of the reasons that it’s a great time is that the tools and the technology that exists today achieves what finance groups have talked about for years.”

Unfortunately, it appears that most organizations continue to depend on point solutions that do not provide the integrated access to data that SaaS solutions can provide. CFOs report that, on average, only 33 percent of their organizations’ infrastructure is SaaS today with a desire to get to 60 percent by 2020. This is virtually unchanged from the CFO Indicator Q1 2016 report.

“When you build a lot of infrastructure around spreadsheets, you’ll have a lot of disconnected and discombobulated locations where planning is going on. It’s in people’s laptops, it’s not integrated, and when somebody changes a sales quota model it doesn’t change the resource model and it doesn’t change the cash fund and it doesn’t change bookings or revenue. So you spend a huge amount of time moving information from one application to another application to try to achieve this result. But you can’t possibly be fast.”

Key decisions around such things as capital expenditures, resource allocations, and investments have been delayed because stakeholders don’t have timely access to data. According to Johnson, companies should be investing in end-to-end planning and reporting tools to improve agility. Change is accelerating and the goal of any CFO in a finance organization is to be as predictable as possible.