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What’s the job of the CFO? Let’s start by agreeing that it goes way beyond the reporting of financial statements. Those are table stakes. No CEO wants to simply hear from his or her CFO that “the numbers are what they are.” The best CFOs are the ones who know the story behind the numbers, the ones who know why the numbers are what they are. In order to do that, it goes without saying that the CFO needs to know where and why the company is spending money. Otherwise, how can they answer the “why” question they’ll inevitably get? Surprisingly, a recent survey by The Economist Intelligence Unit (EIU) of more than 500 global CFOs and finance leaders on their strategic challenges and plans for the next two years, revealed that nearly two-thirds say they lack complete visibility into the transactions across their organizations.
Unfortunately, most organizations don't know what they’re spending money on and with the pace of change and hyper competitive environment in which we live today, sales bear the brunt of this misfortune. Increasingly, companies are recognizing the importance of operational efficiency as a competitive differentiator and contributor to the bottom line.
The challenges that today’s finance leaders face are significant, and underlying much of the problem is an antiquated set of technologies that was installed just as the internet started taking hold (that’s 20-plus years ago for those counting at home.) Legacy systems are hard to use. Procurement teams have the ability to negotiate great contracts but are underutilized. Employees would rather expense things because it’s too hard to make a requisition and/or it takes too long to get approval. “Miscellaneous” is often a large spending category in many organizations – which certainly doesn’t make it easier to gain visibility. Sadly, this is the state of most of the world when it comes to managing spend.
This systemic problem – the lack of visibility and control over spend – was one of the many findings in the EIU report uncovered to better understand the current state of today’s corporate finance departments around the world.
They need technology and want operating efficiencies
What is heartening is that after years of reluctance to invest in modernizing their function with new technologies, the report found that 60 percent of finance leaders see deploying new technology solutions or automating and improving inefficient processes as the two most important tactics they plan to use to control costs over the next two years.
This is an important point because when spending accounts for upwards of 85 percent of a company’s total costs, it is critical that you invest in a business spend management platform that provides a unified set of business processes across procurement, invoices, and expenses.
The key to success is data, and companies are using machine learning to normalize anonymized data to tap into the collective intellect of the entire community of users to empower a CFO’s decision making. We are at a very exciting time in the history of technology because we now have huge specialized data sets, the computing power and the data architecture to effectively handle them, and machine learning and artificial intelligence to be able to spot patterns and deliver prescriptive insights that our customers can use to develop new business models.
They must break down siloes
A CFO’s job isn’t to be a miser or to only say “no” when requests for funds come across their proverbial desk. Rather, the job is to understand how an investment will benefit the company and to collaborate with the entire organization so that everyone is set up to win. More than half of those the EIU surveyed who assessed their organizations as most able to manage risk, cost, and capital were from a collaborative culture.
As part of the study, the EIU also conducted several in-depth interviews with CFOs who are tasked with creating a modern finance department, including leaders at Zendesk, Ally Financial, and Micron Technology. One theme that each of these leaders said repeatedly was the need to collaborate and break down silos within their company.
Read the report to learn how CFOs are responding in a rapidly evolving world where new technologies, uncertainty, and emerging threats abound. The report also includes five qualitative interviews with the CFOs from Ally Financial, Driftwood Acquisitions and Development, Hays, Micron Technologies, and Zendesk.