If you don't have confidence in your final numbers or underlying processes, your plans aren't going to be informed....but you're not alone
Clench your stomach muscles. Take a deep breath, and hold it. Cast your eyes down so no one can see the expression on your face. Just keep moving, and with luck it will all be over soon.
This is what might happen to your body when you doubt yourself, and it’s particularly bad when you’re doubting the work for which you are directly responsible and accountable. For CFOs, that work can be as broad as the strategic insight they bring to the company’s direction, or as specific as the budget numbers on which those insights are based. Either way, a lack of confidence in your numbers isn’t just bad for the CFO, or even the finance department. It affects your entire organization.
When you can’t trust the numbers, you can’t reliably act on them. And a large portion of CFOs are in the middle of a gap between their budgets and the truth.
Trusted Numbers Essential to Success
For proof that this gap exists, you only need to look at a Financial Close Benchmark Report from financial software firm Adra Match. The survey of CFOs, controllers and other finance professionals found a stunning 72 per cent don’t trust the numbers they report after closing the books.
Or in March, the FSN Modern Finance Forum released a report, The Future of Financial Reporting, in which 40 per cent of CFOs suggested that their data isn’t trustworthy and accurate. Perhaps as a result, 55 per cent of CFOs said they worry that controls aren’t operating as they should.
At the same time, the perceived value of trustworthy data and its ability to drive meaningful change has never been greater. Just look at CGMA Magazine, which recently published the results of a survey by SAP and Oxford Economics with representatives of 1,500 companies around the world. Seventy-three per cent of respondents were CFOs, and there was no question that accurate numbers and corporate success went hand-in-hand.
“In those companies whose revenues rose by more than five per cent during the past year, 83 per cent of respondents reported that their finance function’s influence and visibility have increased across the organization,” the article said. “Real-time analytics (used to drive strategic growth initiatives) was deemed critically important or very important to the finance function’s performance by 83 per cent of industry leaders, compared with 45 percent of non-leaders.”
Trusted Budgets Behind Great Customer Experiences
Trusting your numbers isn’t just important to ensure a company can meet its payroll or cover office expenditures. In fact, as CFOs continue to reshape their role from cost manager to strategic leader, they are trying to marshal the resources necessary to do things that used to be the almost sole purview of departments like sales and marketing.
As CFO Magazine reported, a Forrester study published in July showed 89 per cent of financial leaders are prioritizing changes that will improve customer experiences. That means everything from how a company’s web site is designed to the training of call center staff or, in the case of retail, how stores are designed.
There’s just one problem: they don’t have the best information to confidently bankroll those kinds of initiatives. As the article shows, delivering a great customer experience first requires finance leaders overcome challenges to getting the right, trusted data:
Roughly a third of CFOs pointed to a lack of data integration (35 per cent) or to organizational silos that make it difficult to get needed insights from other business stakeholders (37 per cent). Further, about one in five (22 per cent) of the participants said they are hampered by organization-wide inconsistency in the methods used to calculate and assess KPIs.
Trusted Foresight Mitigates Risk
To some organizations, of course, improving the customer experience feels like a dream project compared to putting out the day-to-day fires that threaten their growth -- or even their long-term existence.
CFO Innovation, for instance, assessed the results of a study by the Financial Executives Research Foundation, where 24 per cent of financial professionals said they don’t see significant changes and unknown threats to the business until it is too late. These changes could include shrinking profit margins, hidden costs in equipment or other purchases, or outdated details about customer churn rates.
“The level and speed of disruptive risk is providing a challenge for executive teams to recognize the sources of disruption and how it will drive potential risk and opportunities for the company,” Mark Frigo, CPA, CGMA, professor of strategy and leadership at DePaul University in the U.S., told the publication.
Ultimately, CIO Innovation said, “sharing the data, rather than just sharing conclusions, helps others in the organization understand the analysis and why managing identified risks is important to them.”
Sounds great -- unless the data is dubious.
The Path to Trust Goes Through Technology
If you ask the experts how best to get out of this mess, the answer is pretty consistent: marry the knowledge and expertise about financial data from the CFO’s team with the knowledge and expertise about emerging technology from the IT department and outside vendors.
In ‘Successful CFOs Collaborate, Not Isolate,” for instance, Financial Director focused on a different aspect of that SAP/Oxford Economics study. Its editors noticed that 87 per cent of respondents with company revenue growth between 5.1 and 10 per cent said finance departments collaborate regularly with IT. By contrast, companies with slower revenue growth were 22 points behind in finance/IT collaboration, at only 65 per cent.
Why is this such a big deal? Because ensuring data is accurate will mean double-checking across a range of different sources, which in turn will require the kind of integration across systems that only technology can deliver.
A hint of what this will look like was discussed in an op-ed on Bizcommunity, where the author predicted automation will create a sea change in how finance departments prepare their budgets:
To collect, store and analyze these vast caches of data, the CFO of tomorrow will naturally look to cloud solutions. Cloud-based ERP, EPM and SCM applications can act as the ‘muscles’ of a data-driven, digital approach to business transformation, providing CFOs with the tools to optimize business performance, collaborate, and allocate resources effectively.
Of course, working with IT or tech vendors on automation and integration isn’t a one-way street. It will require CFOs and their staff to provide critical advice on other necessary features such as an audit trail, version control and workflow to provide that single source of the truth.
Accuracy + Trust = Leadership
The quest to close the budget-trust gap is not just a matter of CFOs trying to save their jobs. And it’s not necessarily just about helping their organization avoid risks or create better customer experiences. Making accuracy – and trust – a priority is the hallmark of being a responsible steward. You know, people like Helen Bowman.
The finance leader at Drexel University was among those recently honored by the Philadelphia Business Journal in its 2017 CFO of the Year Awards. In reflecting on her win, Bowman suggested that business ethics really begin with the chief financial officer -- or at least they should.
"There is a strong effort among many companies to go beyond compliance, to do, not just the legal thing, but the right thing,” she said. “The CFO plays a huge role in that.”
It’s not just about occupying the role, however. It’s about taking the steps necessary to ensure that the finance department -- and all those connected to it -- can work with data that holds up to scrutiny. Data that can be counted on when tough choices have to be made. Data that leads to outcomes that not only reflect on the CFO, but the entire organization the CFO supports.
This is the data that should be in every budget, forecast, plan or report -- you can’t afford to strive for anything less.
About the Author
As Chief Solutions Architect, Rishi is responsible for the day-to-day operations and continued success of client implementations at Vena. Rishi has helped many Fortune 500 companies re-engineer and optimize financial processes. His expertise in financial planning and regulatory reporting helped him to the position of Director of Enterprise Solutions at Clarity Systems before he co-founded Vena Solutions with Don Mal and George Papayiannis. Rishi holds a Bachelor of Applied Sciences from the University of Toronto, specializing in Computer Engineering and Communication Systems.More Content by Rishi Grover