Rob Douglas, vice president of United Kingdom and Ireland for Adaptive Insights, examines how CFOs can actively drive business results with data-driven insights
In recent years, the amount of data available to the finance department has exploded. While, in the past, companies worked hard to secure all of their key information in ERP systems, today organisations are collecting data from a multitude of systems – from CRM, website tracking, supply chain, human resources, and more – generating a vast amount of information that can be used to support decision making.
This data deluge brings a great wealth of opportunity, with more information than ever to work into forecasts and inform financial plans. However, it also brings a fresh set of challenges. With so much data at their disposal, data wrangling has become an increasingly complex task for the finance department, demanding more time, resources, and skilled staff. As a result of being overwhelmed by data, most planning processes today are static – meaning they lack buy-in, are inaccurate, and quickly fall out of date. And those plans can’t serve as the strategic, dynamic management tool today’s finance teams need to drive business success.
Achieving a holistic view of the business
The challenge for organisations is pulling all the critical data together into a coherent view of the business that allows them to confidently act on well-founded plans. Increasingly, CFOs are being tasked with not only understanding and communicating financial results but also with helping the organisation to understand the operational drivers behind them, requiring a more detailed analysis of business KPIs, many of which are non-financial. In fact, a recent CFO Indicator report found that 76 percent of CFOs are tracking non-financial KPIs, which involves greater collaboration across the organisation, and data integration to create a holistic view of the business.
While it is positive that so many CFOs are taking this step to become a more strategic adviser, this influx of new data can pose a problem when it comes to consolidation. With financial and operational data typically being housed in disparate, unconnected systems, and organisations remaining reliant on standard processes and technologies for integration, planning becomes a manual and time consuming process. Consequently, many finance departments end up compromising with static plans that do little to drive the business.
Therefore, the first step in active planning is for teams to integrate systems – ERP, CRM and HR systems, to name a few – into a single source. The creation of a single source of trusted data that is always fresh and always live means that organisations can avoid having to manually recalculate to be sure the numbers are up-to-date or consistent across models.
Once this holistic view of data is achieved, finance departments can become more agile by taking an active vs. static approach to planning. Specifically, finance teams must embrace a process that is collaborative, comprehensive, and continuous to adopt an active planning process.
Too often, finance teams are wedded to the annual budget and calendar reporting, arduous plans that leave them little time to engage in strategic activity and are completely out of touch with the workings of the modern day finance department. Macroeconomic changes, competitor actions and business decisions do not act to a 12-month calendar, so neither should CFOs.
With the wealth of data that CFOs now have their fingertips, including financial and operational data, they have the opportunity to take the pulse of the business in real time and implement rolling forecasts so that the business is never making a decision on data that is no longer reflective of the company.
Furthermore, while macroeconomics is a factor that no business can control, the finance department can use this data to plan and model multiple scenarios to ensure that it can withstand a variety of potential consequences. In 2017, this could be a change in exchange rates due to the shifting value of the pound or taking into account a different level of taxation due to amended trade agreements between the United Kingdom and United States. This will enable businesses to respond to changing market conditions or competitive activity and achieve the level of agility successful companies require today, allowing finance to shift into a leadership and guiding role.
By consolidating data that stretches across the breadth of the business – incorporating both financial and non-financial elements – it is possible for CFOs to get both a macro and micro view of the business, as needed, to make business-critical decisions. By embracing this data and taking an active planning approach that doesn’t merely reflect on insights once a year, the CFO can actively drive business results with data-driven insights. After all, collecting the data is one thing, but it’s meaningless if it doesn’t help you make a better decision.
Rob Douglas is vice president of United Kingdom and Ireland for Adaptive Insights.
As dawn breaks on a new financial year, George Bull, senior tax partner at RSM, looks at some of the new challenges ahead for FDs
In the age of digital transformation, having a leader with the ability to steer a business to success is critical. So, what are the most important leadership attributes in the digital era?
Kam Dhillon of Gowling WLG provides a guide to the AIFMD, including what Brexit means for the European marketing passport introduced under the directive regulations
With ‘cost reduction’ the top strategic priority for UK companies in a Deloitte survey, Simon Brew, consulting partner at the firm, discusses how companies should approach costs in the face of disruption and uncertainty