One would be wise not to covet CFO job. It’s hard. The CFO is responsible for the money, the one thing a business simply cannot run without. The role spans accounting and the preparation of financial statements, internal business unit accounting and reporting, budgeting, treasury management, forecasting and financial planning. Increasingly sophisticated software is making the CFO’s life a little easier, however. In our experience, the software fits into six-part strategy for successful financial management.
1 – Connect Finance with Operations
Finance and operations may exist in separate spheres, but they are deeply connected nonetheless. Financial management can benefit greatly from connecting finance with operations. Financial managers become more effective if they have accurate, up-to-the-minute data about operations. For example, if orders are increasing, that will create higher spending from suppliers to fulfil the orders—setting up a possible cash shortage.
If the CFO knows about this surge in orders soon enough, he or she will be able to arrange for credit or defer spending in order to have enough cash on hand to buy needed raw materials. This is largely a matter of software and application integration technology. However, once the data link has been established, the CFO has to know what to do with the data. That, it turns out, is also a matter of software.
2 – Move Toward Transformation and Business Agility
Financial management is a driver of business agility and transformation, even if it plays a stealth role much of the time. After all, the best idea in the world will go nowhere without funding. In our experience, transformation occurs when a business can unite people, processes and technology. With this foundation, aided by powerful data analytics and reporting, the CFO is in a position to guide transformational thinking.
For example, if a company wants to move into a new, digital marketplace, the CFO can either apply a stamp of approval or bring the stakeholders for some financial straight talk about the investment, risks and so forth. This process need not be negative. Understanding investment risk and returns can push in-house innovators to hone their visions and make the business more competitive.
3 – Incorporating World Class Tools and Processes
Successful financial management requires powerful technology and the processes that go with it. For the CFO, this means tools and processes that promote modeling, collaboration, planning and predicative analytics, which is a variant of Artificial Intelligence (AI). And, all of this must be secure and compliant. With Enterprise Performance Management (EPM) tools, for instance, the CFO can take raw operational and financial data from the Enterprise Resource management (ERP) system and turn it into knowledge to steer the company forward.
4 – Take Forecasting Beyond Budgeting
Budgeting is fine, but dynamic forecasting is where the CFO can make a real impact on business performance. The older generation of financial management tools were good at static budget vs. results reporting. New EPM solutions give the CFO and other stakeholders the ability to take a more dynamic, real time approach. As conditions in the company and the broader market change over time, the EPM suite can model different potential forecasting outcomes and offer insights into the best path to take moving forward.
5 – Up-Level the Reporting Process
A good financial report does more than convey information about results. It should also offer insights and stimulate productive discussions amongst the board and other business leaders. This requires having timely data and a toolset like EPM that enables the CFO to model different assumptions about forecasts. To do this, however, EPM needs a “single source of truth” data source.
6 – Embrace the Cloud
Cloud computing is starting to have a significant impact on the CFO role. While the CFO might be familiar with the cloud for its general business benefits, he or she might not have considered its potential for financial management. EPM solutions are now available in the cloud. This provides a number of advantages for financial management. In addition to requiring no capital investment, a cloud-based EPM generally has a faster implementation than an on-premises system. It’s also agile. A cloud-based EPM also gives flexible access to data from pretty much anywhere, e.g. mobile computing, edge devices and so forth.
These six factors combine to make financial management stronger and more impactful. Getting it all right takes some focus and effort, of course. We can help. We have worked with many CFOs and their departments on implementing EPM and related technologies that bring these six components of successful financial management to fruition.