3 Rewarding Ways Finance Can Use Data to Drive Success
Over the last few years, we have seen a wave of developments that have had an impact on executive decision-making. CFOs have been at the center of this disruption, as their role in the last five to 10 years has changed dramatically as more and more responsibility has been put on their plate. Today’s finance leaders not only need to arrive at recommendations at critical junctures for the organization, they also need to show how they arrived at those recommendations.
COVID19 has thrown a huge curveball at CFOs who were already concerned about the health of the business due to political instabilities, trade wars, and other micro- or macroeconomic trends. In fact, according to PwC CFO Pulse Survey, 71% of CFOs are concerned about liquidity and cash management, and 86% are implementing cost controls during this crisis.
In the early days of the pandemic, companies moved quickly to cut costs and right-size resources to weather the first wave of the crisis. They also recognized the importance of automation and intelligence to be able to make faster decisions based on data insights. And although many CFOs had tolerated manual and redundant processes in the past, the pandemic pointed up the liabilities of not having accurate data and well-defined standards necessary to make confident, potentially business- or life-saving decisions.
I have always been very curious about finance, so I have regular catch-up meetings with the financial analysts and data scientists in my company. During one pre-pandemic lunch with my colleague in finance, one lively discussion spanned risk mitigation and compliance reporting, along with internal quarterly and yearly planning. One thing that he said stuck with me: “The most valuable data we need for financial analysis resides all across the business. It’s a battle to find out who has the best data across CRM, HR, marketing, customer service departments, and our own finance systems.” At the end of that lunch, it was clear to me that as a financial analyst, he struggled to derive meaningful insights from data that included expenditures, revenue, sales, assets, and liabilities. He and his team would spend enormous amount of time manually crunching data to gain insights into the financial health of the company.
These are the kinds of challenges that exist everywhere. Some of the common ones we come across are:
- Delayed business-critical decisions due to manual and repetitive work involved in aggregating data
- Days to weeks in closing the book for the month-end, quarter-end, and year-end financial reporting, both for internal stakeholders and external compliance requirements
- Inaccurate reporting due to multiple ERPs and heterogeneous IT ecosystems spanning countries and geos
- Duplicated, inconsistent, and mis-aligned chart of account hierarchies which make it hard to perform both routine changes as well as business transformation initiatives
- High cost to financial data and ability to quickly adjust forecasts and plans in response to changes in demand and supply due to discrepancies in mapping issues and human errors
- Proposed organizational events such as mergers and acquisitions or restructuring drive the need to perform what-if analysis on the material impact to the business
Many would argue that the finance function was largely on autopilot in the lead-up to the COVID-19 crisis. To meaningfully address the challenges I’ve described above (and more), the CFO and finance teams must now be able to regain control of and reimagine financial plans and processes.
Over the last several months, I’ve had the opportunity to be involved in many discussions relating to finance functions in the modern organization. I wanted to specifically understand what CFOs are dealing with the impact of the pandemic. Let me summarize the three key themes that consistently surfaced in these discussions.
- Operational efficiency
CFOs must focus on ensuring business continuity and building operational agility. Some of the important benefits here include faster financial close; shifting the time spent on analysis as against preparing the data, making better cash management decisions; increasing billing accuracy; decreasing invoice disputes; and much more. These steps will help in gaining greater transparency for cost and growth drivers and help improve allocation of resources.
- Risk Reduction
My discussions with my colleagues helped me to understand just how CFOs need to gain greater visibility into material impact on financial statements, including the best way to reduce days sales outstanding and days sales of inventory, increased forecast accuracy, fewer write-offs, and reduced revenue cannibalization.
- Financial Gains
Financial gains can come in many forms. By focusing on reducing the cost of finance as a percentage of revenue, companies can save millions of dollars. The benefit also comes in the form of fewer non-compliance penalties, increased cash flow, decreased interest expense, increased capture of discount rates, increased profit margins, lower opportunity costs, and increased market capitalization.
What You’re Doing Isn’t Easy. We Can Help Make It Better
Here’s some good news for CFOs: Technology comes to the rescue. We now have an ability to automate reconciliation and validation of data across local and regional systems to improve the record to report process. Solutions such as Informatica’s Finance 360 can consolidate, cleanse, and harmonize to improve every financial analysis task. The solution can help govern and manage an enterprise view of financial chart of accounts, cost centers and legal entities and create a consistent definition of financial and reporting structures across general ledger systems, financial consolidation, planning, and budgeting systems.
Finance 360 solution is industry’s first cloud-native finance data management solution built on Informatica’s AI powered Intelligent Data Platform. The solution is designed to help you:
- setting multiple flight paths (or business scenarios)
- building flexibility into planning and forecasting cycles
- adopting contingency-based resource reallocation (or “contingent resourcing”)
- improving performance reporting
- accelerating decision making
- securing senior leadership’s commitment to bold, strategic moves
We’ve designed Finance 360 so you can manage liquidity and cash flow through strict discipline around costs and collecting receivables, as well as helping manage and consolidate financial and operational data to support forecasting and scenario modeling. Learn how you can permanently build speed and flexibility into forecasting, planning, and resource-allocation processes and incorporate new tools and rapid decision-making protocols into your team’s day-to-day work.