A Roadmap Just For CFOs: 4 Essential Ways Finance Technology Will Deliver Real Benefits

Photo by Austin Chan on Unsplash

Small, medium-sized business (SMB) leadership faces a push-pull between running and growing the company. The CEO and leadership team are the initial experts. They must build a larger team, impart their “secret sauce” to the employees and ask them to embrace the entrepreneur’s vision. The CEO (and cohorts) must raise capital, spend the investment responsibly and demonstrate positive results.

As the CFO, your responsibilities include:

• Strategic thinking
• Balance growing vs. scaling the organization
• Reduce risk
• Deliver insight and Information

The workflows that underpin each of the responsibilities are intertwined. Actions taken in the short run impact the long run outcomes.

The CFO’s Corporate Performance Management Framework

Corporate Performance Management (CPM) is the technology framework that stitches together the essential information for the successful CFO.

Diagram by the author

Let’s take a deeper look at how CPM supports the CFO.

Strategic Thinking: This is strategic and tactical planning plus forecasting. Managing uncertainty leads to what-ifs and scenario modeling. Connecting tactical plans to strategic plans using benchmark metrics provides an objective reference for measuring the achievement of expected outcomes. Planning/forecasting models capture key assumptions, simplify gathering information across teams, and build cross-functional collaboration. You have a reference point to understand how the business works.

Balance growing vs. scaling the organization: Planning is a must-have for establishing future action — but execution and management live in the current market and economic situation. The CFO must consider the trade-offs between capital investment (growth), profitability, and cash flow. CPM is the workflow and tech framework to streamline the close, consolidation, and reporting cycle and integrate the financial forecast cycle.

The needed information is available to ask the grow vs. scale questions:

• “Are recent investments in hard or soft assets and people — delivering the expected gains?”
• “Are investments allowing us to produce (or deliver) more with current asset levels?”

You, the CFO, have the financial awareness to accelerate or cut project spending, but never lose sight of strategic (critical) initiatives to move the organization forward. Make intentional project moves.

Furthermore, with this knowledge, the CFO can manage the expectations of investors and financial institutions.

Reduce Risk: There are three flavors of risk avoidance — financial compliance, operational compliance, and technology. The CFO must have complete visibility into the financials to evaluate if earnings, cash flow, or debt, for example, meet lender/investor requirements. Operational risks could include supply chain and labor availability uncertainty and the impact on the firm’s ability to keep customer commitments. Technology compliance covers data security, including access plus backup and recovery.

CPM technology raises the CFO’s confidence in the data by automating tasks, traceable workflows, and creating seamless end-to-end workflows. CPM technology introduces standardization of financial structures (e.g., income statement, balance sheet, or cash flow) following GAAP or IFRS guidelines. Again, consistency and structure add to the CFO’s trust in the data.

Insight and Information: The capability and opportunity to focus on “what might be” and “why did this happen” stems from standardization, minimizing administrative tasks, and streamlining core functions. Certainly, insight comes from understanding the trends in the financial data — but blending market or accounting data with operational data yields a much better perspective. Want metrics and KPIs? We have a unified, validated, common organization-wide data source. No more “where did that number come from” heated questions.

Today’s progressive CFO understands that financial systems must do more than accurately report historical results — what happened last month, last quarter, or trailing twelve months. Technology, especially CPM tools, enables the CFO to focus on “being a better partner with the business.” Thinking strategically, the CFO can proactively provide information to drive market growth, equitably compensate and retain employees, or consider new capital investments. And — given the velocity of market events — the CFO must understand and evaluate multiple scenarios.

Observe — each layer builds upon the base, Information, and Insight. The diagram is a high-level roadmap for process improvement. We can breakout out the specific improvement opportunities and create a detailed project plan.

Even better — the CPM framework lends itself to identifying gaps in business processes, for example, miscommunication between sales and inventory management, human resources recruiters, and front-line store management. Holes in reported numbers or inconsistencies in business plans allow the CFO and leadership to prioritize and fix the underlying business processes.

CPM is the enabling technology for action.

Wrap Up Thoughts

You are the SMB firm’s CFO. How is this information valuable to you?

Your organization grows as capital investment adds more soft and hard assets. The organization expands by specializing in functional departments, operational knowledge, and control distribution. Systems and processes are vital for maintaining organizational effectiveness and efficiency.

Knowledge and learning must be shared up/down and across the organization. Hard data sources, for example, ERP or CRM systems, are critical for informed, quantitative decision-making, but the analysis and discussion across teams provide the insight to adjust and align to get stuff done. The data synthesis “plugs” the systems together to create learnings.

CPM technology is the trusted collection point.

Do not rely on your ERP or spreadsheets for consolidations, financial planning, reporting, and analysis. Your team gains no leverage from outdated methods. CFO Teams must modernize using Corporate Performance Management (CPM) solutions.

CPM is the enabling technology for action.

Does your firm rely way too much on spreadsheets? If you are the CFO or work in Finance — does your team use CPM technology? If not — will you consider looking at CPM tools? If yes — what convinced you?

Leave me a comment.