How Data Transforms the CFO from a “No” Person to an “Answer” Person
There was a time when the CFO in any given company would have the reputation of being the “no” person. Like a stern but loving parent only looking out for a child’s best interest, the CFO’s job was to say, “No,” when marketing wanted more money or the R&D department needed funds to test some crazy new idea. It was the financially responsible thing to do. And, the CFO would always make sure you knew that it wasn’t that he or she liked to say, “No.” It was that the future stability of the company hinged on frugality and fiscal responsibility.
However, the advent of big data and business intelligence is changing all that. The CFO is now poised to be the “answer” person for his or her organization – the person essentially making the big decisions (or at least providing the information with which to make the big decisions) and maybe even running the show. CFOs aren’t just gathering and crunching the numbers. They’re making sense of the numbers and using them to predict future business performance. Here’s how.
360-degree View Leads to Centralized Control
CFOs typically already have access to all the numbers – budgets, expenditures, sales, etc. – throughout the company. Therefore, they’re in a prime spot to have the most holistic, transparent view of money coming in and money going out. With this kind of information, they’re more likely to be able to spot things like where the gaps are in sales numbers, the biggest drains on the operations budget, and where money can be saved, for example. In other words, they’re the ones with both the high-altitude vantage point and access to the details, which centralizes control in their arena.
Number Crunching and Analysis Skills
By training, most CFOs are already the ones who are supposed to make sense of the numbers. The really successful ones have already been using raw numbers to help steer their organizations for years. However, there are two big differences in the data CFOs have to work with today.
First, there’s more data coming in and it’s coming in faster. Smart devices, up-to-the-minute tracking, and the Internet of Things (“IoT”) can measure and report on more data than ever before across organizations. There’s a problem with a delivery? You’re likely to get an alert, maybe even on your phone. The production lines are running slower than usual? You can see how long the slowdown has lasted and figure out how much the slowdown can cut into production. With the right business intelligence (“BI”) tools, you can also see how that slowdown will affect other areas of the business, from profits to deliverability.
Second, technology has made it possible to analyze the numbers faster. BI software can crunch a greater amount of data in minutes or seconds than was possible even just five years ago. Really good BI tools can also format important data into more easily understood charts and graphs for presentations. By combining today’s advanced technology with their business acumen and knowledge, CFOs can provide better analytical information faster, even providing information for minute-by-minute decision making.
Real Answers, Not Just Guesses
This kind of data and business intelligence is changing how CFOs analyze everything throughout an organization: sales leads, profitability, budget requests, operations, deliverability, supply chain, long-term purchasing – literally every nook and cranny of the business. Now, it’s possible to see how different departments and activities are interconnected in ways that weren’t apparent before.
More importantly, this wealth of data and BI technology means that CFOs and their teams can produce real answers very quickly (sometimes in real time) about whatever other managers and C-suite members need to know in order to make informed decisions. That means CFOs are providing real answers to important questions, not just guessing based on past trends.
That fact leads into predictive and prescriptive analytics. Analyzing data used to mean taking a deep dive into past performance of an organization. Past performance can help analysts pick out trends that can help a business in their next sales cycle. However, new, more powerful BI tools can whip up multiple layers of analysis based on different models with different variables. That means data is now being used more often to predict possible business outcomes (thus the term “predictive analytics”) and to fix problems (thus the term “prescriptive analytics”).
How the CFO Will Lead – Choices to Make, Tools to Use
IoT, big data, and technology as a whole are undoubtedly expanding the role and the importance of the CFO in any organization. When deciding what the ultimate role of the CFO will be, there are two specific aspects of big data and organizational process to consider.
How will you structure collection and reporting of your analytics?
Will individual departments be in charge of collecting and analyzing their own data, or should analytics and business intelligence be consolidated under the CFO? This question is a hotly debated point in the business world right now. Depending on how big your organization is, how savvy individual department heads are, and how advanced your data systems are, it might make sense to delegate some of the work to departments. However, at some point, everyone will have to come together to compare notes and share what they’ve learned from their data. Keeping your data in silos doesn’t do anyone any good.
Get a good business intelligence tool.
It’s important to distinguish between data and business intelligence. Don’t be fooled by people who throw around the terms “big data,” “analytics,” and “business intelligence” interchangeably. Data are the raw numbers and information you’re collecting to use. “Analytics” is a broad term that refers to the regular, systematic analysis of data and statistics. Business intelligence refers to turning your data into usable information with which you can make practical business decisions. A good BI tool can be used to analyze different models to make predictive and prescriptive analyses. It can also transform raw data into charts and graphs that will help you make better presentation to stakeholders who may not understand raw data but who need to understand what the data mean for important business decisions.
The Influence and Necessity of Technology and Data
Whether your analytics initiatives are led and managed by your CFO, by individual departments across your organization, or a third-party service provider, if you aren’t collecting data and applying it to business decisions, that lack of strong business intelligence can leave you vulnerable to competitors and the whims of a capricious marketplace.
The moral of this story is that it’s not enough just to collect and have the data. Choose the right person and the best team in your organization to analyze and apply your data, so you can actually make better, faster business decisions – based on real answers and not just guesses – to move your business forward.
About the author:
Dawn G. Patrick, CPA, Partner, has dedicated most of her career to serving clients in the technology industry. As the leader of Cherry Bekaert’s specialty practice focused on innovative companies in Technology, Health & Life Sciences, and Industrial, she supports the technology community with her time and extensive industry knowledge. Prior to joining Cherry Bekaert in 2009, Dawn spent over 20 years with a Big Four firm. Throughout her career, she has worked with public and private companies ranging from startups to large multinational corporations. Dawn has held numerous leadership roles in both her career in public accounting and as a part of the technology community. Dawn’s full bio is available at CBH.com.