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The CFO as Analytics Leader

Updated: Nov 9, 2023

It seems like it’s impossible to have a business discussion or meeting without someone talking about the need for improved data analysis in order to drive key insights into crucial area. This is especially true here in the San Francisco Bay Area with both established companies and startups obsesses with how to use data.

Yet, according to a recent article in CFO Magazine:

“Despite being a quantitative field by nature, finance has trailed other functions like marketing, supply chain, operations, and even human resources in employing advanced analytics to make key decisions.... Finance groups, of course, have long used descriptive analytics (also called business intelligence) to do their work, including reports, dashboards and scorecards, and online queries. But descriptive analytics don’t tell the user anything about underlying patterns in the numbers, and they only describe the past.”

This may be surprising to many CEOs and business owners. However, until more companies deploy their finance staff in a more proactive and strategic manner, their quantitative and analytical horsepower will continue to be underutilized.

Accounting and finance staff have access to the quantity and quality of data that is large and growing. Along with that growth, the power of analytics will continue to rise in importance. With the CFO assisting or taking the lead in data analysis within a company, he or she can become a key internal business partner by providing crucial business insights to non-finance functions like Sales & Marketing, HR, Production, and Operations.

In one example mentioned in the article, the finance team at Toyota Financial Services (TFS) has expanded its focus into proactive business analysis:

“Finance traditionally focused on measuring financial performance. But in the last few years the company has built a comprehensive analytical capability by leverage people, tools, and data... Today the function plays a broader role in measuring and enhancing product profitability, sales effectiveness and customer loyalty.”

By delving into more operational data beyond traditional accounting measures, the finance team is assisting non-finance teams as never before:

“Finance partners with the business to derive insights from volumes of loan and lease contract-level data to improve profitability by geography, product, and channel. Additionally, finance-developed analytical tools combined with sales’ local market knowledge enable consultative relationships with dealers.”

There are many possible ways in which a CFO can lead the analysis efforts:

“A finance organization might, for example, focus on understanding the drivers of financial performance, both financial and nonfinancial. It might assess whether capital investments are well spent (typically using a 'design of experiments' approach, with test and control cases), or whether employees are likely to be participating in fraudulent activity. These types of activities can add significant value to the traditional activities performed by the finance function.”

Of course, this is a natural responsibility for the CFO as he or she is more focused on the ROI of a company’s investments over time. Driving the analytics process could help to assess which marketing projects are effective, how the HR recruiting and retention strategy is faring, or cash flow that is trapped in sub-optimal inventory management.

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