Chief Financial Officers (CFOs) are increasingly expected to play a much more strategic role, especially in the post-pandemic world. Tasked with maintaining an organization’s financial health and business continuity through uncertain periods, today’s CFO is expected to be the first line of defense. Combined with this broader role is the need to ensure compliance with mandatory regulations.
In this fast-changing business landscape, CFOs need to provide real-time, data-driven decision-making insight to execute and deliver strategic business outcomes (and not just lead accounting functions). According to a recent Gartner report, “sixty-nine percent of board directors say that the effects of the COVID-19 pandemic are accelerating their digital business initiatives.” CFOs must shepherd this digital acceleration by balancing technology and data platforms while guiding the organization’s finances, especially in highly volatile markets. This means they must acquire a complete view of the organization to align with its overall objectives.
The challenge is most enterprises rely on multiple systems to suit the varied requirements of different departments. Running on different solution architectures, these disparate systems don’t interact with each other. The lack of data interactivity between these systems causes information silos that have a crippling effect on business growth.
The larger the firm, the greater the number of systems and their complexity. Bigger enterprises with operations in multiple geographies usually have several layers of interconnected processes that cut across different functions. Many large organizations also have multiple entities and disconnected databases serving different purposes.
When it comes to the supply chain, the entire process consists of several functions, namely sourcing and procurement, financial planning and analysis (FP&A), trading and risk, treasury, compliance and hedge accounting and reconciliations. Most enterprises use a combination of point solutions, spreadsheets and Enterprise Resource Planning (ERP) and Commodity Trade and Risk Management (CTRM) systems to manage these areas of their company. At the same time, your treasury relies on a different system since it requires a more sophisticated framework to manage currency exposure, hedge accounting, payments, compliance, liquidity and cash.
With a technology ecosystem built on a siloed foundation of different solutions, extracting timely information becomes cumbersome and often takes days. For instance, in the supply chain, when something goes wrong with procurement, the CFO doesn’t get immediate visibility into the problem, as the data rests in a system that only the procurement team is privy to. They need to work through a maze to gain and present an accurate view. Relevant data needs to be collated individually from procurement, logistics, shipment and possibly trading and risk systems, if it’s a commodity company, to understand the financial impact of the problem.
Companies can find it difficult to accurately respond to problems because it requires capturing and integrating data from all touchpoints in real time and analyzing this data for strategic insights to balance the pressure on top-line and bottom-line results.
Lack of timely visibility makes it difficult to glean data-driven business insights that are critical today to stay agile and competitive in volatile and fast-moving markets.
To enable strategic and transformational efforts while improving speed and agility, CFOs need complete visibility into their enterprise and finance operations — crucial data that currently resides in siloed systems. The need to integrate both enterprise and financial systems to gain a timely and accurate view couldn’t be more crucial.
The inherent complexities of the CFO’s office, coupled with the greater strategic role that they need to play, make them central to the unification of enterprise and finance systems across the supply chain.
CFOs today are operating amidst oceans of data. As architects of business value, they need to embrace technologies that allow them to gain a unified and timely view into enterprise data. In doing so, they stand to wield more influence on organization-wide transformational efforts that can help increase business resiliency and strengthen top-line and bottom-line results with a better understanding of risk and growth opportunities.
Accomplishing this will require them to push for the adoption of integrated processes not just from a financial perspective but also considering its supply chains.
Operating from a single source of truth will allow finance leaders to plan their Profit and Loss (P&L) statements and cash management while always staying abreast of their risk. Companies that embrace the leveraging the data from all their systems stand to gain a competitive advantage in the long term, especially when operating conditions remain highly volatile.
That said, not every transformation depends on technology. For instance, stakeholders today want a better understanding of their environment, social and governance (ESG) and sustainability reporting and how it connects to financial outcomes. This calls for adopting new levels of reporting congruency and transparency in non-financial reporting.
Forward-looking CFOs must translate the company’s current financial and operational status while leveraging historical insights to arrive at the right strategies for growth. In doing so, the CEO can concentrate on the larger business vision while remaining confident in the CFO’s support in accomplishing it.
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