In the latest of a series of articles on the changing roles of finance professionals, Brian Montgomery looks at the importance of metrics
Amid economic turbulence, it often falls on CFOs to steer the business through ongoing challenges, outwit the competition, and emerge stronger on the other side. Yet, despite this challenge, many lean on purely financial metrics – such as revenue, profit and sales – that simply confirm if the organisation has made a right or wrong move.
While these metrics remain relevant, technology has gifted us the ability to be more predictive and see around corners. Now, executives can shift their focus to bring forward-looking KPIs.
From customer lifetime value (CLV), to net retention rate (NRR) and customer satisfaction (CSAT), CFOs can now harness a greater range of nonfinancial metrics to help them predict the future financial health and profitability of their organisations.
In fact, our CFO-CIO partnership report reveals that about half of all organisations in the UKI have developed and deployed a digital finance strategy. These include automated systems for reporting using non-financial data and tools to streamline financial close, consolidation, and statutory reporting. By gathering as much data as possible, finance leaders can more confidently navigate the current economic climate.
Casting the net further
The past two years have been difficult to predict, but the situation is particularly hard for businesses that work on disparate systems. In order to better plan during uncertain times, financial leaders need to move away from the once-a-year approach of reporting.
CFOs must find a way to combat this issue in order to thrive. Relying on legacy systems to process data will not only hamper growth but also leave them struggling to survive
A real-time view of the business can be gained through financial planning and analysis tools. It is possible to better predict how future economic shocks can affect a business when the finance team has a better understanding of the current situation, as it enables more accurate modelling.
Instead of outdated static planning, continuous planning provides flexibility with constantly updated plans, and insight with easily created and iterated what-if scenarios. As part of continuous planning, management can plan and reallocate resources based on the latest results by using rolling forecasts.
In short, taking a more holistic view of data can help finance leaders understand the health of the business. Understanding metrics from other departments such as sales, marketing, and HR, is integral for offering insights that inform future strategies and investment.
Getting to the hard numbers
It’s only possible to accurately plan for the future if finance leaders have access to the right data. Our CXO report reveals that more than half (52%) of finance leaders say that limited and/or outdated information is hampering their team’s ability to make accurate forecasts. And 42% say they are still making decisions based on gut instinct despite having the data they need — because it is siloed, not in the right format, or not readily available.
The figures are concerning, and CFOs must find a way to combat this issue in order to thrive. Relying on legacy systems to process data will not only hamper growth but also leave them struggling to survive.
During 2023, IT, HR and finance teams will need to work together to harness new technology effectively to create business value in an uncertain environment. As such, the ability to source and mine data for insights will be in equal demand to traditional finance skills.
Granting teams access to customer and operational data requires strong data governance, as well as collaboration across the enterprise. All too often, leaders disagree about who owns particular metrics, or how they should be shared, and who is accountable. This means CFOs will need to play a larger role in bringing stakeholders to the table.
Regularly reviewing metrics and data to ensure they’re in alignment with current business objectives is critical. CFOs must no longer keep an eye on just the numbers; instead, they must move to a forward-thinking model which enables them to understand their current state and the gaps in business data against future goals. By doing so, CFOs can ensure that their organisations remain relevant in a rapidly changing economic environment.
Brian Montgomery is Senior Director, International Finance, Workday
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