What new benefits can the finance team offer the company as finance becomes more automated?
Author and CFO Glenn Hopper contends that the CFO has the capacity to take on the role of chief data officer, transforming their division into a powerhouse in data analytics and evolving into a more strategic business partner.
According to Hopper, CFOs in the information age need to know how to use cutting-edge technologies like AI, ML, and RPA to advance both their department and the company as a whole.
Steve Gallucci, global and U.S. CFO programme head at Deloitte, summed up the changing role of the CFO concisely in an article on rising CFO compensation published by the Chief
Executive Group: “The modern CFO is a thinker and [a business] catalyst. They do more than just ensure that the trains arrive on time.
The CFO’s job now is very different from what it was even a generation ago. Finance teams are becoming more forward-looking and supporting strategic decisions across various sectors of the organisation rather than simply reporting on performance thus far.
There is a case for including data and analytics as another area of contemporary company that falls under finance’s purview as the CFO role’s ambit continues to broaden.
Author and CFO Glenn Hopper makes the case in his book “Deep Finance: Corporate Finance in the Information Age”(opens in new tab) that the modern finance team should and should lead their company’s digital evolution initiatives. In this essay, we elaborate on Hopper’s contention that the finance department ought to be the group in charge of the company’s data and analytics projects.
The Development of the Finance Department Toward Data and Analytics
The development of the finance department is at a turning point. Several conventional financial tasks, including managing accounts payable and receivable and even closing the books, can be automated in part or whole. When businesses were pushed to digitise their operations to support remote employment, the pandemic intensified this tendency.
Like any automation initiative, finance automation lessens the workload of employees. Finance leaders must decide whether to reevaluate the results the finance team provides for the organisation or apply those savings to the bottom line and eliminate some employees. Both are possible; nevertheless, it is up for debate whether to go beyond what is now being done.
In The EOXS ERP Podcast, Hopper stated, “What I am pushing for is not that we need to eliminate positions, but that we need to improve the skill set and what finance as a department can do going ahead.” “You still have the same amount of employees, but they’re doing more mindful activities and strategic thinking as opposed to that mindless work.”
Teams in the finance industry sometimes adopt new technology slowly. Hopper offers a word of caution.
I think you’re going to be caught flat-footed if you’re not moving with [the technology trends], he said. “Growth is now exponential rather than linear since it is moving so quickly. And you’ll fall behind if you take too long to adjust. If you don’t change, you’ll be out of date in five or ten years.
Hopper became a keeper of KPIs for all business sectors in his positions as a finance professional over time, partly because to the data gathered for FP&A, budgeting, and building predictive models. As a result, he promoted the finance department as the best source of data and analytics for the entire company.
“Since you play an unbiased function, you won’t prefer sales and marketing over operations or any other department. You are a dispassionate observer of the data, Hopper stated. The analytical abilities that make you effective at finance, in my opinion, also make you strong at data analysis.
You need to start figuring out how to collect all this data, and then utilise your analytical abilities on the crucial business KPIs. You’ll become a more valuable strategic partner as a result.”
Instead of continuing in their conventional duties as record keepers, Hopper envisions CFOs with the right skill set and team transitioning into chief data officers. The result is what Hopper refers to as the “New Age CFO.”
Making the CFO-Chief Data Officer Power Mashup According to Hopper, artificial intelligence (AI) won’t replace current CFOs. CFOs instead run the risk of losing their jobs to New Age CFOs who understand how to collaborate with AI, machine learning (ML), and big data.
Wait on before packing your bag to go back to school. This does not imply that you require a computer science master’s degree.
Understanding relational databases and unstructured data, as well as the data that is already available, how to get it, and what you can do with it, is the simplest thing that you can accomplish, according to Hopper.
Feel free to heave a sigh of relief: The person who creates the algorithms need not be a data engineer, especially if they work in a field unrelated to that of Hopper. Hopper asserts that a New Age CFO will, however, be aware of the importance of those algorithms as well as the distinctions between technologies like AI, ML, and robotic process automation (RPA). With brief courses or the right publications, CFOs can have a better understanding of data science and fields like artificial intelligence and machine learning. Moving further doesn’t necessitate enrolling in approved courses; instead, numerous continuing education resources provide executive-focused series of classes.
A New Century CFO’s Business Case
Hopper considers the return on investment finance teams will make in data science to be as follows:
Hopper used the example of “let’s say you are flying an F-22 fighter plane” to demonstrate his military journalism background. It has its weaponry and flight controls. And the query is, “How much does this fighter jet’s navigation system cost?” And it makes no difference since, despite all the other wonderful features it offers, it falls short of its potential if you don’t know where you’re going. I believe that the financial sector can be that financial system.
The resources saved through automation can, however, be reinvested in various ways for additional rewards. Retraining employees so that they may concentrate on more strategic activities can be beneficial if cash flow management is a top goal. Workers who previously had to spend their time on monotonous duties can now concentrate on fraud detection, procurement negotiation, and other areas that lead to cost avoidance.
Hopper also pointed out that effective, data-driven finance systems might be helpful during the M&A process.
He claimed, “I’ve gone through a number of deals and [I’ve observed that] the companies that have solid finance processes can raise the worth of their company.” “You demonstrate that you have these data and these tendencies in due diligence. It truly demonstrates the importance of the business that you are extremely clear about where your revenues, cost of products sold, and expenses are coming from.
The goal at hand for the Modern Age CFO is to increase the value the finance division adds to the company. Technology enables finance to become more forward-looking, even if it is still important to report on how the business is doing and accomplish compliance-related activities. Also, the department will get better at developing predictive models to find opportunities, dangers, and trends for the company as it continues to embrace its new skill sets in this area.
Analytics and Data Management Best Practices for CFOs
For many already overworked finance directors, the potential of the New Age CFO and their finance staff can seem like a daunting task. Here are five recommended practises that Hopper recommends for executives looking to manage the analytics and data for their organisation.
1. Make data democratic.
No employee of the organisation, including finance, should act as the information’s gatekeeper, according to Hopper. “The chief data officer should gather trustworthy data, use it, and supervise it. But, dashboards with that data should be made available to everyone, regardless of department or position. A company that is truly data-driven will be accessible.
According to Hopper, business nirvana occurs when anybody, whether at the executive, managerial, or staff level, can access the data, conduct tests, and come up with their own solutions.
2. Before you expand, put the appropriate technology systems in place.
Any business, according to Hopper, can profit from data collection. It’s critical to plan ahead and put the necessary processes in place to enable a data-driven finance organisation for companies seeking scalable growth.
You shouldn’t try to switch your accounting, CRM, and project management systems once you have already entered the hockey stick phase of growth, according to Hopper. You don’t want to be building the aeroplane as you are flying, so put your systems in place first so you can handle it when it occurs.
3. Pay attention to modest successes.
In order to gain support from everyone in the firm, Hopper advises concentrating on the modest triumphs.
When you have a management team that doesn’t understand why we need to do this and believes that things are OK the way they are, he added, “I’m finding that these tiny wins are a big way to start obtaining support early on.” It’s about demonstrating these straightforward, modest successes and then assisting them in visualising the future road map of what is feasible.
Hopper proposes assembling a “guerilla team” comprising people from sales, operations, and finance who recognise the benefits of a data-driven business. They can then search for chances for minor victories in their respective areas and promote them to management.
Hopper remarked, “It’s excellent if you can point to folks in your field that are employing data science and business analytics. But, it could be difficult to find it depending on the sector. In order for it to spread throughout the organisation, it truly takes someone who has the vision and recognises its importance, ideally at the top level.
4. Steer clear of notions of “transformation.”
The all-encompassing and somewhat useless catchphrase of the moment is “digital transformation.” The phrase creates the illusion of an immediate ROI.
The term “digital transformation” is misleading. It is not a transformation because that would imply that it is finished. It’s evolving, and it’s evolving quickly, according to Hopper. “Let’s refrain from declaring that our organisation needs to undergo a digital transformation. The underlying message is, “We must take use of and employ the best tools at our disposal.
5. Always assess your company, market, and technology.
According to Hopper, the tools that are accessible to developing businesses are continuously changing, so be prepared to assess them as they hit the market.
The biggest challenge I face as CFO is having to constantly monitor not only the sector I work in but also the tools and technologies that are available. I can’t just rely on the idea that since something worked well in the past, we should continue doing it in the future.
Instead, he advises maintaining communication with your entire staff to comprehend their procedures and identify any bottlenecks, as these are opportunities for progress. Keep an eye on finance software and technology in general in addition to remaining current with the newest technologies and what’s happening in your business.
Using the promise of big data and analytics may seem out of reach, especially if your business is tiny. Yet, it is preferable to start planning how to develop a more strategic, data-driven finance operation right away for those that are aiming to grow.
Hopper remarked, “If you fall behind on staying current with new technology, then you don’t even know what’s conceivable.” “For this reason, in my opinion, education is crucial at all levels. Similar to anything else in business, it’s about having a strategic vision, comprehending the terrain, and figuring out how to navigate it.