Post 19 October

Selling the C-Suite on Financial Innovation

In essence:
At a time when businesses are making cuts and trying to save money, CFOs are arguing for the need for additional finance technology.

Finance leads might need assistance convincing their sceptic colleagues because they are used to being on the other side of the pitch.

Focus on ROI, profitability, efficiency, and customer service to demonstrate the full value of finance automation.

If you proposed investing in finance tool integration and adding, for example, process automation in 2019 — right in the middle of the longest economic growth in American history — but your proposal was rejected. Why do you think you’ll be more successful now, then?

Basically, reason should prevail over instinct.
Let’s face it: if providing unit economics, cash flow, and current accounts receivable data that was a step or two above “back of the napkin” statistics ever worked, it was then. Since the viability of the company is not in question, modernising finance reporting typically isn’t a top priority.

Everything is done. There is currently a need for the accuracy, quickness, agility, and insights required to closely watch runway, provide customers with varied levels of support, more accurately estimate demand, and quickly respond to problems like fully remote closes and supply chain failures opens in new tab. Six months ago, it was all unimaginable.

Hard evidence supplants intuitive instinct. Work from any location while replacements arrive. Ecommerce supplants face-to-face sales.

Did you know that a unit margin was 20% rather than 18%? Possibly not worth the expense to learn in January. Now, the unit margin could be either -5% or +5%, and it is crucial to know which. For many firms, tracking DSO precisely wasn’t that important six months ago. It is existential now. Finally, everyone recognises the value of scenario planning.

Now, CFOs need to inform their colleagues that without consistent and timely data—which manual accounting and finance procedures simply cannot provide—you can’t do any of that very well.

According to Brainyard CFO in residence Josh Burwick, “In one interim CFO capacity, it took three weeks to close our books on a monthly basis.” We lacked solid information on our COGS, gross margins, refunds, or discounts for the crucial holiday season if a board meeting occurred at the “wrong moment,” as it did in December 2019. We were able to somewhat go around it. Yet, if that were to occur in this setting, it would be game over.

Also, Burwick is noticing that lenders are demanding a lot more precise data on unit economics and cash burn.

No one will support you if you don’t have a good grasp on these, and you risk running out of money before you can take action, he warns. “Finance needs a clear picture of costs and cash burn on an approximately weekly following month-end base basis basis,”

It’s difficult, but that’s what CFOs are expected to do: strike a balance between budget cuts and the need for more precise and timely data.

Before getting into the presentation, let’s take a look at some of the reasons why financial innovation is necessary right now to produce superior insights. Please take note that we are not prescribing how to obtain these deeper insights as we believe most CFOs are aware of what they require based on our surveys. The issue is that it’s difficult to explain to busy coworkers how the financial data that they rely on is produced in any situation, but it becomes significantly more challenging when there is turbulence and uncertainty.

Detailed View
Many financial teams now work remotely as a result of the COVID-19 pandemic, which will persist until a reliable vaccination is made available for purchase and widely disseminated. Nevertheless, many of the financial software platforms and systems in use prior to COVID are incompatible with this workstyle. For instance, on-premises systems don’t provide any assistance for data access and collaboration, much less efficient remote closing.

Next come forced cuts. A recent Brainyard poll found that 25% of CEOs expect to lose finance department team members in the upcoming months, despite the fact that finance departments are sorely in need of automation to make up for laid-off workers.

The epidemic is a blatant stimulus for investments in financial systems, according to Vin Kumar, a global operations and digital transformation leader at business development firm The Hackett Groupopens in new tab.

According to Kumar’s statistics, businesses that used some level of automation before to COVID were in a lot better position and were able to handle the crisis far better than those that did not. Companies that were genuinely unprepared have been exposed by COVID.

He views sectors like FP&A solutions and automation, as well as access to digital, cloud-based collaboration tools, as areas where a division between the “haves and have nots” arose quite rapidly.

The CFOs and businesses that were moving slowly in terms of technology, automation, and the digitalization process were caught off guard, he claims.

If that sounds familiar, consider the most recent investment proposal you heard for marketing, sales, a warehouse, or another type of technology. Most likely, you had a burning query.

The ROI calculation is absent.
It will take some work to get a financial innovation project approved if your organisation has a tendency to consider IT as a cost centre. The first task is persuading coworkers that technology is now strategically necessary for the reasons we’ve mentioned. Avoid using trendy terms and focus instead on how specifically finance technology will give your business a competitive edge.

Finance leaders should heed their own counsel, according to Heidi Pozzo, a former CFO who oversaw a project to modernise the financial processes at the packaging company Longview Fibre Paper and Packaging now WestRock.

Pozzo, a former CFO who is currently a business consultantopens in new tab in Portland, Oregon, believes that CFOs constantly demand that everyone else show a return. Hence, be sure to have that planned out for the innovation you’re requesting.

Your pitch should be:
Demonstrates how technology will support profitable business growth. Pozzo advises, “Look beyond cost-cutting.” “Pay attention to how the investment will genuinely increase your company’s profitability, efficiency, and productivity.”

Engages the client in the discussion. How will this assist your business deliver its goods or services more effectively, and how will that enhance customer acquisition and retention?

Demonstrates a commitment to strategic objectives. Pozzo says, “I’ve seen a lot of money lost by not planning things out in advance. She directs CFOs to respond to these queries:

Analyzing market trends, outside opportunities, internal resources, and core strengths is a step in the strategic planning process. Probably two of those have changed. How exactly are you reacting?

How does the innovation fit in with long-term goals that have just undergone revision?
What useful information would it provide that you don’t now have to guide strategy?
Draws attention to possibilities for cross-functional cooperation. As CFO, Pozzo preferred to concentrate on profitability by customer, a number that requires information from the departments of sales, marketing, procurement, and other divisions in order to be computed.

Money isn’t always a topic of discussion, according to her. But when you begin bringing that level of knowledge and suggestions to the table, it actually sparks wider discussions about how the company might expand.

If necessary, can be deployed gradually. Start with minor projects that promote profitability and growth or that help increase efficiency and so provide a quick ROI, especially for large, expensive technology efforts, and then build on success.

Decreases risk Yes, a pandemic and a recession are currently prominent concerns, but the proposal should also address persistent problems like competitive challenges and cybersecurity.

Calculators that claim to provide an average cost of a data breach estimate $3.9 million?! are frequently regarded as sensationalised and only applicable to large businesses. Yet, 60% of all cyberattacks purportedly target small-to-midsize businesses opens in new tab. Financial information is a common target, and using unsecure, consumer-grade collaboration tools remotely puts your business at danger. Include in your pitch if the enhanced or new technology will protect sensitive information.

Really examining your risks and considering, Well, what happens if we wind up in these situations?” is a critical component of innovative, strategic financing.” stated Pozzo. CFOs are well-positioned to identify issues using “what if” scenarios.

In fact, many crisis teams fall short in the three areas where finance executives excel—modeling, documenting, and measuring.

Prepare to pitch.
Lean on your team and, when necessary, the vendor to develop clear, succinct information that stays out of the weeds but gives enough detail to make wise judgements because your coworkers are under a lot of pressure.

The majority of finance and accounting personnel currently working from home might serve as a strong starting point, according to Kumar, when arguing for increased automation and digitization of paper records. Only approximately a quarter of the finance team members will be expected to report back to the office when it is feasible, according to the results of our most recent Brainyard Summer 2020 Finance Priorities Survey.

The groundwork has been laid for a sizable work-from-home movement.

Working remotely is now a viable option for businesses, thus the focus is on how much of that labour can be automated and/or supported by further technological investments, according to Kumar.

Savings on real estate may be able to balance the expenditure.

It’s time to stop thinking and start doing for businesses that have the resources to fully or substantially automate their end-to-end financial management procedures in order to recover stronger and more resilient. Budget-conscious people can look at less expensive choices like robotic process automation.

Start fiddling with it, Kumar advises, and automate as much as you can. For instance, RPA is a useful technology that, when used in conjunction with an existing ERP system, may automate manual rules-based processes when data needs to be transferred from one system to another. This is especially useful when the application integration process is difficult to complete or when funds are limited.

Programs that have quick implementation and adoption times are successful. Whereas 10 years ago it was typical to take 12 to 18 months to see results, today’s cloud-based subscription models mean you may be up and running more rapidly. This is another selling point for businesses who can’t spare a significant, upfront capital outlay.

Make sure the technology will actually be used; this is equally crucial.
A lot of work is often put into having a tech project or piece of software approved, and after it has the go-ahead, it is all but forgotten, according to Burwick. One of the main causes of underutilised software licences in businesses is that nobody is held responsible for them after they are purchased.

CFOs must be certain that the software they support will be adopted. Participate in the evaluation process with your team. When it comes to licence renewal time, the last thing you want is the CIO to raise a red flag by displaying a utilisation rate that refutes the case for purchase.

Establish accountability markers that indicate if a project is on track or off, advised Burwick. Software for performance measurement can be used for this.

Achieving a Contract
Now that you have the interest of your executive colleagues, you are prepared to begin your research.

According to Ethan Taub, CEO of financial services company Loanry, B2B IT providers are aware that they must be at their best right now. Get the executive team up up and personal with the suggested solutions by requesting demos, referencing client success stories, and doing so.

Because they have not been exposed to them, many people fail to recognise the advantages of financial innovation and systems, according to Taub. “When consumers can truly witness the automation and speed associated with financial technology, those opinions will shift. Getting your finances in order now will spare you a lot of grief later.

While assessing your options:
Be specific in your demands, state why your business requires the product, and inquire as to how the issue will be resolved. Less technical CFOs should ask IT executives for assistance. Don’t enter it naively, Taub advises. Beg for assistance.

Ask for advice based on their experiences from coworkers at other companies that have bought the aforementioned goods. Locate these individuals outside the vendor representative by asking around or using finance discussion sites.

Put results first. Request comparison graphs to depict before-and-after scenarios, such as: “With your old system, it took three weeks to close the books every month. That will be cut down to one or two days.

To sum up
Businesses that make investments in tough economic times are typically well-positioned to prosper when the economy starts to recover, according to Pozzo. If they take the appropriate strategic actions and keep investing in themselves, they will surpass their rivals.

Since the instinctive reaction is to stop all new discretionary expenditure until the economy improves, she urges CFOs to utilise this as the go-to argument to win support.

She claims that assuming you can cut your way to success is a fatal error because it is ineffective. “Very successful businesses understand how to invest in the right places at the right times, which is what separates them from average businesses.”