How CFO’s Can Contribute To The Bottom Line
Imagine a CFO is able to check the overall profit & loss statement every day, review the contributions from every region and product line, review expenditures and orders at a product, supplier or consumer level – all this at a click of a mouse. Fueled by this information, the CFO remedies the anomalies in respective business units.
The finance department has always been adept at keeping books, managing budgets, and maintaining reports of owned cash, capital, taxes, and other statutory accounts. Organizations who ply their trade globally competing with other resourceful organizations, demand a whole lot more from their respective finance departments, ideally expecting them to make a direct impact to the bottom line.
In this effort, modern day CFOs, equipped with cutting edge Business Intelligence tools, lead their departments to form tightly-knit partnerships with core business functions. With a singular focus on driving financial performance, they collaborate with business managers to achieve the following:
- Product-price optimization
- Optimizing inventory
- Rationalizing sales commissions
- Optimizing merchandize assortments
- Bringing down cost center expenses without affecting quality of output
- Streamlining procurement services
Real-time data through BI dashboards is helping CFOs around the world, across major organizations to offer data driven inputs on store hours, vendor/partner agreement optimization, mergers & acquisition opportunities, and new valuable partnerships.
“We need to collaborate with the business if we are going to improve the financials,” says a CFO from a major online retailer. “Showing them actuals and targets isn’t enough; we need to help them reengineer fundamental processes. In short, we need to change from being a financial record keeper to a proactive partner with the business.”
Unfortunately, not all organizations equip their CFOs with a unified view of all business functions. Though many are now taking the right steps. However, there is still a long way to go to create a massive industry-wide disruption.
A poll conducted among finance executives reveals a dark truth about the reality of contributions from their respective finance departments.
- About 41 percent believe that their departments are contributing to achieve unified objectives at the top level
- Only 29 percent believe that the finance department helps in company-wide strategy refinement
- 29 percent – in optimizing processes
- Less than half or 43 percent say that the finance department is making infinitesimal impact overall or helping drive sales (50 percent)
One factor which is common among CFOs who proactively advise other business units is that they possess a strong foundation of standardized financial information flowing throughout the organization, and have the capacity (technical or otherwise) to leverage the data for business profitability. This enables all business units within the organization to utilize BI dashboards with cutting edge data visualization tools to gain a singular view on aspects such as past activity and forecasts to make important decisions.
This is how a Finance Dashboard looks
With the luxury of unified data analysis via self-service reporting and analytics tools, CFOs are now spending more time (than ever) on analyzing data to strategically contribute to all business units within the organization. CFOs are creating company wide disruptions through the power of BI:
- They allow financial analysts to spend less time producing standard financial reports and more time analyzing the root causes of performance anomalies and working proactively with the business units to fix or avert problems.
- Optimize resources in collecting financial and operational data, allowing more time for modeling scenarios and forecasting results to assist with major decisions about investments, product development, and staffing.
- Working proactively with the business to shore up areas of weakness before the end of the next financial period.
- Bringing a unified vision to business executives and helping them understand the profitability of every customer, product, and process on a daily basis.
Office Depot, an American office supply retailing giant, has succeeded in achieving financial and product data alignment at a detailed level through an enterprise data warehouse.
Through this initiative Office Depot has developed a so called common language that enables financiers and merchandisers to communicate about product profitability and figure out ways to improve it.
By using a variety of BI tools, the organization’s financial analysts in conjunction with the product unit, noticed the lack of profits being generated by their flagship Black and White copiers when compared to their colored ones. This allowed the finance department to raise a flag, communicate this to the respective business unit and arrive at a solution by shifting inventories.
In another instance, finance managers noticed that pricing discounts were edging higher than expected in several locations and notified business managers who took action.
“In the past, finance had its profit & loss statement and merchandising had its sales & gross margin reports by product, but the two weren’t connected,” says James Hoganson, director of sales accounting and reporting at Office Depot. “Now, both groups can see the profitability of individual products on a daily basis, which has enabled the business to change its strategies more quickly.”
Today, CFOs are being empowered by Business Intelligence. And they are better prepared to serve major business units. Through the timely support of Business Intelligence reports, CFOs are able to share their strategic inputs and help business managers make data driven decisions leading to better financial results.
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