CFO challenges lead back to technology – insights from Intacct Advantage

SUMMARY:

At Intacct Advantage, I was reminded that the struggles of CFOs and CIOs have a lot in common. For the CFO, technology has the potential to address some vexing problems. But becoming a strategic CFO involves much more than the right tools.

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Matt Armanino on CFOs – at Intacct Advantage

One big perk of attending Intacct Advantage: being around financial leaders grappling with technology. At most enterprise shows, I tend to hear more from CIOs. Their struggles aren’t that different.

CFOs and CIOs are both in a push to become more strategic – but they don’t get to toss out their day jobs. CIOs are still expected to keep systems running and hackers out; CFOs are expected to fulfill their compliance and financial close functions. Yet in both cases, the big wins come when strategic pursuits are claimed.

This is leading CFOs towards a deeper pursuit of technology – cloud technology in particular. At Intacct Advantage, I mixed informal chats with sessions from Intacct’s CFO Summit program. My takeaways are a mix of the expected and the surprising:

  • CFOs showed a persistent interest in tech security, even interrupting presenters to ask about security.
  • Revenue recognition rule changes were on the CFO radar screen, though not necessarily with the urgency some would advocate.
  • Of all the tech bells and whistles, CFOs love idea of dashboards with real-time KPIs the most – but they don’t always get to dashboarding on their own projects.
  • Management-by-KPI is gaining momentum, but it requires new metrics.
  • Forecasting can be a huge asset, but it requires predictive capabilities that put a strain on poorly integrated legacy systems.
  • What strategic CFOs want to accomplish requires modern, integrated software – and cloud has an edge.

The first CFO Summit session was a presentation by Matt Armanino and Lindy Antonelli of Armanino LLP. Each year, Armanino puts out its CFO Evolution Benchmark Survey (here is a PDF link to the CFO survey ebook used in the Intacct presentation).

During the talk, Matt Armanino outlined six key ways CFOs can make the move to business leadership:

  • Standardize and improve processes
  • Provide effective KPIs
  • Integrate technology
  • Provide accurate forecasting
  • Drive improvement with technology
  • Support growth and expansion

With that in mind, let’s run through my takeaways.

Why are CFOs so interested in tech security?

During Armanino’s presentation, he and Antonelli shared data on “high performing” CFOs and their pursuit of technology. 70 percent of what they consider “Best in Class” CFOs “Drive Improvement with Technology,” as compared to only 15 percent of “laggards” and 26 percent of “average.”

The respondents cited a range of deployment benefits, categorized into “efficiency,” “improvement,” and “money/risk.”

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Though the efficiency section earned the most survey tallies, during the presentation, the first question was about security:

Was there any conversation about security? As we push into technology, we have noticed that not only customers view it as a priority, but employees view it as a priority as well.

Armanino responded:

It’s a very good question. At the time the survey was done, the wording of it didn’t highlight security, but I will tell you, there’s no hotter topic right now. I literally meet with two to three CFOs a week on average throughout the year, and it comes up in the course of those conversations.

So why is security top-of-mind for tech-minded CFOs? Armanino:

The big change in this area is boards are paying attention now. I don’t know if any of you sit on any boards, but boards are really paying attention [to security]. It’s driving down, from the top, questions to the CEO, and ultimately – guess what? Those cascade down to all of you. That’s the big change year over year. It’s a massive focus, and I will tell you, if you’re again not thinking about cybersecurity today and starting to get smart on it, you need to be.

Revenue recognition – urgent concern or low priority?

Intacct promoted revenue recognition preparedness at Intacct Advantage. Understandably so, given they’ve been out in front on this issue, first adding revenue recognition functionality in their May 2016 release, and building on it since. But how serious an issue will this be for CFOs?

Intacct isn’t the only one flagging up this issue. Brian Sommer’s been hitting on RevRec for diginomica, including Intacct, RevRec, Workday – confusion or opportunity? Sommer:

A decision to defer a new financial accounting implementations because of the timing of implementing new RevRec requirements would be a bad one. The potential risk to the firm for getting the application of new RevRec rules wrong is great. The risk that the errors could trigger reputation harm to the company and its top officers is a real one, too. Longer-term, there’s risk in supporting a maze of spreadsheets or a custom application designed to handle the RevRec calculations.

RevRec doesn’t impact all firms equally (a candy manufacturer is probably not impacted). Firms dealing with lease accounting or SaaS-type contractual revenue streams will be impacted; some will have to manage old and new regulations simultaneously, requiring dual reporting (sounds fun).

At Intacct Advantage, I picked up on CFO concern over RevRec, but not urgency. One customer expressed hope the rule change schedule might be pushed back. My interview with Smith Systems CFO Douglas M. Boughton was typical of what I heard at the show. Although Smith Systems has a straightforward sales model with limited deferred revenues, Boughton was glad to knock RevRec of his list of concerns:

[Intacct] clearly has a stronger understanding than most anybody else I’ve spoken with. Just like on security, scalability, transaction load. It makes it very comfortable for me to not have to worry about those things.

CFOs that modernize their financial software with a provider that addresses RevRec changes will have a big upper hand over the custom spreadsheets folks.

Dashboarding – a big CFO win, but sometimes a project afterthought

CFOs are sold on dashboards. The ability to health-check their business on any device is a huge perk of modern financials. In my piece on Intacct non-profit customers, panelists spoke of the gains dashboards have brought. Shannon Atkinson, Chief Financial Officer, Raising A Reader, told attendees:

It used to be our goals were just these ideas out there, and they were never really measurable… Now, what we’ve done is taken Intacct’s dashboard tool and created opportunities for all of us. Every person within the organization has instant access to where we are, and where we stand against our goals. Even our non-financial staff members understand what a green thumbs up or a red frowny face means.

Too often, dashboards are postponed as a “nice to have.” That’s how Boughton put it: he’s eager to get to dashboards, but it wasn’t part of their cloud financials rollout. Antonelli said after go-live, CFOs get distracted by month and year-end close:

What I find is that everybody’s in this hurry-up get live in the implementation… They forget about implementing dashboards. Put your dashboards in place. Get those KPIs in place. It’s super important.

The wrap – tech obstacles and opportunities

Effective dashboards are tied to meaningful KPIs. In my interview with Intacct CEO Rob Reid last February, I asked him which measurements matter. It’s a trick question because it varies by industry. For SaaS companies, benchmarks include customer lifecycle, churn, and business unit performance. In professional services, you could build a dashboard on Reid’s pointers:

  • Am I on budget or am I off budget?
  • Are we meeting our deadlines with the customer?
  • Are we keeping high customer satisfaction?
  • Do I have resources coming off of a particular project that I could be applying somewhere else, so I don’t have consultants on the beach?

The catch? You need a real-time view to create that dashboard. The same is true for forecasting. That means moving from historical reporting to predictive analytics. But as Armanino noted, the barriers to predictive go back to technical limitations, along with the problem of inaccessible/inaccurate data:

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From Armanino LLP’s CFO Evolution Benchmark Survey

Armanino also spoke to the challenge of mergers and acquisitions when processes aren’t standardized. Whether it’s process standardization, real-time dashboards, or accurate forecasting, it’s tough for CFOs to pull off a strategic move on old, poorly-integrated systems.

That doesn’t mean cloud is an imperative for all CFOs. Cloud just has advantages when it comes to everything from mobile dashboards to app integration (Watch for more on the integration part in a future piece). And, I’d argue, even security.

Certainly in a fast-moving area like RevRec, frequent functionality updates favor SaaS financials. A move to a cloud financials solution will also impose a beneficial level of process standardization, with configuration used only for differentiating processes. Code customization is off the table. For so-called business agility down the road, that’s a good thing.

Cloud or not, the strategic CFO is in need of a modern financial system that plays nice with others via boatloads of APIs. Unlike CIOs, CFOs have their own tech literacy to contend with. 94 percent of the CFOs Armanino surveyed said they needed better technology skills; 64 percent said they were working on upgrading their own tech skills.

Tech alone won’t solve the problem. Based on Intacct’s surveys, only 20 percent of the time CFOs spend is “strategic.” When I asked Houghton of Smith Systems about his strategic focus, he echoed a familiar refrain:

I think it’s coming. As a smaller organization, I still have to have my hand in some of the day-to-day. Slowly, I do see myself freeing up more and more. Certainly with Intacct’s ability to get to the data quickly and turn it into meaningful information – that has helped tremendously.

Intacct or not, the right tools do seem to make a difference – but they aren’t enough. Completing the journey likely involves a cultural cocktail of leadership and pure, raw determination.

Image credit - On-site photos and screen shots by Jon Reed.

Disclosure - Intacct paid the bulk of my travel expenses to attend Intacct Advantage 2016. Salesforce is a diginomica premier partner.