Though Intacct now has 10,500 customers, and a 47 percent year-to-year growth rate as of last quarter, let's be blunt: their success hinges on the ability to serve the needs of today's CFO. But for the risk-minded CFO, change is no cakewalk. What metrics should a CFO use to manage their business? How do they strike a balance between operational and strategic?
Armed with results from their recent CFO survey, Intacct CEO Rob Reid joined me for a phone chat to about the changing CFO. At diginomica, we always approach vendor-produced surveys with a critical eye, so I wanted to learn from Reid's customer examples as well. What resulted was a view of the CFO in transition, making course corrections in real time rather than tracing missteps in static historical reports. But how do you get there?
"CFOs have to attack the status quo"
Reid provided context on why CFOs are wary of change-for-change sake. They've been burned before:
What I’ve always been told is you have to attack the status quo, because if you don’t, somebody else is and you're going to lose the business.
They also are concerned that when we went through Y2K back in the late '90s, 50 percent of all the implementations failed, and then about 50 percent of all CFOs got fired. There was this concern about, “Boy, if I switch, am I taking on too much risk?" That's a big reason why we focus on ease of implementation.
Along the way, financial systems stagnated:
We believe that accounting really got stagnated. All people were doing was just trying to appeal to, “Let’s make sure we satisfy all the requirements for being a GAAP system.” We really felt that you could also have operational metrics that could help you do much better, so we are a fully GAAP system, but we’ve incorporated all this additional capability that’s allowing people to truly see the nuances of their business.
Reid believes CFOs must become change agents, not just pragmatists:
CFOs are known for their integrity, they’re known for being very balanced, they're known for being very pragmatic. They’re the ones that try to lasso the CEO and draw them down from their high horse. If the CEO says, “Here’s the vision. Here’s how we’re going to go,” the classic CFO says: “Well, here’s reality.”
To do that, they're going to need real-time tools:
I’ve spent about two-thirds of my career with large companies, and about one third with small companies, and I rarely used to get information until 120 days after it happened, so I was always looking in the rear view mirror.
Now, you need to be able to manage your business in the moment as opposed to what happened last quarter. It's no longer about clicking off the debits and credits, though we still need to track that. It's all about how can we help the business grow if they have the right information.
The CFO survey: CFOs are struggling to be strategic
So how do Reid's views stack up against Intacct's CEO survey? The results found that CFOs are still spending too much time on administrative obligations:
We do a CFO survey of our customers to understand what they're up against. One of the things they've been telling us is that, unfortunately, they're having to spend about 80 percent of their time on the task of pulling together the books, doing the accounting, and figuring out what's going on and revenue recognition. When it comes to reporting, CFOs want more insights into their business than profit/loss performance.
The time spent on strategic pursuits is too limited:
What CFOs really want to do, and where they only get to spend about 20 percent of their time, is moving to be a strategic advisor to the business, to the management team and the board. What they're now really trying to look at is how can they take insight from their systems as opposed to just closing out the books.
The good news - if you can call it that - is that the basic tools are in place. But now CFOs want sharper insights:
In talking to a number of these CFOs at our conference, all the easy things have pretty much been done. You’ve got tools in place to understand. Now what they want to do is to find the diamond in the rough, whether it be "How can we build the business faster?" or: "Do we have some risks that we don't naturally see just by looking at the higher-level metrics?" They want to be able find those nuances.
The real-time CFO needs new metrics
As you might expect, Intacct believes they can help CFOs make this transition by automating processes on the one hand, and providing a real-time business view on the other. Reid rattled off a flurry of Intacct customer success/satisfaction stats. I asked him what types of metrics a strategic CFO should want in their cloud ERP system. Reid cited customer lifecycle, churn, and business unit performance as three benchmarks often used by the "subscription economy," including cloud software companies. He used professional services as another example:
If you're running a consulting organization/business services, which is the largest sector of the United States economy now, you want to understand not only about the profitability of every project, you want to understand the state of any project as it’s going through. 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?
Intacct customer stories - "tracking the success of every village"
I asked Reid for field examples. He started with a non-profit scenario, the Nike Foundation, which uses Intacct to manage their initiatives for impoverished single mothers in Africa. A key part of that project is going from village to village, educating women on business skills. The Nike Foundation began using Intacct to tracks the success of these women in every village. But they learned something surprising:
They found out they had to take a different approach; there were different things that caused success from village to village. They totally revamped the way that they went forward with the program because they found out they had to do it village by village, as opposed to just doing the same thing across all of Africa. If they didn't have a system like ours, capturing those operational metrics about success and failure, and what was working and wasn’t working, they probably would have proceeded for years with the same approach.
I asked Reid for examples of those metrics:
They started tracking how many people participated from each village, how many went through the training, how many then tried to go off and create a business, how many of those were successful at it, how many failed, how many went back, and then what made them successful.
With Intacct, Reid says they were able to determine which factors impacted which village:
It could have been that in some cases, they put in venture money to enable them to start the business. In other cases, they might have put them through multiple days of training. They were able to identify which approaches work best... It could have been that the mentoring in one village was more important, where in another village, having more funds was more important.
Reid noted that a classic approach of treating the entire project as one business unit, and running a profit and loss every quarter, would not have enabled Nike Foundation to hone in on each village and adapt:
Most businesses are very complex today, and so when you're able to understand the different aspects of what’s working and what isn’t working, then you can come to the truth and resolve it.
Reid shared another story from FlightWorks, which leases jets to corporations. Prior to Intacct, FlightWorks would buy a group of jets from a specific manufacturer. But their analytical hands were tied:
With their old system, they would do is look at their overall P&L and go, “We made money this quarter or this month,” or, “We didn't make money,” but they couldn’t identify which jets were actually the best for them. It’s a very complex process that you’ve got to go through, involving the type of jet, the size of the jet, the frequency the jet was utilized, as well as maintenance and fuel costs. Plus appreciation and depreciation.
With Intacct, they can parse those details:
FlightWorks was able to start going in and segmenting all these different things, as well as looking at it across the fleet. Let’s just say they had five Gulfstreams and five Learjets. All of a sudden, now they could do a mini P&L on those 2 types and then start to decide, “You know what? The best time for us to sell the Gulfstreams is in the third year, whereas with the Lears, we should hold on to them for five years."
CFO dilemmas can't be fixed in one article, but real-time metrics are an interesting lens. Intacct still has a lot to prove, so this is a story we'll return to. As for an update on the subscription billing solution, I was unable to coax Reid into providing an exact customer count since they launched it, but he did say this:
It’s been a driving force for us. We improved our win rates dramatically over the last six months because of both of those capabilities.
And about that subscription billing customer count?
I’m a little reticent to tell you, because it has been a competitive differentiator. I really don’t want my competition to know that we’re kicking their butt because of it, so I’m going to ask if I can reserve that one, if you don’t mind.
Not a problem, Mr. Reid :)