The past few decades have seen incredible organizational transformation in the business world. This transformation has altered the makeup of finance departments, yet the required skills foundation has remained relatively static. With this dichotomy of rapid transformation and static foundation, it is no wonder so many companies are struggling to turn data into better decisions!
In modern organizations, this digital transformation has also forced finance to take on a broader, more strategic role. Finance now needs the right data, analytics, reporting, and other tools to support their more strategic demands. It’s clear they can no longer rely on complex, disconnected spreadsheets to drive million- and billion-dollar business decisions.
The combination of these two forces – digital transformation and a more strategic role – is forcing modern CFOs to rethink their approach to the makeup and organization of their teams. As finance quickly moves from just crunching numbers and generating reports, to finding the most efficient usage of capital and assets to position the company for successful growth, they are at a crossroads.
Making the first move
The first step is to evaluate your organization's short-term needs and understand how you will support the company’s overall strategy. What metrics should you be tracking? Do you have access to your data in order to derive company metrics? How are other teams and departments dealing with their data? How can finance get ahead of the company’s data demands and become the single source of truth for insights? What tools are needed to support these new strategic demands?
All of those questions have a consistent theme: collaboration. At Northwest Hardwoods, a leading hardwood supplier, the finance team used to create the company’s budgets on their own, without input from the business. Accounting had to continually refresh their reports to get their close done. The FP&A Manager at Northwest Hardwoods says he knew it was time for a change:
Our budgeting process was very long and very tedious; the level of detail was extreme. It would take anywhere between four and five months to even bring all the budget entities together and roll it up into a consolidated level.
Today, using cloud-based financial planning and analysis software, the Northwest Hardwoods finance team is able to save time and increase collaborate with managers across the business and in the field to develop more meaningful budgets. Bringing everyone together around data lets finance work with operations and management to create strategic forecasts and budgets with more accuracy, efficiency and therefore, more buy-in.
Assembling the right team
CFOs now need to assemble a team with the technical skills to utilize operational, financial and other business data together. They also need resources to understand what it means and what’s important. As finance modernizes their way beyond spreadsheets, everyone in finance must have the ability to quickly learn and master new software solutions.
This also includes involving the right people from outside of finance to catalyze collaboration. As we explain in our white paper Best Practices in Financial Planning & Analysis, there are five steps finance must take to lead business transformation. Getting the right people involved is the first step. As finance collaborates with operational budget owners, the demands of the business will quickly outpace the capabilities of spreadsheets.
Moving away from spreadsheets
Moving away from spreadsheets also frees up time for strategic analysis which is key for the modern finance organization. Dorel Sports, the world’s leading bike portfolio company, formerly spent too much time standardizing and compiling spreadsheets. As Dorel Sports’ CFO Michael Lynch, Global Director of FP&A, told me:
When spreadsheets arrived from all our regional offices, standardizing and compiling them into a single master was time-consuming. We wanted to spend less time on this and more time on analysis. We also wanted to streamline our reporting, which involved dumping data from our ERP system into spreadsheets.
Moving to a cloud-based FP&A solution helped Dorel Sports cut a month from their budgeting cycles. With more time to dive into the actual data, finance was able to identify opportunities to reduce inventory costs by as much as 15%.
As businesses modernize, finance has to rethink their requirements around capabilities and tools. Does your finance team have the right set of skills to become the strategic center of your business? If not, it’s time to start bringing in more data and technical resources as well as the tools and systems necessary to successfully navigate this business transformation.