Real-time, forward-looking financial insight and analysis are “make or break” for enterprises today. CFOs who rise to this challenge will achieve greater visibility across their enterprises and using that visibility to improve strategic decision-making, build more agile operations, giving their organizations an edge over their competitors.
This rapid evolution in total controllership is driving the finance department’s reporting and analysis functions from the past and present into the future. Earlier, finance spent most of its time looking in the rear-view mirror. Closing the books took so long that the information was of little use in deciding whether to stay a particular course or in guiding course corrections. Today, in enterprises with world-class controllership, necessity has been the mother of faster closings and more robust financial reporting, providing near real-time insights into whether the enterprise is executing to its strategic plan. More predictive insight is becoming the order of the day.
Companies that continually evaluate the performance of business units and markets, and adjust their investments and spending based on those evaluations, could see their value rise 40% faster than their less-agile peers over the course of 15 years.
With enterprise-wide visibility into the business—in real time—providing solid data deftly analyzed, corporate decision-makers are better empowered to act quickly and confidently to drive business strategy and growth.
START WITH SPEED-THEN ACCELERATE
By integrating historical performance indicators with the enterprise’s operational data and leading indicators, finance can be a real-time and even predictive enabler of business decision-making. Top-performing organizations close their monthly consolidated financial statements in two days, bottom-performers in nine days.
In long-cycle businesses, such as power plants, a day or two makes no difference. However, most industries move much faster. In the financial services industry, some accounts have to be reconciled daily. In big banks, if an error is not caught immediately the cascading effect at the end of the month could snowball into a billion euro issue.
The larger the organization, the more need for consolidated information on the go, involving integrated IT solutions from business intelligence software on down to mobile devices. Automatic alerts about deviations between business unit performance and the initial forecast represent another best practice.
ADDING VISIBILITY AND DEPTH
Total controllership’s enterprise-wide visibility, with standardized and automated systems that provide consistency between financial and operational data, sets finance up for more granular and timelier analysis. It can also empower the business lines with tools for their own ad-hoc reports and analysis.
One clear advantage to standardization and automation lies in freeing up finance talent from the reporting routine to actually do the kind of business analysis companies need for profitable growth.
A well-thought-out, well-integrated system that is flexible enough to grow and change requires a significant investment of time and money. Short-term savings could exact a long-term cost.
Take the example of truly understanding sales. The analysis of a good month for sales could pinpoint a high-performing salesperson. Digging deeper could show either a one-off windfall or a best practice that should be incentivized across the sales team to increase revenue. Further analysis could show that “a good month is not necessarily a good month”—that last month’s sales were simply pulled in from what had been expected this month, putting pressure on future deliverables.
Several researches from IMG Knowledge Institute confirm that automating the accounts receivable and payable processes can help enterprises make these kinds of connections by providing better visibility and control over cash flows, the extraction of useful analytics and stronger internal controls.
BROADENING BUSINESS INTELLIGENDE HORIZONS
Total controllership extracts business intelligence from markets, channels, supply chains, competitive analysis, big data analysis and even weather reports. Increasingly, supply chain partners are opening up to their trusted partners and sharing real-time information using standardized formats. Otherwise, the lack of transparency in the accruals process hounds CFOs with globalized supply chains.
A better insight can lead to a better understanding of the cost to serve different customers. The emerging “big data” analytics trend represents another tool for business intelligence inside and outside the enterprise, crunching massive amounts of information from social networks, fleets of vehicles or other data-rich sources.
DELVING INTO PERFORMANCE MANAGEMENT AND DECISION SUPPORT
With statistical analysis, scenario planning, modeling and contingency planning, total controllership enables deeper performance management and business decision support.
Ideally, two, three or more units within an organization would be reviewing the same data through different filters and collaborating on a response. In retail, for example, where margins are slim, sharing one-click access to store-level sales information can be critical, with the controller looking at dollar levels, the procurement people looking at the same database for replenishment and the sales team looking at a dashboard with pricing patterns.
With data in hand, CFOs can help prioritize and focus their enterprise on areas of greatest potential return, as well as identify areas for cost savings—along with an understanding of the full impact of those cuts.
MANAGING CHANGE AND ENTERPRISE-WIDE COLLABORATION
Many CFOs are still most comfortable with core finance and accounting and spend most of their time at it. In a survey of insurance industry CFOs, for instance, over 60% rated themselves “very effective” in meeting financial reporting obligations yet only 25% gave themselves the same grade in supporting business strategy.
Perhaps it is because of the sheer volume of their core responsibilities. Maybe it is because business units are protective of their data or that driving process and system standardization across a complex, global enterprise is a monumental task. Whatever the cause, almost half of companies surveyed are not even attempting to integrate financial and operational data. And as these companies fall behind, market leaders are reaping benefits from greater enterprise-wide visibility and strategy, through partnership, powerful enabling technologies and a more expansive approach to controllership.
KEY CONSIDERATIONS: RE-EVALUATE TO RE-FOCUS
A chief consideration for finance, today, is re-evaluating lower-value processes to free up finance department resources for higher-level analysis. “Automate, eliminate or get somebody else to do it”.
Also key to total controllership is establishing partnerships throughout the enterprise—not only with the CEO but also business line executives and the CIO. Finance leaders will also want to consider establishing formal career frameworks to identify and develop key talent within the organization.
TOTAL CONTROLLERSHIP'S COMPETITIVE ADVANTAGE
CFOs have some of the best data in the company and must wield the skills and methodologies to derive actionable business insight from it. Top-performing CFOs are mining their data more quickly and analytically. They are gaining visibility across their enterprises, the analytical capability to turn that visibility into valuable business insight for enterprise growth—and, often, a competitive edge in the market.