Today’s outperforming CFOs embrace a broad interpretation of their role, involving themselves extensively in the management of the businesses and its future. Successful organizations require their CFOs to be forward-looking and view change as an imperative to identify and seize new growth opportunities.
On the backdrop of a dynamically evolving business landscape, CFOs today are spending more time than ever thinking on the following key questions:
- Which external factors will substantially drive or impede your business performance in the next few years?
- What is your organization’s focus for the next few years?
- How will you allocate capital investments to drive growth / organization’s vision?
- How is your visibility into profitability?
CFOs are frequently being called into more boardroom and executive level discussions around demand and price pressures, supply chain issues, impacts on revenues and margins, and liquidity concerns. Visibility into profitability and cost is a crucial element in guiding CFOs as the company makes important decisions around strategy, operations and investment priorities. Deloitte’s recent CFO Signal’s quarterly survey reported more than 50 percent CFOs indicating the need for better visibility in profitability for improved decision-making. Most of the CFOs spend sleepless nights trying to deliver stronger business insights based on real-time access to reliable business information across the organization.
Deloitte’s recent CFO Signal’s quarterly survey reported more than 50 percent CFOs indicating the need for better visibility in profitability for improved decisionmaking.
Data analytics can come a long way in improving the visibility into profitability for the finance function. The right combination of analytics tools and capability can help improve profitability assessment and costing efforts. But analytics is just not about choosing the right tools and developing the required capability, it’s also about asking the right business questions and determining how to answer them.
CFOs should perform an evaluation that defines the strategy and roadmap to improve visibility into costs and profitability. This evaluation would typically involve getting answers to the following key questions:
- What business issues / decisions we intend to address with analytics?
- What exactly do we want to measure?
- Where does data reside and is the current data structure well-understood?
- Are there different versions of truth when it comes to cost, at sales & marketing level, finance level and operations level – How are we addressing the issues related to data collection and integrity?
- Which cost drivers align to consumer consumption patterns and how to capture the information related to such cost drivers?
By improving visibility into profitability and cost, CFOs can be more confident on the insights they leverage for a range of critical business decisions including effective pricing strategies, identification of opportunities for cost reduction, market diversification and many more. When finance has a better view of profitability and costs, it can help drive enhanced business partnering capabilities instead of just providing standard P&L statements and reports, since they now have access to information the business didn’t have before!
Data analytics can come a long way in improving the visibility into profitability for the finance function.