In an article published by the Chief Executive Group on increasing CFO salaries, Steve Gallucci, global and U.S. CFO program leader at Deloitte, summed up the evolving role of the CFO succinctly: “The modern CFO is a strategist and [a business] catalyst. They’re not just the person making sure the trains run on time.”
Indeed, the role of the CFO looks quite different than it did a generation ago. Instead of the proverbial bean counters reporting on performance to date, finance teams are becoming more forward-looking and assisting with strategic decisions across multiple areas of the business.
As the scope of the CFO role continues to expand, there is an argument for another aspect of modern business to enter finance’s purview: data and analytics.
In his book “Deep Finance: Corporate Finance in the Information Age(opens in new tab),” author and CFO Glenn Hopper argues that the modern finance team can and should head their company’s digital evolution efforts. In this article, we expound on Hopper’s thesis that finance should become the team to lead the business in data and analytics initiatives.
Glenn Hopper, author and chief financial officer at Sandline
The finance department is at a critical juncture in its evolution. Many traditional finance functions – expense tracking, accounts payable and accounts receivable management, and even closing the books – can be either partially or fully automated. The pandemic accelerated this trend, as companies were forced to digitize their operations to accommodate remote work.
Finance automation, like any automation effort, reduces the workload of workers. Finance leaders have a choice: either take those savings to the bottom line and eliminate some positions, or reexamine what the finance team produces for the company. The two aren’t mutually exclusive, but whether to go beyond business as usual is a question to wrestle with.
“What I am pushing for is not that we need to eliminate jobs, but that we need to change the skill set and what finance as a department can do going forward,” said Hopper on The NetSuite Podcast. “You still have the same number of people, but instead of doing that mindless work, they're doing more mindful tasks and thinking more strategically.”
Finance teams can be stubborn about technology adoption. Hopper cautions against it.
“I think if you are not moving with [the technology trends], you're going to be caught flat-footed,” he said. “Growth is going so fast that now it's not linear; it's exponential. And if you're slow to adapt to it, you're going to get left behind. If you're not evolving, then you're going to be obsolete in five or 10 years.”
In his roles in finance over the years, Hopper found himself becoming a keeper of KPIs for all areas of the business, largely enabled by the data collected for FP&A, budgeting and creating predictive models. This led him to champion the finance team as an ideal source of data and analytics across the business.
“You're in an impartial role, meaning you're not going to favor sales and marketing over operations or any other group. You're an objective observer of the data,” said Hopper. “I [also] think that the analytical skills that make you good at finance also make you good at data [analysis].”
“You have to start finding ways to gather all this data and then use your analytical skills on the key metrics of the business. [That will make you] a more valuable strategic partner.”
Hopper sees CFOs with the right skill set and team becoming chief data officers instead of continuing in their traditional roles as record keepers. This amalgam of roles creates what Hopper calls the “New Age CFO.”
Artificial intelligence (AI) isn’t going to replace present-day CFOs, according to Hopper. Instead, CFOs run the risk of being replaced by New Age CFOs who know how to work side-by-side with AI, machine learning (ML) and big data.
Hold up before you dust off your backpack to head back to school. This doesn’t mean that you need a masters in computer science.
“The easiest thing that you can do is understand how relational databases and unstructured data works, [as well as] understand the data that is out there, how you can get to it and what you can do with it,” said Hopper.
Go ahead and breathe a sigh of relief: You don’t have to be a data engineer who builds the algorithms, particularly if you’re not in an industry rooted in data like Hopper. But, according to Hopper, a New Age CFO will understand the value of those algorithms, as well as the differences between innovations like AI, ML and robotic process automation (RPA). CFOs can get a better understanding of data science and disciplines like artificial intelligence and machine learning in short courses or appropriate books. Going further doesn’t require taking accredited classes – many continuing education sources have series of classes geared toward executives.
Here’s how Hopper thinks about the return on the investment finance teams will make in data science:
“Let’s say you are flying an F-22 fighter jet,” Hopper analogized in a manner clearly evidencing his military journalism background. “It has its flight controls and its armaments. And the question is, ‘What does the navigation system cost on this fighter jet?’ And it doesn’t matter because, despite all the other cool things it has, if you don’t know where you are going, it doesn’t live up to its potential. I see finance as being able to be that financial system.”
However, other reinvestments of the resources saved via automation will have their own returns. If cash flow management is a priority, then reskilling workers to focus on more strategic tasks can prove valuable, too. Employees who used to spend their time on tedious tasks can now focus on procurement negotiation, fraud identification and other areas resulting in cost avoidance.
Additionally, noted Hopper, good, data-driven financial systems can prove advantageous in the M&A process.
“I've been through several transactions, and [I’ve seen that] the companies that have good financial systems can increase the value of their company,” he said. “In due diligence, you show that you have these records and these trends. You're very clear on where your revenues are coming from, where your cost of goods sold are and where your expenses are, which really shows the value of the business.”
For the New Age CFO, the task at hand is increasing the finance department’s value add for the business. While it’s still necessary to report on how the business is doing and complete compliance-related tasks, technology allows finance to become more forward-looking. And, as the department continues to embrace its new skill sets in this realm, it will become better at creating predictive models to identify opportunities, risks and trends for the business.
The Future of Finance is in the CFO’s Hands(opens in new tab): CFOs have never worked harder, steering their organizations through the most difficult conditions likely ever faced. Find out the core component of their success in this free business guide.
The potential of the New Age CFO and their finance team is exciting – but can also seem like an overwhelming undertaking for many already-overloaded finance executives. Here are five best practices Hopper offers leaders interested in managing the company’s analytics and data.
“No one in the company – finance included – should be the gatekeeper of information,” said Hopper. “The chief data officer should aggregate reliable data, work with it and oversee it. But that data should be made available in dashboards to everyone regardless of department [or level. That accessibility] is a sign of a truly data-driven company.”
Business nirvana, according to Hopper, is when people – whether at the executive, managerial or employee level – can access the data, run tests and find their own answers.
Hopper argues any business can benefit from collecting data. For those looking for scalable growth, it’s important to think ahead and get the needed systems in place to enable a data-driven finance organization.
“You don’t want to wait until you are already in that hockey stick part of growth to be trying to switch your accounting, CRM and project management systems,” said Hopper. “Get your systems in place first so that you can handle it when it happens, because you don't want to be building the airplane while you're flying.”
Hopper recommends focusing on the small victories as a way to get buy-in across the company.
“I'm finding these small wins are a big way to start getting support early on, [especially when] you have a management team that doesn't understand why we need to do this and thinks things are fine the way they are,” he said. “It's about showing these simple, small victories and then helping them see the roadmap in the future of what's possible.”
Hopper suggests building a sort of “guerilla team” with individuals from sales, operations and finance who see the value in a data-driven company. They can then look for opportunities for small wins in their areas and champion them to management.
“If you can point to people in your industry who are using data science and business analytics, that's great,” said Hopper. “But depending on the industry, it may be hard to find that. So really, it takes someone – ideally at the highest level so it can permeate through the company – that has the vision and sees the value in it.”
“Digital transformation” is the all-encompassing and relatively meaningless buzzword of late. The term sets up a false expectation for immediate ROI.
“[Digital transformation] a misnomer. … It's not a transformation, because that implies it's one and done. It's an evolution, and it is happening faster and faster,” said Hopper. “So let's not put it out there that, ‘We've got to digitally transform our company.’ It's really, ‘We've got to capitalize on and use the latest and greatest tools available to us.’”
Hopper said that the tools available to growing companies are evolving constantly, so be ready to evaluate them as they come to market.
“The biggest thing for me [as CFO] is that I have to stay vigilant, not just about the industry I'm in but also about the tools and software that are out there,” he said. “I can’t just rest on, ‘Well, this worked fine last year, so it's what we're going to do in the future.’”
Instead, he recommends staying in contact with your entire team to understand their processes and where the bottlenecks lie, because those bottlenecks are areas for improvement. In addition to staying abreast of the newest technology and what’s going on in your industry, keep an eye on finance software and technology in general.
Particularly when your company is smaller, harnessing the potential of big data and analytics may seem out of reach. But for those looking toward growth, it is best to start thinking of how to create a more strategic, data-driven finance function now.
“If you get behind on keeping up with the latest technology, then you don't even know what's possible,” said Hopper. “That’s why I think education [at any stage] is important. Just like anything else in business, it's having that strategic vision, understanding the landscape and seeing a way to carve your path through it.”