In short:

  • As the finance department becomes a central source for data, its interactions with other departments, particularly sales, can drive improvements.
  • Increased data transparency and exchange between finance and sales can help sales increase its value creation for the company, an especially important factor in turbulent times.
  • Business leaders need to rethink how the sales department measures and compensates success to ensure the system aligns with the business’s needs and goals.

Much has been written about the evolving role of the CFO and the finance department’s role overall. Finance is becoming more strategic, data-driven and involved throughout the business.

In particular, the sales department will find itself with a new partner as organizations work to ensure profit margins aren’t shrinking.

To understand this changing relationship – and how to get the most value from it – we’ve assembled five best practices for finance leaders as they work more closely with sales toward the joint goal of running a healthy business in a volatile, competitive landscape.

Our Sources
For this article, we spoke with:

Frank V. Cespedes
Cespedes is a senior lecturer at Harvard Business School and author of six books including “Sales Management That Works: How to Sell in a World That Never Stops Changing.” With a prolific consulting career, he has also written more than 50 company case studies and technical notes on topics from strategy development to pricing.

Hilmon Sorey
Sorey is the managing director of ClozeLoop, a sales management consulting firm operating in Silicon Valley, California; Nashville, Tennessee; and Johannesburg, South Africa. As an award-winning trainer, speaker and author, he has written eight books on sales and management. Sorey also serves as a partner at 2.12 Angels, a venture capital firm investing in pre-seed and seed-stage companies in the enterprise space.

The Evolution of Finance to Strategic Sales Partner

As CFOs and their teams automate many time-consuming, manual tasks, they can take on a more strategic role, helping leaders throughout the business understand their contribution to success. As the data revolution goes mainstream, research shows that it’s not only for large firms: CFOs at midsized companies are pursuing data analytics initiatives, too.

CFOs have typically used data analytics for upper-level decisions around planning, budgeting and forecasting. However, increased access to data, as well as their more involved role across the organization, means they are now also called to apply analytics to daily operations – including sales operations.

“A lot of profit can fall in between the operational cracks, and analytics can be a game changer in the way it leads to improved operational discipline," says Ajit Kambil, PhD and global research director of Deloitte's CFO program, in an interview with The Wall Street Journal.

Using Data Analytics as a Finance Leader
At many organizations, the finance team is now expected to deliver insights via data analytics. Get the playbook for building a data analytics practice from the ground up to expedite growth and, of course, boost your team’s relationship with sales.

However, the traditional nature of sales often makes a true partnership tricky to achieve.

“In many companies, sales has long been a kind of ‘black box.’ The department is essential for meeting quarterly revenue targets, but it tends to be hermetically sealed off from other parts of the business,” says Frank V. Cespedes, senior Harvard lecturer and author. “If the sales force makes its quarterly top-line numbers, the sales VP and sales managers have lots of autonomy.”

Near real-time data on sales margins and efficiencies marks the unsealing of the box. Access to more data – of the right kind, which we’ll cover shortly – provides insights that couldn’t have come at a better time, as many companies are struggling for stable ground amid a turbulent market.

“It is especially important right now for sales and finance to work closely together because the tactical and strategic synergies provide not just greater adherence to company goals but also competitive advantage in execution versus those who are still operating in departmental silos,” says Hilmon Sorey, managing director at sales management firm ClozeLoop.

But, in order to capitalize on the power of their data, leaders will need to rethink some of the practices entrenched in sales – including what constitutes success and how to measure it.

Best Practices for Enabling Sales as a Finance Leader

1. Introduce value to the sales conversation.

For many sales organizations, volume is king.

“Many sales leaders understand activities that drive the top line in their firms but not the financial ramifications beyond sales volume,” says Cespedes. “Many firms focus solely on sales volume, but that doesn’t necessarily correlate to profitability in many businesses [right now].”

Value is being pushed to the forefront not only because of data’s increased availability but also out of necessity. Uncertainty due to the pandemic, labor shortages, inflation, supply chain issues and irregular demand trends have pushed even the most hesitant midmarket companies to use data to respond quickly and authoritatively. What may have seemed like a nice-to-have before is now required as businesses make critical decisions around everything from working capital use to resource optimization to forecasting.

If the focus of a sales organization is volume, products and services will be sold based on ease of selling, not on the actual ROI of the sale. When the focus is on value, offerings will be sold based on profitability, customer experience and business priorities.

Finance can help sales find these value opportunities. For instance, digging into the numbers shows that existing customers tend to be the most profitable. A classic report from Bain & Company and Harvard Business School found that increasing customer retention rates by 5% increased profits by 25-95%. And according to classic business-school book “Marketing Metrics,” the probability of selling to an existing customer is up to 14 times higher than the probability of selling to a new customer.

We could go on, but you get the point: CFOs and sales leaders can identify these instances of value in the data together to make sure they are putting resources toward areas with the most profit potential.

2. Find a balance between growth and profit.

A focus on sales volume isn’t necessarily bad. In fact, a recent study from consulting firm AchieveNext showed CFOs across the middle market currently prefer top-line growth over margin growth by a nearly four-to-one margin. Turns out, even the traditionally-cautious CFO will seize opportunity when it knocks. However, value needs to be a part of that equation to create managed growth that drives profit simultaneously.

Managing profitable growth is about finding balance and building it into compensation plans. On one hand, those who focus too much on growth will likely follow the well-trod path of numerous businesses that grew too fast. Yet, a company that’s not growing the top line is most likely going to struggle in two or three years. Find the balance, and build it in.

The idea of managing profitable growth becomes especially important in times of inflation when increasing costs may turn a once-good profit margin negative.

In order to achieve the tricky balance, finance and sales need to work together. Sales forces need to be accountable, transparent and able to accurately measure their efforts. Leaders need to identify and prioritize opportunities to ensure that the company makes the right investments – not just any that will contribute to the top line. In this scenario, accurate forecasting and a smart strategy become critical.

Actionable Ways Finance Can Help Build a High-Performing Sales Organization

  • Share finance’s view of the previous period’s projections and actuals with sales during the budgeting process.

  • Meet monthly to discuss and refine forecasts. Spot trends of too aggressive or conservative forecasts. Adjusting comp plans monthly is a bad idea, but quarterly changes will be more palatable, particularly if sales reps see their compensation matching the company’s success.

  • Conduct a regular review together of the latest pipeline data to ensure sales are on track and operations knows what’s coming.

  • Create common dashboards to ensure sales and finance teams are on the same page – literally.

Finance has access to the operational data that can help sales sell the right stuff. Sharing that information with sales helps tailor sales efforts so the company creates a healthy return on its business and pursues smart growth opportunities.

3. Designate new sales metrics and incentives.

Fun fact: A 2011 study from McKinsey Global Institute estimated that globally, enterprises stored more than seven exabytes of new data in 2010. One exabyte of data is the equivalent of more than 4,000 times the information stored in the Library of Congress.

But wisely using that much data isn’t without its challenges.

“Technologies and easily-built dashboards now enable companies to measure many things, which leads some managers to try to measure everything, and busy salespeople then get lost in the day-to-day noise,” says Cespedes. “And many companies further obscure performance with unfocused appeals to ‘big data’ or ‘digital transformation.’”

In a different McKinsey report, on performance management in 2016, researchers found that the proliferation of indicators often produced immaterial KPIs which diluted employees’ focus. In fact, the authors regularly encountered performance appraisals using KPIs that accounted for less than 5% of the outcomes in the job.

Considering the confusion around metrics, it’s worth helping sales cut through the noise and determine which metrics are actually indicative of performance, then change the incentive structure to reflect them.

Historically, sales teams are compensated for hitting revenue goals while operations leaders see bonuses tied to profits. In more normal times when products’ profitability is well-established, this arrangement makes sense. But when increased costs around materials, labor, shipping and storage – and now inflation – affect profitability, shared metrics rooted in profits may produce a healthier company when built into sales revenue goals.

By sharing data, sales teams can adjust incentives to reflect newly-designated metrics and goals – and improve both top-line sales and bottom-line profits in the process.

4. Bridge the goals gap between sales and finance.

For effective collaboration, both sales and finance need a greater understanding of each other’s goals. Sales leaders can’t rework their priorities unless they know how those priorities affect the company’s health. Conversely, financial executives need to understand the selling process so they don’t ask for impossible changes in sales priorities.

“Executives must know the questions to ask about their sales models, and those questions change as buying behavior changes,” says Cespedes. “When senior executives lack this understanding, it affects a key C-suite responsibility, which is the development and implementation of a market-relevant strategy.”

Finance executives can learn more about the sales process by meeting with the department regularly and asking the sales team questions related to data, sales effectiveness, market-share growth, growth outside the business core and the investment in sales. Analyzing these areas can provide finance the background it needs, as well as initial insight into areas of improvement and opportunity.

Pro Tip: Be a CF-Go.

In his book “Secrets of Rockstar CFOs,” Jack McCullough, founder and president of the CFO Leadership Council, advocates for being a “CF-Go,” not a “CF-No.” To create a solid relationship with sales, finance needs to remain practical and discerning while genuinely listening to the team and being flexible and open to investing in new ideas. In other words, be a facilitator, not a gatekeeper.

Download the ebook: Secrets of Rockstar CFOs

5. Integrate ERP and CRM systems.

One of the major issues that keep sales and finance disjointed has to do with disparate data living in different systems.

In an interview with Harvard Business Review, AchieveNext Managing Director Ed Wallace notes that CFOs often reduce their sales leaders’ forecasts by 25% or more each month for several common reasons. One of particular note: “Our CRM system gives incomplete data or doesn’t connect with our other data, so we can’t really see what’s going on.”

While finance leaders may feel they lack insight into sales generation and forecasting, their colleagues in sales may face a similar conundrum if there isn’t much relevant data in the ERP system. Integrating the CRM with the ERP system gives both teams the opportunity to work more effectively together.

ERP Use Case: CRM
Investing in a CRM ERP module almost always makes it easier to share customer information, find new opportunities with existing customers and handle customer-service issues – all of which position the business for a revenue boost.

When Finance Isn’t at the Table With Sales

When finance doesn’t partner with sales, the company not only stands to miss out on major opportunities; it also may struggle to maintain a healthy status quo. Our editor shares a case study:

In 2014, I took a job as the general manager of a series of events and websites serving technology resellers. This was a “right place at the right time” job, as business was great for both attendees and exhibitors. A new VP of sales started at the same time, and together we recognized an opportunity for growth, as we would be running the biggest events serving this market.

Prior to our involvement, the largest of the events we’d manage was just an excuse for awesome parties in Las Vegas. Previous management hadn’t seen the potential for it to become the nexus for the community, where relationships would be created and renewed on an annual basis. The sales manager and I saw that the event lacked a certain professionalism that would attract new attendees and exhibitors. So, while our finance overlords were distracted with M&As, we improved everything from registration to food to the look and feel of the event.

Our operations manager was freaked out. “Finance is going to kill us over the margin loss.” Luckily, they didn’t pay much attention because acquisition integration is hard, and by year two, we were seeing solid revenue growth. Finance’s only comment was, “That’s great. Why is your margin shrinking?” Explaining that we were setting the event up for top- and bottom-line growth was greeted with a roll of the eyes.

So the operations manager, VP of sales and I sat down to figure out the margins on everything, as well as the ease of implementation for sponsors. Our solution was to triple the available marketing sponsorships. We’d put a sponsor’s name on everything from stages to napkins. The margins were usually around 90%, and the sponsor only had to pay – no staffing issues, no booth furniture – and they got to look bigger than life. Sales loved selling the new sponsorships. It was easy – so easy that they often sold sponsorships to companies that weren’t exhibitors.

The attendee experience wasn’t ideal when they couldn’t actually meet with some of the sponsors. Our fix was to build more sponsorships into bundles that included booths. Some sales people didn’t like it. Their job got harder, but the VP of sales understood we’d made the shift in order to improve the event for attendees. Finance fought it too, since margins were under pressure again. But when attendance continued to increase by 10-15% per year and the bundles sold well, everyone got in line. There’s nothing like top- and bottom-line growth to quell the naysayers.

Looking back, the finance team had three strikes: They made sales and other teams fight to create a growing and profitable business. They let others do their job by figuring out unit margins on everything we sold. They simply didn’t look beyond gross margin analysis twice a year, neglecting other data that would’ve led them to realize we were on the right track.

You have the data and the insights! Don’t be that finance team!

The bottom line

Whether your company’s sales and finance departments are adversarial or just not speaking regularly, there is a strong business case for bringing them together. Particularly in today’s uncertain business environment, a finance team that helps steer sales can position the company for any challenge or opportunity that might come its way.