Selling the C-Suite on Financial Innovation

In short:

• CFOs are making the case for more finance technology — at a time when companies are cutting back and preserving cash.
• Accustomed to being on the other side of the pitch, finance leads may need help selling skeptical colleagues.
• To illustrate the true value of finance automation, focus on ROI, profitability, efficiency and customer service.

Maybe you made the pitch in 2019 — smack in the longest economic expansion in U.S. history — to invest in integrating finance tools and adding, say, process automation, and got shot down. So what makes us think you’ll have more success now?

In a nutshell, data over gut instinct.

Let’s face it, if delivering a step or two above “back-of-the-napkin” unit economics, cash flow and current accounts receivable data ever worked, it was then. Modernizing finance reporting tends not to be a priority when the health of the business isn’t in doubt.

All that is over. There’s now demand for precision, speed, agility and the insights needed to closely track runway, support customers differently, plan for demand with more predictability and rapidly adjust to challenges like fully remote closes and supply chains seizing up. All unthinkable six months ago.

Hard data supplants gut instinct. Work from anywhere supplants come on-site. Ecommerce supplants face-to-face sales.

Knowing that a unit margin was 20% instead of 18%? Maybe not worth the cost to find out in January. Now that unit margin could be -5% or +5% — and knowing exactly which has become hugely important. Tracking DSO at a precise level wasn’t super critical for many businesses six months ago. Today it’s existential. Everyone finally understands the importance of scenario planning.

Now, CFOs need to educate colleagues that you can’t do any of that very well without consistent and timely data — and manual accounting and finance processes just can’t provide it.

“In one interim CFO role, it took three weeks to close our books on a monthly basis,” says Brainyard CFO in residence Josh Burwick. “If a board meeting happened to fall at the ‘wrong time,’ as it did in December 2019, we had no firm data on our COGS, gross margins, returns or discounts for the critical holiday period. We were able to work around it somewhat. However, if that were to happen in this environment, it’s game over.”

In addition, Burwick is seeing lenders demand much more accurate cash burn and unit economics data.

“If you don’t have a firm handle on these, no one will fund you, and you may run out of money before you have time to act,” he says. “Finance needs a clear view of costs, cash burn on as close to a real-time — roughly week after month-end — basis as possible.”

Balancing belt-tightening with demands for more accurate and timely data isn’t easy, but that’s what CFOs are being asked to do.

Let’s look at some reasons now’s the time to spend on financial innovation to yield better insights, then delve into making the pitch. Note that we’re not being prescriptive on how to get those keener insights because, based on our surveys, we believe most CFOs know what they need. The problem is, helping busy colleagues understand what it takes to generate the finance data they depend on isn’t easy under any conditions; it’s even harder during times of volatility and uncertainty.

Macro View

The COVID-19 pandemic, which will be a problem until a safe vaccine is commercially released and widely distributed, has forced many finance teams to adopt remote-work arrangements. But many of the financial software platforms and systems that were in place pre-COVID can’t accommodate this workstyle. On-premises systems, for example, offer little support for data access and collaboration, much less effective remote closes.

Then there are forced cuts. Finance departments are desperately lacking automation to make up for laid-off staff, yet a recent Brainyard survey revealed that 25% of executives expect to lose finance department team members in the coming months.

Vin Kumar, a global operations and digital transformation leader with business improvement consultancy The Hackett Group, says the pandemic is a clear catalyst for investments in financial systems.

“Our data clearly shows companies that adopted some level of automation pre-COVID were in a much better place and handled the crisis much better than those that didn’t,” says Kumar. “COVID has shone a bright light on companies that were really not prepared.”

He sees access to digital, cloud-based collaboration tools, both for finance and the enterprise as a whole, as well as FP&A solutions and automation as areas where a delineation between the “haves and have nots” surfaced pretty quickly.

“The CFOs and companies that were going slowly with automation, technology and the whole digitization journey were caught flatfooted,” he says.

If that sounds familiar, think back to the last pitch you listened to for a marketing, sales, warehouse or other technology investment. You likely had one burning question.

“Where’s the ROI Calculation?”

If your company tends to view IT as a cost center, it’s going to take some effort to push a financial innovation project through the approval pipeline. Job one is convincing business colleagues that technology is a strategic necessity now for the reasons we’ve discussed. Our advice: Avoid buzzwords and talk about how, exactly, finance tech will deliver a competitive edge for your company.

Heidi Pozzo, a former CFO who led a financial systems modernization effort at packaging provider Longview Fibre Paper and Packaging (now WestRock), says finance leaders should follow their own advice.

“CFOs are always asking everyone else to always demonstrate a return,” says Pozzo, now a business consultant in Portland, Ore. “So make sure you have that mapped out for the innovation that you’re asking for.”

Ensure your pitch:

Shows how the technology will help grow the business profitably. “Think beyond cost cutting,” Pozzo says. “Focus on how the investment will actually make your company more profitable, more efficient and more productive.”

Brings the customer into the conversation. How will this help your company become more efficient in providing its goods or services, and how will that improve customer acquisition and retention?

Demonstrates support for strategic goals. “I’ve seen a lot of money wasted by not thinking this through ahead of time,” says Pozzo. She tells CFOs to answer these questions:

• The strategic-planning process involves analyzing business trends, external opportunities, internal resources and core competencies. At least two of those have likely changed. How, and how are you responding?
• How does the innovation align with long-range objectives, both established and recently revised?
• What valuable insights to inform strategy will it bring that you don’t have today?

Highlights opportunities for cross-functional collaboration. As a CFO, Pozzo liked to focus on profitability by customer, a metric that can’t be calculated without input from sales, marketing, procurement and other departments.

“Finance isn’t always in the middle of those conversations,” she says. “But when you start bringing that level of insight and ideas to the table, it really generates broader conversations about how the business can grow.”

Can be implemented gradually, if need be. Especially for big, expensive technology ventures, start with smaller projects that support profitability and growth or that help improve efficiency and thus produce a quick ROI, and then build on success.

Reduces risk: Sure, a pandemic and recession are high-profile concerns right now, but ongoing issues, like competitive threats and cybersecurity, should also be covered in the proposal.

Calculators that purport to estimate the average cost of a data breach ($3.9 million?!) tend to be seen as sensationalized and relevant only to large enterprises. But small-to-midsize firms are reportedly targeted in 60% of all cyberattacks. Financial data is a popular target, and remote closes using insecure, consumer-grade collaboration tools put your company at risk. If the upgraded or new technology will protect sensitive information, include that in your pitch.

“A key aspect of innovative, strategic finance is truly assessing your risks and thinking through, ‘Well, what happens if we wind up in these situations?’” Pozzo said. “CFOs are in a good position to use ‘what if’ scenarios to spot problems.”

In fact, three areas where finance leaders shine — modeling, documenting and measuring — happen to be where many crisis teams fall short.

Ready, Set. Pitch

Your colleagues are being pulled in many directions, so lean on your team and, where appropriate, the vendor to come up with clear, concise information that stays out of the weeds but provides enough detail to make good decisions.

Kumar says a good starting point when advocating for more automation and digitization of paper records can be the majority of financial/accounting employees who are now working from home. Our new Brainyard Summer 2020 Finance Priorities Survey shows that only about one-quarter of finance team members will be required to return to the office when it’s possible to do so.

The stage is set for a massive work-from-home movement.

“Companies now know that working remotely is feasible,” says Kumar, “So the focus now is on how much of that work can be automated and/or supported by additional investments in technology.”

It’s possible spend can be offset by savings on real estate.

For companies with the funds to fully or partially automate their end-to-end financial management processes, it’s time to stop analyzing and start acting so that you come back stronger and more resilient. Those on tighter budgets can explore less costly options, like robotic process automation.

“Start tinkering with it and using it to automate as much as you can,” says Kumar. For example, RPA is an effective tool that, when paired with an existing ERP system, can automate manual rules-based tasks where information from one system has to be transposed into another system. This is particularly valuable when application integration is extremely complex and/or funds required to integrate are scarce.

Projects with short implementation and adoption timelines are a win. Where 10 years ago it was common to take 12 to 18 months to see results, today’s cloud-based subscription models — another selling point for companies that can’t swing a big, upfront capital outlay — mean you can be up and running more quickly.

Just as important, make sure the tech will actually be used.

“What typically happens is, there’s a ton of work put into getting a tech project or software signed off on, and then once greenlighted, it’s all but forgotten,” said Burwick. “It’s one of the major reasons there are so many unused software licenses inside companies — no one is held accountable after purchase.”

CFOs need to be very sure that software they advocate for will be embraced. Bring your team into the assessment process. The last thing you want is the CIO raising a flag when it comes to license renewal time and showing a utilization rate that belies the argument for purchase.

“Set accountability signposts that show whether a project is on or off target,” said Burwick. “You can do this with performance measurement software.”

Getting a Deal

OK, so you have the interest of executive colleagues and are ready to kick some tires.

Ethan Taub, CEO of financial services firm Loanry, says B2B tech vendors know they need to bring their “A” games right now. Request demos and reference customer success stories, and get the executive team up close and personal with proposed solutions.

“A lot of people don’t see the benefit of financial innovation and systems because they have not been exposed to them,” says Taub. “Those perceptions will change when they can actually see the automation and speed associated with financial technology. Being more financially organized now can save you a lot of heartache in the future.”

When evaluating options:

• Be organized with your requirements, clearly explain why your company needs the product and ask how exactly it will solve your problem. CFOs who are less technical should seek support from IT leaders. “Don’t go into it blindly,” says Taub. “Ask for help.”
• Talk to peers at other companies who have invested in the product in question, and ask for tips based on their experiences. Find these contacts outside the vendor rep, whether through finance chat forums or just asking around.
• Focus on results. Ask for comparison charts to show before-and-after scenarios, such as: “You took three weeks every month to close the books with your old system. That will be whittled down to a day or two.”

Bottom Line

“Companies that invest during times like this are generally well-positioned for success when the economy starts to open back up,” says Pozzo. “They’ll outpace their competitors if they’re doing the right things strategically and continue to invest in themselves.”

She advises CFOs to use this as the ace-in-the-hole argument for getting buy-in when the gut instinct is to shut down all new discretionary spending until the economy improves.

“Assuming that you’re going to be able to cut your way to success is a fatal flaw — it doesn’t work,” she says. “The difference between companies that are just average and those that are really successful is that the latter know how to invest in the right places, and at the right time.”

Bridget McCrea is a Florida-based freelance writer who writes about business, technology, and finance. She’s the author of five books and a contributor to publications like Logistics Management, Supply Chain Management Review, tED Magazine and Florida Realtor.