By Chris Newbery, industry consultant Retail/CPG EMEA at Teradata
Retail & CPG CFO’s are widely seen as the trusted lieutenants to their CEO’s, providing insight that drives strategic decisions, with the best being able to carefully balance both costs and expected return on investment. Sadly, far too many are seen as simply ‘the numbers man/woman’ though, aggregating data from multiple statutory and governance driven backwards looking reports, with “cost first” approaches that are more likely constraining innovation rather than leading it. It does not have to be that way. The CFO’s broad remit, and natural ownership of core financial data, can instead provide the foundation for an enhanced role that leverages data analytics and end-to-end decision making to enable new value opportunities, delivering profitable future growth for their Retail or CPG organisation.
Even with widespread implementations of ERP solutions, finance departments are weighed down by the ever-increasing burden of reporting. Demands to close books faster, the sheer volume of data required, and the effort needed to integrate it, means that many CFO’s become boxed in. Their focus narrowed to finding, preparing, and collating the data needed for specific reports. It often becomes a highly labour-intensive, manual, and repetitive process which takes up most of the finance team’s valuable time.
One example of why this happens, is that regulatory and statutory reporting, risk management and anti-fraud rely on much of the same data yet are often created in isolation. Another is that common definitions and calculations are rare, making the re-use and sharing of data difficult. The intensity of this work, combined with the increasing pressure to decrease headcount, leaves no time or bandwidth for any of the fun, value adding strategic work relating to future-focused analysis. When this happens, it’s probably fair to say that the role has lost its lustre.
In an effort to cope with the increasing speed, intensity and complexity of reporting, many Retailers & CPG’s invest heavily in applications focused on automating individual processes. Stand-alone tools for data visualisation, workflow solutions and cloud-based analytics which can improve specific activities, without often transforming them. What they also do is accelerate the fragmentation of the data still further, with new silos being created to support bespoke applications, cloud instances and departmental solutions. What’s missing, and what’s necessary to free the CFO to create value, is a complete change of mindset.
To overcome these constraints, CFO’s need to reinvent themselves as the champions of enterprise data analytics. They need to leverage both their natural strengths and their organisation-wide purview, to promote the standardisation and reuse of all data to underpin end-to-end decision making. For example, a Category Manager seeking to achieve lower unit costs of purchased goods, may agree to higher purchase volumes to secure discounts, and thereby hit their KPI. But handling these large volumes leads to higher warehouse and logistics costs, negatively hitting the KPI’s of the Supply Chain team. Even worse, these costs are often higher than the savings made by buying in bulk in the first place. Neither party sees the whole picture, but the CFO can, and should. The data that can highlight this misalignment is available to the CFO, and it supports regular operational and financial reporting, but all too often remains locked up in siloed systems and reports.
The concept of a common finance foundation, integrating ERP and non-ERP data, can unlock this value. Instead of viewing data and reports as a series of vertically aligned pipelines, CFO’s can and should integrate data into a single platform that can support all of the reporting, and act as the framework for decision-making and strategic planning. The key shift happens when they change priorities and mindset from a focus on using data to report backwards, to analysing data for insights going forwards. Rather than viewing data through the lens of specific reports, CFO’s need to lead efforts to create a single analytical architecture that consolidates, simplifies, and standardises data from all across the business to create insights that drive the most profitable and effective growth. This will, of course, also support faster and higher quality reporting. There is significant overlap in the data required by most reports, and building a standardised foundation with common definitions and calculations not only reduces the time taken to produce the reports, but is the essential first step in automating their production.
As they integrate and standardise data from across the business, these forward-thinking CFO’s are also able to generate new opportunities to add value. Suddenly they are spending less time reporting what has happened, more time analysing why it happened, and are able to create strategies to influence what happens next. The CFO role is uniquely placed to do this, as they have the company-wide overview, the authority, and access to most of the data. The sooner they shift focus from managing a bunch of financial reporting applications, each with its own data silo, to implementing a shared data platform that provides the basis for deep analytical insights, the sooner they transform the role and value of the CFO. Integrated data, plus common definitions and formats will allow them to have more answers at their fingertips. This ‘Super ledger’ that combines granular financial, product, customer, and operational data all down to an individual transaction level simplifies multidimensional profitability analysis, and clearly illuminates the true cost to serve any store location, product, or customer.
Armed with these insights, CFO’s can once again become the key trusted advisor to the CEO and primary advocate of data in the business. In today’s fast-moving data-driven Retail & CPG environment, those that make this shift the quickest will be seen as the new superheroes leading value generation and growth. Those that don’t, and the organisations that fail to move rapidly from reporting to analysing, will find their opportunities and overall value increasingly choked off by their sclerotic reporting demands.