By Nate Spohn, VP EMEA, Fivetran
The economic landscape of the past year has been characterised by its lack of predictability. New market conditions have moved the goalposts for CFOs and other financial leaders, who are learning that simply saying ‘revenue went up’ or ‘revenue went down’ no longer paints an accurate big picture of company performance. Successful financial planning now requires an extremely agile mindset from CFOs, with a focus on the reason behind the change, in other words ‘revenue went up or down because.’ Adopting this approach will allow them to make structured decisions and stay ahead of rapid change by putting the ‘P’ back in Financial Planning and Analysis (FP&A).
To work out how revenue is being affected, CFOs today need to focus on the big data. With processes moving online, managing the flow of information in and out of a business has become as critical as effectively managing the organisation’s cashflow. Indeed, a Fivetran study conducted by Dimensional Research last summer found that financial teams were in pole position among organisational departments to be given access to Business Intelligence tools to help them use data to access key business insights. But the data needed for effectual budgeting, forecasting and financial planning cannot come from the financial team alone; CFOs need to widen their financial lens to incorporate data from all areas of the business.
Cross-functional data collaboration leads to holistic insights
Since the start of the pandemic, changing customer behaviour has been difficult to track and almost impossible to predict. CFOs need to operate nimbly to keep up with the unprecedented speed with which businesses are transforming operations to reflect the adapting circumstances. Doing so requires continuous planning, where financial leaders make constant revised, accelerated and multiplied decisions based on the insights generated by big data to keep up with market and digital transformations, and retain a competitive edge.
This means the different functions of a business cannot operate in silos, because every team – such as marketing, customer service and IT – will have access to data that demonstrates value for customers. For CFOs, connecting with these other functions and combining financial analysis with information from other sources, such as product engagement or marketing data, will paint a fuller picture of where any issues lie or where something is working particularly well. It will reveal why revenue trends are occurring and signal much more clearly where to target resources, especially during periods of crisis or unpredictability, for optimised and agile decision-making.
Importance of centralised data to continuous financial planning
Continuous financial planning relies on both data availability and democratising the data so as to bring more people from across the company into the decision-making process. However, there is a technical challenge to this kind of collaboration: the very fact that each siloed department has different sources of information and different datasets to work with means combining them for holistic insights to drive profitable business decisions is easier said than done.
For a unified approach to business intelligence and the subsequent holistic financial insights for CFOs, businesses need to establish a single source of the truth that everyone in the company can access. In fact, Gartner found that 73 percent of finance functions favour a centralised and tightly governed source for data, and it’s likely this proportion will only grow as financial leaders recognise the integrity of this approach.
Spreadsheets have long been a useful tool in using data for financial planning, but they’re not built for company-wide collaboration and planning. Dealing with big data requires a data analytics process that can shift and evolve alongside market trends and consequential changes in revenue. Spreadsheets, by comparison, are detrimental to productivity and create the very silos that make data too dispersed and complicated to be workable. Manual tasks such as this inevitably delay time to insight and consequently, decision-making.
Plus, limits on data availability means that data is not always ready for financial analysis as quickly as it’s needed for this approach, and it only takes one data source to be unavailable for wider delays to occur. As CFOs look to rely on more disparate sources, this can become a real barrier to real-time collaboration. And as continuous planning involves constantly changing operational focuses, it means constantly re-cutting data to uncover new efficiencies and opportunities for the business as a whole. This means that data schemas are in a state of perpetual flux, with more datasets constantly being added.
To eliminate these issues, more and more businesses are choosing to automate the core processes of consolidating and validating all relevant information for financial decision-making, thus enabling finance teams to focus on activities such as updating budgets in real-time and creating rolling forecasts for nimble business decision-making. Integrating separate planning processes into a single, continuous process helps CFOs go as seamlessly as possible from data to insight, and from insight to actions that will positively influence the direction of the business and its growth.
Modern data stack is integral for the modern CFO
Analytics excellence often resides in the financial department, which means it is incumbent on CFOs and other financial leaders to build the credibility of technology that can help centralise and democratise data. The modern data stack is set to become an integral part of the CFO toolbox, increasing company-wide trust in data and enabling faster, more scalable decisions and more accurate forecasting and planning. Despite the enhanced focus on the customer journey at the moment, all workflows still need to be under the umbrella of finance, and CFOs will need to instruct other teams on financial planning and use the relevant datasets to do this successfully. Through this collaboration, CFOs can lead business transformation that accelerates better performance in today’s quickly changing market conditions.