Start with Speed—Then Accelerate
Speeding up the reporting close is essential to delivering “news you can use,” but total controllership
means doing even more to improve outcomes. By integrating historical performance indicators with the
enterprise’s operational data and leading indicators, finance can be a real-time and even predictive
enabler of business decision-making.
Top-performing organizations close their monthly consolidated financial statements in two days, bottomperformers
in nine days, according to the American Productivity & Quality Center (APQC). “At first glance,
the difference may not seem all that profound, but every month, the CFO and his/her team at the topperforming
organization get to take high-level pulse readings on operating performance and refresh
financial forecasts one full week faster than the slowest team. What’s really important, of course, is what they do with that faster stream of data.”
In long-cycle businesses, such as power plants, a day or two makes no difference. However, most
industries move much faster. And at the other end of the spectrum, in industries such as financial
services, some accounts have to be reconciled daily. Especially in big banks, if an error is not caught
immediately the cascading effect at the end of the month could snowball into a billion dollar issue.
For companies between these two extremes, it is clearly not enough to know simply what happened last
month. Decisions depend on knowing how things are going this month, even today. Executives on the
front lines want access to more leading indicators.
A case in point: JP Morgan pulled out of the growing sub-prime securitization business when it was
booming based only on two leading indicators. Late payments on sub-prime loans were increasing
alarmingly while at the same time credit default swaps were becoming more expensive. These were
sufficient indicators for the investment bank to pull out at the right time—emerging from the credit
crunch much stronger than its competition.
The larger the organization, the more need for consolidated information on the go, involving integrated
IT solutions from business intelligence software on down to mobile devices. Automatic alerts about
deviations between business unit performance and the initial forecast represent another best practice.
“If there is a particular region that has committed to collect $100 million of cash, and you can find out in
the second week of the month that they’re going to miss their target, you can call them, incentivize them,
conserve cash, postpone some purchases,” “These are the kinds of decisions that organizations would like to take.”
Even closer to the edge: a restaurant in which mobile devices automatically transfer orders to the kitchen
and the cash register, so that data can be analyzed daily by its chain operator to know which menu item is
moving, which is not—and how to adjust purchasing, inventory and even promotion.
As the preceding examples suggest, leading companies are using such real-time information to project
their immediate future and attempt to manage that future. Peter Drucker used to call this “the future that
has already happened.” Steve Player, North America Program Director of the Beyond Budgeting Round
Table, quotes the late management guru in urging CFOs to analyze the indicators already visible in the
company and the market and plug them into multiple predictive scenarios. “Even real-time reporting is
not good enough,” Player says, unless you use it to project and manage your future.
Adding Visibility and Depth
Total controllership’s enterprise-wide visibility, with standardized and automated systems that provide
consistency between financial and operational data, sets finance up for more granular as well as timelier
analysis. It can also empower the business lines with tools for their own ad-hoc reports and analysis.
One clear advantage to standardization and automation lies in freeing up finance talent from the reporting
routine to actually do the kind of business analysis companies need for profitable growth.
On the flip side, however, is the temptation to skimp on business intelligence solutions in the current
economic climate. A well-thought-out, well-integrated system that is flexible enough to grow and change
requires a significant investment of time and money. Short-term savings could exact a long-term cost.
“The enterprise may fail to make the right decision at the right time if they don’t have the right business
intelligence,”
Take the example of truly understanding sales. Analysis of a good month for sales could pinpoint a highperforming
salesperson. Digging deeper could show either a one-off windfall or a best practice that should
be incentivized across the sales team to increase revenue. Further analysis could show that “a good month is
not necessarily a good month”—that last month’s sales were simply pulled in from what had been expected
this month, putting pressure on future deliverables.
The APQC suggests that automating such processes as accounts receivable and payable can help enterprises
make these kinds of connections by providing better visibility and control over cash flows, the extraction of
useful analytics and stronger internal controls. Standardizing operational and financial input from across the
enterprise has the added benefit of minimizing ad hoc spending and maximizing cash on hand, liberating
cash that might otherwise move too sluggishly through the books.
Broadening Business Intelligence Horizons
Total controllership extracts business intelligence from markets, channels and supply chains as well,
including competitive analysis, big data analysis and even weather reports. For instance, U.S. home
improvement retailers study the National Weather Service’s hurricane forecast each year to figure out what
to stock in certain regions. From ice to plywood, they plan the supply chain based on the long-term forecast.
Then, as a particular storm progresses, they pinpoint more precisely where and when it will land and then
activate the supply chain to ship to the right stores.
Increasingly, supply chain partners are opening up to their trusted partners and sharing real-time
information using standardized formats. “Global networks of business partners and suppliers share intimate
commercial data to help them perform more like a single enterprise,” write digital strategy authorities Don
Tapscott and Anthony Williams. Otherwise, lack of transparency in the accruals process hounds CFOs with
globalized supply chains. As partners are added, the chain becomes longer. Entering master data becomes
more difficult. Processing multiple formats and payment schedules from suppliers and partners makes it
more and more challenging to close books and forecast revenue.
Better insight can lead to better understanding of the cost to serve different customers. Companies know
that the cost to serve customers (and, therefore, the profitability) varies significantly across products,
channels and related supply chains. Yet many haven’t mastered the art of quantifying it, says Deb
Bhattacharjee, Advisory Services, Ernst & Young. “If you quantify these differences you can act on that
knowledge. You can discontinue an unprofitable product, alter your distribution/channel strategy, or
combine distribution of multiple products to increase combined profitability and then redeploy the freed
up capital towards accelerated innovation.”
The emerging “big data” analytics trend represents another tool for business intelligence inside and outside
the enterprise, crunching massive amounts of information from social networks, fleets of vehicles or other
data-rich sources. “Big data is all about the bottom line,” says Terri Deane, vice president of treasury for
Maines Paper & Food Service, which has cut costs by using big data analysis of details collected from
sensors on its fleet of trucks.
Expansive Intelligence. Business intelligence is extracted from across the enterprise and beyond—from
business lines to markets, channels and supply chains —and analyzed by finance departments refocused
on total controllership.
Delving into Performance Management and Decision Support
As the APQC report points out, it is what you do with the input that matters. With statistical analysis,
scenario planning, modeling and contingency planning, total controllership enables deeper performance
management and business decision support. “CFOs must get deeply enmeshed in the strategic as well as
the financial aspects of the major operating, investing and financial decisions facing the firm,” writes Robert
A. Howell, a visiting professor at Dartmouth College’s Tuck School of Business.
Ideally, two, three or more units within an organization would be reviewing the same data through
different filters and collaborating on a response. In retail, for example, where margins are slim, sharing oneclick
access to store-level sales information can be critical, with the controller looking at dollar levels, the
procurement people looking at the same database for replenishment and the sales team looking at a
dashboard with pricing patterns.
Data in hand, CFOs can help prioritize and focus their enterprise on areas of greatest potential return, as
well as identify areas for cost savings—along with an understanding of the full impact of those cuts, says
Craig Schiff, CEO of BPM Partners.
A finance executive with a supermarket chain recently described scenario planning about the possibility
that any one country might leave the Euro Zone. “It’s about whether we’ve already got plans in place and, if
not, making sure that we have the resources and a clear time frame of how that mitigating action could be
implemented,” the company treasurer says. “It’s part of our corporate responsibility to ensure that we keep
to a normal business operating environment as much as we can and for as long as we can. We want to be
the safe port in the storm for not only our employees but also our suppliers, our customers and, ultimately,
our investors.”
Managing Change and Enterprise-wide Collaboration
Even though the controller is the person responsible for fiscal prudence and accuracy—and is expected
to be a natural, valuable and neutral partner in the enterprise’s strategic deliberations and operational
decision-making—it is an ongoing struggle to achieve strategic alignment across the organization.
This leaves employees focused on the wrong activities or unprepared to act when key measures are
significantly off-target.
Many CFOs are still most comfortable with core finance and accounting and spend most of their time at it.
In a survey of insurance industry CFOs, for instance, over 60% rated themselves “very effective” in
meeting financial reporting obligations yet only 25% gave themselves the same grade in supporting
business strategy.
Perhaps it is because of the sheer volume of their core responsibilities, or because the recession’s headcount
reductions have taken a toll. Maybe it is because business units are protective of their data. Or because
driving process and system standardization across a complex, global enterprise is a monumental task.
Whatever the cause, almost half of companies surveyed are not even attempting to integrate financial and
operational data.
But as these companies fall behind, market leaders are reaping benefits from greater enterprise-wide
visibility and strategy, through partnership, powerful enabling technologies and a more expansive approach
to controllership.
Enterprise-wide Collaboration. Total controllership means partnering across the enterprise to increase
visibility, deepen performance management and enable decision support for better results.
Key Considerations: Re-evaluate to Refocus
Many say that a chief consideration for finance today is re-evaluating lower-value processes to free up
finance department resources for higher-level analysis. “Automate, eliminate or get somebody else to do it,”
is how Vijay Damle, Head, F&A Services, TCS, puts it.
Also key to total controllership is establishing partnerships throughout the enterprise—especially with the
CEO, but also business line executives and the chief information officer (CIO). Collaborating with the CIO to
implement well integrated, company-wide sharing of operational and financial data in the context of solid
business intelligence systems makes possible the most actionable insights.
Finance leaders will want to consider establishing formal career frameworks to identify and develop key
talent within the organization. Focusing on technical skills and behavioral competencies, the career
framework should aim to develop well-rounded finance professionals with ability to adapt their technical
knowledge to deliver new value to the business. Where needed, the mix of finance talent in the department
should be reevaluated, with the right balance of business analysts, accountants and other specialists.
In Conclusion
In the new normal of increased volatility, complexity and velocity, total controllership holds many of the keys
to corporate confidence and agility of action. CFOs have some of the best data in the company and must
wield the skills and methodologies to derive actionable business insight from it.
Top-performing CFOs are mining their data more quickly and analytically. They’re combining historical
numbers with operational and forward-looking information from throughout the enterprise and beyond.
They are gaining visibility across their enterprises, the analytical capability to turn that visibility into valuable
business insight for enterprise growth—and, often, a competitive edge in the market.