Finance is firmly in the driving seat when it comes to informing and making decisions. When a company is growing fast, it needs good solid information with intelligent insight to inform company decisions. Gone are the days when the whim of a CEO, or board bias drives direction and strategy. So lets look at what makes a great analysis team and how to get there.
Long have finance teams had their heads firmly glued to Excel spreadsheets. These days automation, more data and faster forecasting means CFO's and their teams can't always rely on Excel to do the job. They need to produce more insight faster, and have more time to analyse it.
Taking away the time it takes to collect, manipulate, defend and justify the numbers means a big part of the job is gone, replaced, hopefully by thinking and analysis.
Most finance leaders love to model the numbers. Experimenting with 'what if's' and finding answers to burning questions. Data is what drives this so a single source of truth provides completeness. With the right tools for the job, there's more time for strategic thinking, getting your team thinking more and number crunching less.
When compiling budgets, forecasts and reports It can be easy to get caught up in the numbers rather than asking what effect they are having. Asking the right questions means you are going to get more from the data and offer better insight to the decision makers.
With more data and information streams you can delve well beyond the traditional cost centres to identify what's making the difference. If it's people and projects which drives revenue or impacts profit, then having access to less traditional forecasting data like payroll or project completion dates will help to see beyond departmental lines.
This was certainly the case with a couple of our clients. Online domestic insurance company Home Appliance Group, found with more time and the right tools they could see that the number of contact centre seats directly impacted profitability, rather than the number of products they had. They could then analyse when and how more staff impacted the revenue and start targeting results more effectively.
Having easy access to the numbers meant the board could ask questions and finance could model outcomes based on those 'what if's'. All of this wouldn't have been possible if they hadn't got the resources or tools to do it.
investment, expansion and Timelines
The process of applying for funding or decisions on expansion be it in acquisition, new territories or product development all need proper analysis. The cost of money, risk and possible rewards will need multiple scenarios built to model and stress test outcomes, as well as support the growth ambitions of the company
Your team need to understand the drivers behind the expansion and how they affect future growth, profitability and critically, cashflow.
Timing is always at the heart of modelling outcomes. Whether budgeting, raising funding, looking at liquidity for expansion, the time frame is what impacts the ability to deliver on plans and promises.
Your team need to be able to ask 'what if' around parameters which can easily be changed be it date, currency fluctuations or other variable to see the impact on cashflow, P&L and balance sheet.
In order to plan and mitigate risk, you first have to see it coming. That it means research, a long enough view of the road ahead with time to change course if needed. The speed of growth dictates how far ahead you need to be looking. Proper competitive analysis, macro economic impacts and social trends can throw light on where the company is exposed.
Often we are so focused on fighting fires inside the company we don't apply our minds to the external and competitive changes. Take for example some of the recent struggles in restaurant chains and retail. Changes in how and when people buy and consume products, or trends in eating out, staying in and many other parameters have blindsided many of the well known brands that have suffered in recent years.
An alternative reality is those companies weren't looking far enough ahead or anticipating enough behavioural changes which would impact their businesses, or anticipating the impact of tech and their exposure to shifts in how people buy and eat prepared food.
We may mourn the loss of big name brands on the high street but the truth is their demise was as much about lack of informed decisions based on less than adequate information, with little time to turn the business around or avoid risks until too late.
New markets or the threat from new start ups is a constant. There are now tools to forecast pretty much anything; with extensive access to data to help inform decisions.
The biggest thing CFO's can do to encourage and drive an analysing culture is to share information better. Shifting the emphasis to two way flow of information and across departmental boundaries helps to open up discussion and break down silos of not only data, but thinking.
If for example, business works in projects then reporting to heads of department doesn't help drive improvement at project level. The truth is employees need to know the truth be it good or bad. That way they are more engaged and bought in to change.
Better more friendly report formats, and dashboard analytics which are easy and fast to produce will mean more people will understand and ask questions. More company wide analysis helps allay fears.
Sharing information sounds easy but the reality is harder. Limiting and directing the right information to the right people at the right time in the right formats is virtually impossible for most finance teams who are having to produce these using Excel and hefty BI systems. Self service reporting is banded around as an answer but equally as important is sharing the vision and insight the numbers tell us with everyone in the company in ways that all can understand.