Save content
Have you found this content useful? Use the button above to save it to your profile.
pulse
Pixabay_PublicDomainPictures_HB

CFOs must ‘rethink’ company health measurements

by
17th Dec 2015
Save content
Have you found this content useful? Use the button above to save it to your profile.

Research from the Chartered Global Management Accountant (CGMA) has found that CFOs need to rethink how they measure the health of their corporations in the digital age.

The report found that while the majority of a corporation’s value derives from intangible assets such as customer sentiment and brand, few finance professionals surveyed said they could access the right data to measure and monitor these critical elements – just 16% in the case of customer sentiment.

The research, conducted by CIMA and AICPA and sponsored by Oracle, went on to argue that measuring the business value of such intangible assets through innovative KPIs will continue to grow in importance as digitally enabled business models proliferate. Intangible assets have increased in importance over the last several years and today account for 80% of the value of companies that make up the S&P 500 index.

“Finance is well placed to become the rudder of modern business, but to do so it needs to be able to draw on relevant data from across the entire organisation,” commented Laurent Dechaux, Oracle’s applications VP for ERP Western Europe, “without this capability, there is a risk that digitally-savvy lines of business will bypass finance altogether; generating their own strategic insights to take directly to management.”

Speaking to promote the report Dee Houchen, senior product marketing director at Oracle, told AccountingWEB that in terms of practical advice FDs can take from the findings it is “all around being closer to the business, and to be more of a strategic partner to the business.

“FDs need to ensure that the metrics being measured are actually justifiable and meaningful and are driving business decisions,” she continued, “Because ultimately that’s why people gather information - to drive insight within their business rather than data for data’s sake.”

Houchen commented that in terms of the kinds of metrics that are feasible to collect and report on, it very much depends on the business.

“I’m a firm believer that KPIs really have to be driven by your specific business, and measure what is really important to your organisation”, she said. “What is important to a financial services organisation won’t necessarily be what’s important to an oil and gas firm.

“The key thing is to identify what will make an impact to your business, measure that and then manage against that on a frequent basis and have the right info at the right time to be able to empower that decision making. There is no ‘one answer fits all’, ‘everything for everybody’ measure.”

Houchen feels that this kind of flexible mindset is where finance executives come into their own because they “have that strategic view as well as the methodology that comes from an accounting background to ensure that they are gathering the right information.

“Finance executives understand where the business wants to be and can then help define those metrics. Even if they don’t collect them themselves they can ensure the lines of business are, and therefore manage the company’s strategic direction, react when things are not going the right way and make informed decisions.”

Tags:

Replies (1)

Please login or register to join the discussion.

avatar
By Scriptic
21st Dec 2015 04:49

Measure This.

".....metrics being measured are actually justifiable and meaningful and are driving business decisions."

The first and most important thing about those business decisions that needs to be measured is whether liquidity/cash flows arising from them is going to be capable of supporting them, something that does not appear to get a mention here.  

 

Thanks (2)