The myth of the strategic CFO
Comparing data from AccountingWEB’s strategic finance leader and Software Excellence Awards surveys raises a question about whether finance managers are as strategic as they think.
This article is the result of a recent conversation with CFOs and shared services managers at firms that use Concur software. While the people I talked to were admirably strategic in their outlook and application of appropriate tools, the signs coming from AccountingWEB’s financial decision-makers was less reassuring.
Strategic self image
Earlier in the summer, AccountingWEB published the results of our Strategic finance leaders survey, which found that 67% of respondents felt they had been playing an increasingly strategic role over the past three years. When the responses from chief finance officers were isolated, the ratio rose to 87%.
But later in the same survey, the questions turned to the non-core tasks that absorbed most of their focus, which included:
- Cost reduction - 80%
- Gross margin improvement - 65%
- Office cost/property leases - 59%
- Pensions - 52%
- Purchasing - 48%
Way down the other end of the scale sat strategic analysis, mentioned by 2.2% of respondents. That disparity in their relative priorities confirms that many finance managers have not succeeded in extracting themselves from day-to-day firefighting and begs the question, how they are going to be effective at cost reduction and margin improvement if they don’t carry out strategic analysis?
The survey also asked about Brexit, and found that just 7% of respondents had prepared a strategic plan. Of the rest, 37% had thought about how they will react but taken no action and 54% admitted had yet to consider how Brexit will affect their business.
Revenue growth (39%) and financing (26%) did show up in the strategic leader survey, but not in the top five priorities. Notable by its absence from the list was investment appraisal or variants to suggest respondents were working with colleagues to build and assess business cases.
On the positive side, one of the key comments that came from a finance manager who said, “Data and finance are becoming more merged as the data economy drives forward.”
As the current data guardians and providers of management information, finance leaders are the natural inheritors of the “chief financial data officer” role emerging around Big Data. The availability of predictive tools that can compare forecasts to actuals across financial and non-financial measures can give management a genuinely strategic view into what lies ahead, and potential impacts of the options they are considering.
But are finance managers equipped for that role? One survey respondent commented that they don’t have the time to fulfil such aspirations: “Basically it’s another full-time job.” Another complained about inadequate training for the task.
And finally, AccountingWEB has evidence from elsewhere that points to low uptake of the kinds of predictive tools that will help finance managers live up to their strategic ambitions.
Software Excellence insights
The latest soundings from our Software Excellence Awards survey suggests that the lack of strategic investment extends to the finance departments themselves.
Advances in technology that have occurred since we ran our last software survey in 2013 have seen a profusion of financial analysis, planning and management tools come to market – often delivered as online software as a service.
There have been shifts in three of the “enterprise” application areas we track: mid-market and ERP accounting software; expenses management; and forecasting, planning and analysis (FP&A). Yet the overall penetration, even among companies turning over more than £5m a year is still less than 10%, as this chart illustrates:
Of course, you can do a lot of these tasks in Excel – but how efficient and accurate is that? Can a spreadsheet really be deployed as a vehicle for controlled, strategic data management and provide the much sought after “single version of the truth”? Most big time auditors think not.
The underlying discrepancies in the figures we have collected this summer suggest that some managers may have bought into the strategic finance leader ideal, but they aren’t really living it. We are not suggesting that you have to buy new software to join this club, but it would be more encouraging for the future of British business to see wider adoption of some of the tools that open the door to innovative new ways of influencing and directing performance.
Do you agree with this hypothesis? Help AccountingWEB get a more realistic of what’s happening in modern finance departments by telling us about the tools you use in the Software Excellence Awards survey. The final deadline for ratings is Monday 31 July.
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AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.