In today’s challenging market landscape, CFOs are struggling to answer basic questions like what is my optimal cost structure and what will my cash position be at any given time?
The inability to dig deeper into reports, time-consuming manual verifying and uploading of data, and the prevalent use of spreadsheets not designed for collaboration make the answer unnervingly complex.
But as the current market uncertainty pervades, CFOs need to refresh their approach to achieving cash and cost transparency. Below are three steps to consider.
Step 1: Get your data in order
The biggest misconception lies with the quality of financial data. Many CFOs assume that the colossal amount of data they have is of top quality. The truth may be more sobering.
Part of the problem lies with the manual use of spreadsheets. Besides time consumed, it introduces human errors. Sharing them across different departments by email also creates separate copies that may add data inconsistencies.
Automating the taxing task of entering data into spreadsheets is not the final answer. Neither is uploading consolidated account information that makes drilling down to specific transactions difficult. While live or online spreadsheets address some of the issues, the simple truth is that spreadsheets were never designed for collaborative planning.
CFOs and the finance teams need to capture and verify data right at the point of creation. They also need to create a single data repository to act as a single source of truth that CFOs and their various teams — controller, treasury and financial planning & analytics (FP&A) — can use for analysis and queries. It also tells you the cash position at any moment, allowing the CFO to take proactive actions, such as contingency resourcing.
Step 2: Democratize scenario planning
During a crisis and as the market recovers to a new normal, all stakeholders — including line managers and business unit leaders — need to get involved in scenario planning. It should not just be the FP&A team working on its own and calling the shots.
Democratizing scenario planning and putting these capabilities in the hands of departments and divisions allows them to make informed decisions. After all, they are closest to the market, and are privy to shifting trends and market assumptions.
With a single data repository, their data and assumptions can help CFOs and senior management to stop reacting to P&L metric movements. Meanwhile, the resulting collaboration on scenario planning — a feature that Jedox offers — shifts the conversation between the CFOs and the business units and allows CFOs to work as a business partner.
Step 3: Start small, think big (and not the other way around)
Trying to overhaul the financial and data infrastructure for the sake of better cash and cost visibility may be warranted but is not practical.
In today’s lean times where protecting cash flow becomes vital, it is a hard pill to swallow. It can also lead to resistance, low adoption, and unwanted workarounds.
At Jedox, we feel it’s more practical to start smaller. Aim at processes where 80% of the time is spent on. In our experience, these are manual processes on data preparation and verification. A platform that automates them can help to free up resources to do more analysis on your cash position.
We have made it easier with two Starter Packs. Designed from our experience, best practices and past learnings with other customers, these can fast track CFOs to achieve the holy grail of financial planning — integrated financial planning — by addressing the top three tasks, including month-end reporting, forecasting and budgeting.
Attaining cash and cost visibility is a journey and not a means to an end. You need to begin with the fundamentals such as getting data right. But once you attain this visibility, you are in a better position to gain new foresight.
This will become more critical in the months to come as economies race to recovery mode. Being able to make informed strategic decisions and balance risks with opportunities (like making strategic acquisitions or adding new revenue pipelines) will decide how well your company will fare as the new normal becomes a certainty.