Thanks to the rise of highly integrated, cloud-based software, businesses are generating more data than they ever have before. Over the next seven years, the world’s volume of data will expand tenfold. Enterprises will contribute 60% of that growth. In a feedback-filled environment like this, the ability to parse data will be remarkably valuable.
Luckily, that happens to be a skill Finance possesses more than any other department.
“In the past, organizations looked to the CFO to ensure the financials of the company were accurate,” Adaptive Insights CFO Jim Johnson recently told Forbes. “Today, with the increase of data across organizations, CFOs are looked upon to advise leaders as they plan out the strategic future of the company.”
We hear frequently that finance is the natural analyst inside the organization; that this department is specially suited to providing strategic advisory. But why is that, exactly? What is it about CFOs and their teams that grants a special ability to help steer the company?
The reasons boil down to the unique visibility over the business that Finance has, coupled with its logical placement to serve as a strategic adviser. Let’s explore the contributing factors:
Finance’s priorities align directly with the company’s
Every employee in the company contributes indirectly to the organization’s top-line goals, but individual departments often have more immediate goals that dictate their day-to-day priorities. The monthly imperatives of Sales & Marketing, for example, are not necessarily shared by Product & Engineering. Finance is unique in how directly its goals align with those of the overall organization. Between reporting on the company’s performance, maintaining the fiscal health of the business, and ensuring the stability of its essential processes, Finance’s work transpires on the same level as the organization's most important objectives.Finance unites data from all over the business
The high-level picture Finance has of the business is no cursory overview; it is a multifaceted, detailed aggregation of data from many diverse sources. As operational software becomes more tightly integrated, Finance is increasingly where its data output flows. The ability to cohere data from many different verticals offers the team both top-down and bottom-up visibility into the business.Finance controls for cognitive bias
According to a theory propounded by McKinsey’s Olivier Sibony, finance teams and CFOs in particular tend to adopt a rigorous decision-making process to reconcile what he calls a “confusion of roles.” The idea is that finance leaders are expected to offer strategic opinions while providing leadership with fact-based reporting. Sibony cites an M&A scenario as an example: the CFO is expected to both drive discussions with the counterparty—making the CFO a subjective participant—and advise the CEO objectively, based on unbiased metrics. To perform these roles responsibly, the CFO must become “the owner of a safe and sound decision-making process, which is a role that no one else plays.”Finance blends public and internal intel
Finance not only has the company’s most comprehensive view on internal performance, it also serves as a hub of market intelligence. Other departments have their own specialized views of the external market—Sales & Marketing keenly understand the competitive landscape, while Product are experts on the customers themselves—but in terms of incorporating macro trends into business decisionmaking, the finance team stands alone. It’s that understanding that undergirds the effective budgeting and FP&A that already fall under Finance’s job description.Finance manages the ultimate KPI
Finally, the finance function happens to be responsible for managing the most important organizational resource of all: money. Owning the responsibility for creating the P&L, advising on investments, and tracking every metric that shows up in financial reporting, is a powerful position to hold. It is in these numbers, after all, that business results need to move the needle. Finance is therefore in a position to assess all kinds of business decisions, both before and after they’re made.Conclusion
The proliferation of enterprise data means the need for an institutional analyst—we call it an “in-house consultancy” function—is growing. For the above reasons, Finance is in a prime position to fill that role. To live into this new mandate, the department needs to leverage some of the new capabilities emerging in enterprise software: a high degree of integration to enable free data flow, AI and all its attendant analytic capabilities, and of course, automation sophisticated enough to liberate the finance team from its traditional, manual tasks. All of these will contribute to the finance function’s ability to ascend from an operational custodian to an in-house consultancy—to spend less time on busywork and more time creating value.