The Power of Data: How CFOs Can Improve Decision-Making

Dimitri Raziev21 Apr 20224 mins
The Power of Data: How CFOs Can Improve Decision-Making

The CFO is one of the central figures of any business organisation. The strategist, the data guardian, the economic steward and many other names are applicable to this executive role. This has never been that way before. The role has evolved away from being an accounting manager to a role whose strategic decisions influence the company’s future. How the data can empower the decision-making of the CFO?

From Numbers to Strategy

The title CFO has originated in the late 1960’, prior to that the role was mainly called a financial manager. However, even after the three-letter abbreviation was first used, the role of the modern CFO has evolved tremendously. Previously, the organisations didn’t rely on the CFOs to make strategic decisions. The role mainly involved accounting, reporting, and compliance with tax and other regulations. 

However, today the CFO is not a “numbers” job anymore. The modern CFO can steer the company’s future by making strategic decisions. Deloitte even emphasises that there are “four faces” of a CFO, meaning the financial officer has transitioned to one of the key persons in any organisation.

The Evolution of the CFO Role

One of the influencing factors of the evolution of the CFO role is attributable to technology. Several decades ago instantaneous data wasn’t available. Modern technology not only provides continuous access to real-time data today but also offers insights previously much harder to obtain.

Couple decades ago the accounting tasks and budgeting was much more time and resource-consuming. This meant that the CFO prepared the accounting reports only after the strategic decisions have been made. However, today it is easy to change the variables. Thanks to technology the CFO can adjust predictions, and prepare budgeting and other estimates, which makes them closer to the decision-making process.

Another theory why a CFO became a more central role is attributable to inflation. Some argue that the overwhelming inflation in the 1980s was one of the major factors that moved the role of the CFO to the front line. The business had to make strategic decisions when the prices were rising and the CFO was a key person to understand both- the needs of the organisation and the books. Also, this person was able to “translate” the accounting terms and ratios into the regular language. This way the books will be understandable by shareholders and wide audiences. 

Post-Pandemic Need for Data-Driven Decisions

During a couple of past years, the uncertainty surrounding the economy increased. Either due to the pandemic or geopolitical instability, new inflationary pressures have brought the spotlight back to the importance of analysing the data and making decisions based on it. During the pandemic, a survey of CFO indicated that around a half of finance executives put liquidity management as their key priority. Maximising the internal liquidity seems to be one of the 

few factors that are still in hands of the company and more or less immune to the external shocks. Moreover, 72% of CFOs who participated in the Accenture survey answered that their role shifted far beyond being “economic guardians” of the enterprise to “architects of business value” and “catalysts of digital strategies.”

One the most important data after the pandemic-hit world is the AR data. The best way to prepare for the future is to prepare cash projections. However, the better the company manages its Accounts Receivable and credit control, the more reliable the cash projection will be. Moreover it is also in hands of the company to reduce the days sales outstanding (DSO) and improve cash conversion cycle (CCC). Using digital automation tools like Kolleno AR software can give the cash flow a boost. This is possible thanks to tailored communication strategies. The machine learning algorithms are suggesting strategies for better collection based on the specific customer.  

Another important benefit of automation is improving customer relationships. It may sound surprising, but professional credit collection communication, timeliness and appropriateness are key to keeping the customer satisfaction level high. A survey by PYMNTS has found out that 70% of CFO who went for the digitalisation of their AR have done that in order to increase the lifetime of the customer.   

Modern Technology is Here to Help

CFO was always involved in analysing data. However, the demand for analytical sophistication and conclusion-making abilities has increased in order to make long-term future decisions. Thankfully, modern technology and cloud computing give a modern CFO access to data that has never been so easily available before. However, the availability of data is not enough by itself. Meaningful reports and analytics is needed as well. According to the Gartner research 54% of finance organisations have a problem with providing meaningful reports to decision-makers. 

Kolleno not only seamlessly does the work of credit control and accounts receivabla management. Our software also prepares reports and analytics that empower a modern CFO to make decisions that will help steer their organisation into the future.