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Investment priorities for the CFO: What the analysts say

November 29, 2006

CFOs have their sights set on a seat at the executive table – not as accounting or compliance experts, but as business advisors. But industry watchers say inefficiencies in financial operations continue to divert their attention.

According to David Axson and Greg Hackett: "transaction processing still accounts for two-thirds of finance work, unchanged over more than a decade...Finance is still largely viewed as overhead. The bean counter image reigns."¹

And a recent survey by IDC and RevenueRecognition.com suggests that improving basic financial processes continues to be a priority. "Forward-looking finance managers are searching for process improvements that increase quality and reduce time spent on cyclic processes," said Kathleen Wilhide, research director, Compliance and Business Performance Management Solutions.²

Gartner: Three focus areas

New research by Gartner shows similar trends: "Finance transformation has been held back by the limitations of ERP systems," writes vice president Nigel Rayner.³ In his report, CFO Finance System Priorities Through 2009, Rayner identifies three areas that CFOs will need to focus on to reach the next level of productivity:

• Streamline transaction processing.
• Implement CPM applications.
• Ensure consistency of financial and non-financial data.⁴

Streamlining transaction processing

ERP implementations have brought some efficiency gains. Research by The Hackett Group shows the cost of Finance falling from 2.2 percent of revenue to 0.75.⁵ But many companies continue to struggle with mixed environments and multiple ERP instances that don't integrate well with each other. In these cases, the spreadsheet is seen as the only way to bring all the data together.

"CFOs should attempt to centralize and standardize their core financial applications if they have not already done so," writes Rayner.

"Moving to a modern financial application suite will provide the right foundation for more-efficient transaction processing and, although implementing a single-instance environment may be challenging in a multinational organization, it will provide a more stable foundation for future growth, both organic and through merger-and-acquisition activity."⁶

Implementing performance management applications

ERP systems excel at collecting and storing data. But they weren't designed to enable strategic finance activities such as driver-based budgeting and make it difficult to reconcile top-down with bottom-up plans. Nor are they well-suited to supporting the additional reporting, analysis, or scorecarding capabilities that comprise a full performance management environment.

Performance management capabilities increase the value of ERP applications by integrating the raw transactional data with other enterprise data and presenting it in a format that enables CFOs and other Finance users to see how the business is actually performing.

Staffing leader Manpower, for example, relies on Cognos performance management solutions to respond to both local labor conditions and global trends: "The biggest thing, especially for planning, is being able to use planning data in a reporting environment and bringing that together with other sources," says Vivian Adashek, Manager with the U.S. Finance Department at Manpower.

"Being able to analyze in a real-time world and being able to create reports from analysis really gives users access they didn't have before."

Consistency between financial and non-financial data

Building a "single version of the truth" from disparate data silos gives the CFO the holistic view of business performance that they need to provide strategic advice about the business. It's a view that few CFOs have today. "Most companies have a line item for rent," says David Axson. "Very few have one for keeping their best customers happy."⁷

Building this view can be difficult: "We're looking for relationships between information," adds Axson. "But we tend to structure our data by an accounting architecture of cost centers and line items."⁸

It's here that CFOs and CIOs must work more closely. To be successful, the CFO must clearly understand the key drivers of the busines. The CIO must ensure that the company's performance management system has the flexibility to integrate disparate data into a consistent source of information, and the power to support the changes to plans and business models.

A solution

Cognos, an IBM company, can enable performance management – integrated planning, scorecarding, and other business intelligence capabilities – to support the transformation of finance. IBM Cognos 8 Planning provides dynamic planning, budgeting, and forecasting across finance and operations for immediate insight into resource requirements and future performance.

And IBM Cognos 8 Business Intelligence provides visibility across financial and non-financial systems through analysis, reports, dashboards, and scorecards. So CFOs are able to see, understand, and control the levers of financial performance from a single platform.

As David Axson and Greg Hackett suggest, a fully integrated system brings real strategic value to the business. "The integration of planning, reporting, forecasting, and decision-making into a single, continuous, and seamless process aided by the latest performance management tools and technologies brings core management activities into the 21st century."

Summary

Standardizing core financial applications. Implementing performance management systems. Gaining an integrated view of financial and operational data. By focusing on these priorities, CFOs can move the finance function above and beyond transaction processing. The benefit? They'll spend more time at the executive table as strategic advisors.

Find Out More Read the related story, "Performance management at Manpower Download original papers by David Axson and Greg Hackett in the "Innovation in Action" series. See the IBM Cognos 8 Planning Demo See the IBM Cognos 8 BI online demo Visit the Cognos Innovation Center for Performance Management™

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Sources

¹ David Axson and Greg Hackett. Shifting Sands: Focusing Finance in the 21st Century. Cognos Innovation Center for Performance Management.

² IDC, Financial Processes and IT: Where Users Are and Where They Are Going, Doc #203649, Sep 2006

³ Nigel Rayner. CFO Finance System Priorities Through 2009. Gartner. 24 August 2006. ID number G00142575.

⁴ Ibid.

⁵ Cognos Innovation Roundtable Proceedings, Oct. 24, 2004, New York.

⁶ Nigel Rayner. CFO Finance System Priorities Through 2009. Gartner. 24 August 2006. ID number G00142575.

⁷ Cognos Innovation Roundtable Proceedings, Dallas, Dec. 2005.

⁸ Ibid.

⁹ David Axson and Greg Hackett. Dynamic Planning for Today's Uncertain World. Cognos Innovation Center for Performance Management.