Timing is everything, as they say, so let’s talk about the importance of timing in finance.
It probably goes without saying that accuracy is the bedrock of sound financial decisions. At the same time, often the pace of business requires finance to make decisions before influencing circumstances become certainties. As a CFO, my confidence in each decision is tied to how far into the future I have to project data in order to make a judgement call.
I have the highest level of confidence making decisions one to two years out. When finance tries to predict the conditions that will determine the effectiveness of decisions a little further out–say two to three years in advance–visibility starts to get hazy. And further than three years out? That’s beyond the discernable horizon. Decisions made three years plus in advance are little more than minimally informed guesses.
You might take from all this that finance prefers to make short-term decisions because they come with a correspondingly higher likelihood of success. On the contrary, as the risk goes down so does the potential for strategic impact. An obvious decision, while still important to get right, does less to position a company (or their finance team) as a market leader.
Weighing the need for accuracy against the pressure of time passing creates a unique set of challenges for financial decision makers. How can finance balance the pull of short-term accuracy with the push to deliver against a long-term strategic plan?
Put a Premium on Short-Term Accuracy
While no one wants to focus exclusively on the short term, this is where the greatest potential for accuracy exists. There is no reason to accept inaccuracies in the near term, especially since their impact on foundational analytics will be compounded over time, possibly leading to large misses in the long term. Additionally, accurate current data means that finance can quickly contribute their input to a decision- making process.
As a result, I need to know that my short-term data is as accurate as possible. Determines platform with its embedded analytics in core financial management applications enable our finance teams to build end-to-end processes that link financial and strategic corporate performance management to financial ERP processes and operational business processes. Effective measuring and monitoring of business performance allows me to see the numbers in real time—knowing that the budget is on track, procurement is hitting savings metics, and payments are being managed.
By combining spend analysis and procurement and finance analytics, we get more value from the numbers. Visibility into key financial metrics, and digitization of processes and information also help me influence cost reduction and operational efficiency. And better analytics and visibility drive identified savings, cash management, and cost reduction and avoidance into P&L impact.
Increase Data Actionability Through Accessibility
When we talk about the “expiration date” of a set of data, it is incumbent upon the person or team doing the analysis to bring the CFO the freshest information possible. Even if they accomplish that, the clock starts ticking once the data has been pulled. The more manipulation that is required between pulling the data and using it to make a decision, the more dated it becomes.
When a solution is able to store real-time data and facilitate analysis, the time delay associated with making the right information available shrinks. That, in turn, increases the value of the information and the accuracy of the decision.
In my next post I’m going to branch out and discuss the external compliance and risk concerns that finance is trying to satisfy any time we make a decision that is hopefully both accurate AND timely.
* This paper touches on the value of tracking all P2P processes and managing them as a business key performance indicator (KPI). Read the paper to lean more about how a TCO P2P KPI can positively impact the bottom line of any business.