The CFO role in B2B companies is evolving to provide deeper value to firms, we learned recently when David Axson of Accenture explained that since the 2008 Great Recession the CFO role has had a seat at the strategic planning table. In addition, the CFO is now responsible for providing the vision to take B2B into the on-demand, no inventory digital age of financial planning.
The CFO must prove the value of financial planning and make sure it does not just get stuck running reports that may not provide any real intelligence into KPIs critical to the B2B enterprise.
Axson, managing director for Accenture, the business consulting and accounting firm, wrapped up day two of Hub 15, the third annual Anaplan user conference in San Francisco on May 19. After two days of workshops and breakout sessions on vertical topics facing sales, operations and other corporate professionals Axson had the task of putting the finance track in perspective in his solo session on “The CFO as Architect of Digital Value.”
Axson opened by saying that he has to struggle to think of any B2B role less impacted by technology than that of financial analysts. “But there is light at the end of the tunnel,” he said. The reality of financial technology is finally matching the hype, according to Axson. For example, the functional richness of the Anaplan planning application is coming to fruition.
Financial planning and strategic planning
For the CFO role, job number-one is financial integrity, Axson said. Since the 2008 financial crisis, the CFO has been the best friend of the CEO. “The 2008 downturn was unprecedented in our lifetime—it matched the 1930s,” he said. The end result was that the finance function now has a seat at the strategic decision making table. There is alignment between financial planning and strategic planning, according to Axson.
And while financial planning is dependent of on many data inputs, too many details do not equal accuracy, according to Axson. He related a story of a Fortune 20 CFO he knows who told him that his finance department was exactly wrong in its very detailed budgets.
“I see people embracing financial rigor for planning the future, but last year’s budget is not a good model for the future,” Axson said. “Unpredictable events have been going on since time immemorial.” As an example he cited that when he was a boy he never thought he’d ever be concerned about whether Greece could pay its bills. “This is the most exciting time to be a finance professional,” he said.
Just say ‘no’
Today, the finance business partner needs to have the guts to say “no,” Axson advised. “No, you don’t need that report,” was one example he gave of something a B2B CFO might say.
One of his clients likens a good CFO to the barkeep who tells you that you’ve had enough to drink and takes away your car keys. And Axson says he agrees with that sentiment.
Axson is also waiting for the line item of a B2B budget that relates to retaining the most valuable customers. And he’s looking for the line item for the total investment in innovative products. Such data is integral to streamlining business processes within a B2B enterprise.
Europe by any other name
In B2B finance today there is a fundamental opportunity to create consistent definitions across a company. “So when I say Europe, you mean Europe,” Axson said.
As an example of a fundamental misunderstanding of inconsistent intra-company definitions, he cited a company that included Turkey in its concept for Europe. In the old days, the financial impact of having Turkey in or out of your definition of the European market would have been a rounding error in the overall outcomes. However, in the last six years, Turkey has been the fastest growing economy in that part of the world. So its effect on the company’s European financial modeling is now quite significant.
Financial professional costs
Over the last 25 years, the costs of employing financial professionals have come down 80 percent in terms of real dollars. What hasn’t changed is that 60 to 70 percent of a financial professional’s time is spent on lower value tasks, such as creating spreadsheets, according to Axson. “It’s scary that we’re still relying on MBAs to create spreadsheets,” he said. But this will be disrupted and expects drastic change in the coming years.
“CFOs will create centers of expertise that can be rapidly deployed wherever they’re needed,” he said. For example, a $45 billion market cap tech company has centralized its shared services into an FP&A center.
Adapt or die
The world economy is no longer being driven by the BRIC countries, according to Axson. Take the case of Brazil—the B in BRIC. Last year the United States economy grew faster than the economy of Brazil. And the C in BRIC, China, is concentrating on its domestic market and not accepting western conventions.
With the added uncertainties of a 40 percent decline in the price of oil and a 25 percent strengthening of the U.S. dollar versus the euro, CFOs will need to update their financial model assumptions right now. “Your competitors are adapting their models now while you have six week old data,” Axson said.
The top issue for CFOs is complexity of the enterprise resource planning (ERP) system, according to Axson. The integration value of an ERP system is about the whole ecosystem coming together to deliver value, he noted. As an example of delivering ecosystem value, Axson asked us to consider car-sharing solution Uber. Without the driver to pick up and drop off riders, Uber wouldn’t be where it is today.
Inside the CFO agenda
For the B2B CFO, the agenda needs to be about driving growth, according to Axson. “Specifically, driving growth in an increasingly volatile, global and digital marketplace while helping to ensure compliance and delivering evermore enterprise value,” Axson wrote in his presentation.
But just what does digital mean to the finance function? Axson asks. In a hypothetical case study, Axson looked at the example of an OEM that prints 3D auto parts versus a traditional parts OEM. At the digital OEM, an engineer prints out parts on a 3D printer in a plant. This then triggers a sale and receivable in its supplier systems and a payable in its customer’s system.
A sensor on the part automatically updates the asset record upon installation and payment happens automatically on prenegotiated terms. Gone are the traditional OEM CFO worries of inventory, payables processing, receivables processing and fixed asset processing.
“Just think of the impact on DSO, DPO” and other commonly cited financial metrics, Axson said. “There is no opportunity for error; no opportunity for human intervention to introduce error.” So whether you compete with Uber or 3D auto parts printers, what’s the impact of digital on your industry? Axson asked.
“What’s your opportunity to create value?” If you cannot answer that B2B question, the metrics you’re using to measure performance have been masquerading as KPIs. Think of your KPI dashboard as the instrument panel in your car. If it reported everything that was going on with your car all the time, you’d never get out of the garage, as Axson told us. “You only need the check oil light when it’s necessary.”
In the end, reporting metrics depend on the lifecycle of your business. “If you’ve been in a market for 50 years, retaining customers is really important,” Axson said. “Reporting analytics are only as good as the decisions that are based on them.”
CFOs need to answer three basic questions:
- What happened?
- Why did it happen?
- What should you do?
So what would your CFO do?
For more coverage from Hub 15, visit here.