Boards deal most often with two C-suite executives: the CEO and the CFO. Especially at public firms, where audited GAAP reporting and Sarbanes-Oxley compliance are mandated, the CFO might spend more time with Board members than does the CEO.
Traditional financial reporting is backward-looking and peer-comparing. CFOs spend lots of time and energy explaining how the last quarter went, how YTD results compare with linked periods, and how the firm is doing compared with an identified group of competitors. Necessary data, but often boring (absent huge surprises, fraud, or malfeasance).
I’ve spent my career as a CIO, not a CFO. There is little I can tell a CFO about GAAP stuff, so I won’t try. But maybe a CIO can show CFOs how to help the Board govern by improving processes and data.
Digital Optimization Delivers Better Data, Faster
Let’s start with my second-favorite topic, digital optimization (DO)[1]. I define digital optimization as “doing the things you already do, but using technology to do them better, faster, and cheaper.” At many firms the low-hanging fruit for DO is replacing Excel spreadsheets and Access databases with more robust technology and automating the movement of data among systems. When you hear the acronym RPA (robotic process automation), this use case is often what they are talking about.
Digital optimization has three major benefits:
- Data moves from desktop spreadsheets to corporate databases and becomes accessible to more people;
- Replacing manual data entry and re-entry reduces both errors and delays, making data more reliable;
- The time and money spent on audit is greatly reduced. (I’ve seen as much as 50% reduction in expensive external audit billing when processes go hands-off.)
CFO tip: Take the lead in identifying digital optimization candidates that yield better, faster data.
Modern Databases Do Double-Duty
As you get IT started moving data from desktops to robust corporate data stores, consider updating the database products themselves. Huh? Why should a CFO care about updating database products? Isn’t that IT’s purview?
IT is the custodian of corporate data: They keep it safe and accessible. As CFO you are one of the major data owners and users. You’re the “economic buyer.” The Finance team reaps the benefits of better access. That is why you should care about having the right tools.
Traditionally, databases were designed to do one of two things well: accumulate transactions or answer questions.
For lots of technical reasons, databases that did one of those things well were bad at the other thing. And transactional databases were very good at accepting data, but lousy at running reports at the same time as data was being entered. So, most firms used a transactional database underneath their ERP, CRM, EHR, banking, or whatever systems users used day-to-day, then copied the data from the transactional database into a second “query” database for use running reports and doing analysis. This creates several problems for data users:
- Timing – Data gets copied into the query database periodically (every night, say), so depending on when a report/query is run, the data can be stale.
- Interpretation – For technical reasons (again), the process of copying data[2] can be convoluted and it is entirely possible that a report/query run against the transactional database—even assuming no timing difference—will produce different results.
If it hasn’t happened to you, take my word for it. There’s nothing as embarrassing as two executives in front of the Board arguing about which of their reports is righter.
The good news for data users like the CFO is that database technology has improved drastically in recent years. New vendors offering all-in-one databases have emerged, and traditional database vendors have responded with all-in-one database upgrades or products. Operations and transaction data can now be blended with analytics in new ways.
Depending on your situation, you may be better off switching vendors or staying with the incumbent[3]. Of one thing I can assure you: Allowing Technical Debt to accumulate in the fast-moving Acceleration Economy is the worst of all worlds.[4]
CFO Tip: Partner with your CIO—and Chief Data Officer if you have one—to map out a database strategy that supports your need for more, faster, and better analysis.
It is imperative that CFOs take an interest in turning piles of raw data into accessible and useful information. As W Edwards Deming said, ‘Without data you’re just another person with an opinion.”
- Digital Transformation is my favorite topic, but that’s the CEO’s worry.
See my recent article for the definition of Digital Transformation: What is Digital Transformation Exactly? – Acceleration Economy ↑ - The technical term for this copying is ETL, which stands for ‘Extract, Transform, Load’ ↑
- Don’t despair: Acceleration Economy publishes a Data Revolution channel and on January 27 will be hosting a Cloud Database Battleground that will help you and your CIO understand your options. ↑
- You are paying 5- or even 6-figure maintenance fees every year to your database vendors. Not upgrading to take advantage of new capabilities you are paying for anyway is throwing money away. ↑
