How Chief Financial Officers Can Become Major Corporate Playersby
Today, it’s all about strategy—not spreadsheets—and it’s time for CFOs to recognize that their strategic value to the company goes well beyond just keeping the books. It used to be that the finance department was mainly responsible for entering data, paying the bills, and providing other executives with the historical financial information they needed. Their jobs were made more difficult because multiple applications and silos of data, all expensively maintained by IT, made workflows cumbersome and error prone, creating endless obstacles for sales, fulfillment, analysts, and accurate reporting. Not anymore.
Secure software-as-a-service (SaaS)-based accounting enables full integration of accounting with other business systems, allowing CFOs to gain an unprecedented level of insight into financial management as a way to drive business efficiency, identify opportunities, reduce risks, and understand the short- and long-term implications of their decisions. Accounting in the cloud also eliminates the costs and complexity associated with hardware and software purchases and maintenance, increasing operational agility and ROI.
Armed with real-time visibility into key financial and operational metrics for their organizations, CFOs can now provide forward-looking analyses to help steer the business amidst rapidly changing conditions. The role becomes less about being the financial historian and more about helping to foster better and faster decision-making across the enterprise.
Making the case for cloud
Adopting cloud-based accounting starts with recognizing the traps, pitfalls, and obstacles created by legacy on-premises accounting systems. Perhaps the most constraining aspect of the way these systems have been implemented is that data becomes physically scattered across multiple departments, lines of business, and IT centers. Such an arrangement prevents companies from integrating the data and collaborating with other departments to streamline financial processes and minimize compliance risks. Moreover, this results in multiple process chokepoints and is one of the reasons why it takes some businesses well over one week to close out their monthly books.
Most existing accounting implementations also rely on an array of manual processes that waste a CFO’s time. For example, the proliferation of spreadsheets and manual data entry results in hopelessly complex, error-filled reports. In fact, most companies are still using spreadsheets for planning, budgeting and forecasting even though most spreadsheets have errors! Equally problematic, manual time and expense management processes lead to constant revenue leakage as busy and overwhelmed employees fail to enter data accurately. As a result, most CFOs spend more than half their time doing accounting rather than supporting their organizations through strategic decision-making.
Real-time business insights
A best-in-class, cloud-based financial management system is designed to integrate and centralize financial data from across the enterprise, automate financial processes, and, through the use of APIs (application programming interfaces), integrate financial processes with other operational business systems. Centralizing data and automating processes accelerates workflows while ensuring access to correct, up-to-the-minute information. SaaS-based accounting also enables the finance department to automate time and expense tracking, linking those entries to client projects to improve billing accuracy. One of the most important benefits of such a system is the elimination of a reliance on spreadsheets, which leads to streamlined workflows and far greater accuracy. The top SaaS-based accounting system should also support synchronizing multiple ledgers and sub-ledgers, support built-in real-time KPIs and analytics, and facilitate audits by providing secure access for auditors from any location. Designed as a global solution, the system should also support multiple currencies, languages, and business models.
One of the key benefits of SaaS-based accounting is that by centralizing and automating financial processes, CFOs are now able to make far more strategic decisions based on real-time data that comes straight from the financial system, ensuring both speed and accuracy.
With all these advantages, what’s preventing companies from rapidly moving their financial processes to the cloud? First, it must be said, many companies are. JMP Securities predicts that SaaS-based enterprise resource management (ERM) is projected to grow from about $4.5 billion in 2014 to $15.4 billion by 2020. However, for companies that aren’t making the move to the cloud, concern over security and privacy remains a key obstacle. Here, though, it’s important to separate reality from myth. Remember, there was a time when people were afraid to keep their money in banks because banks could be broken into. Of course, homes could also be broken into, burned down, flooded out, and wiped away by tornadoes and hurricanes. Banks prevailed because security became part of their core mission.
The same is true with cloud services. They are typically safer than on-premises deployments because SaaS providers have made security and privacy part of their core mission. At the same time, many on-premises deployments are maintained by IT administrators not adequately trained in security and privacy, opening the door to internal and external threats.
In addition to the focus on security, top-tier SaaS providers offer stringent service-level agreements (SLAs) that ensure their services meet the performance requirements of their customers. As a result, many companies and even the U.S. government now have a cloud-first strategy in place.
For CFOs to offer their full strategic value to their organizations, they must unshackle their financial processes from the constraints of on-premises systems and gain the real-time visibility into consolidated financial and operational metrics that only cloud accounting can deliver.
About the author:
Marc Linden is the Chief Financial Officer of Intacct. He has more than 25 years of finance, business strategy, and general management experience. Linden oversees the financial and administrative organizations at Intacct—a leading cloud financial management software vendor and the AICPA’s preferred provider of financial applications. He is an industry thought leader, continually looking to improve the way mid-market companies practice accounting and make financial decisions. Linden holds an economics degree from the University of California at Berkeley and an MBA from Harvard Business School.