A key component in this tracking process is data. The CFO must have access to accurate measures of everything from sales income to operating expenses.
However, the problem is that many finance departments are still stuck making important business decisions based on last quarters’ numbers. While looking back in this way can be useful, it’s never as effective as looking forward.
The challenge is that, when forecasts vary widely from actuals, it poses problems for the business. When actuals are lower than forecast, inventory carrying, and capacity costs grow. If they exceed forecasts, revenue opportunities might be missed and customers lost.
Better data is vital
All of these challenges can be avoided if CFOs understand how data fits into forecasting. They need to consider that not all data is created or logged equally or in a standardised way across the company.
This is a significant issue. If the CFO is to contribute to key business decisions, having access to real-time, quality data is absolutely fundamental. While recognition of this fact appears to be growing, there’s still quite a way for many Australian firms to travel.
One of the biggest reasons for this lag is that CRM tools, which provide the foundation for most financial reporting, were not actually built with people in mind. Usually, they’re perceived by the majority of those working within a business as an administrative task rather than a thing of strategic value.
Often staff view CRM systems as little more than a big spreadsheet that captures data for management. This attitude results in massive inconsistencies in the type and quality of data collected, not only across business units, but within entire teams too.
To counteract this attitude, CFOs would benefit from pushing their counterparts to collect the data they need so they can identify the insights that will actually deliver advantage to them. This has to happen in real time, so that the CFO can have an up-to-date view of how the company is operating and performing.
The best way to do this is to demonstrate the value it will deliver to a specific part of the business. If they understand the value, they’re less likely to view the whole exercise as a tiresome admin task.
As well as changing the way data is collected from across their organisation and clarifying the types of data they need, CFOs also need to consider the technologies that are in place.
Thanks to the rapid development in areas such as artificial intelligence (AI), the business world is now on the verge of CRM 4.0. This will bring to an end the generic CRM interface everyone has been dealing with and many of the manual processes they have had to endure.
While there is some negativity around AI and the long-term impact it could have on society, businesses should view it as a servant rather than let it become a master of users. It’s widely accepted that it will create a world with less tedium and more opportunity for individuals to apply innovation and creativity to meet their customers’ needs - and that has to be seen as a positive.
As an example, consider the sales department. AI-powered CRM has the ability to help an organisation be more strategic in deciding the deals they put effort into closing and new business they go after, as well identify those that really aren’t worth their time. The technology essentially provides a link between insights into the buying situation and sales actions. It can identify whether a customer has engaged with the business before and whether they are worth following up.
AI-powered CRM can evaluate past results such as wins, losses and no decisions. As salespeople continue to input data, an AI system refines its algorithms to make more precise recommendations on where the next big deal could come from. Not only does this reduce time wasted on customers with little potential, it better equips teams to go after high-quality opportunities and ultimately makes them more effective.
A future of better forecasting
In reality, it’s not realistic to expect that an organisation will ever get forecasting 100 per cent correct 100 per cent of the time. This is because there will always be external forces at play, such as the economy and world events, that are impossible to predict.
However, by focusing on data quality and harnessing emerging technologies such as AI-powered CRM platforms, CFOs can be in a much better position to be more accurate most of the time. And that has to be good for business.
Tim MacCartney, APAC managing director at Miller Heiman Group
Eliot Hastie is a journalist on the wealth titles at Momentum Media.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).