The ability to act quickly is key to competitive advantage — and nothing gives an organization a greater ability to act than cash.
That’s why CFOs are under so much pressure. Like most other departments, finance is expected to do more and do it faster with less. Lowering headcount; getting better deals on technology; finding a better return on financial investments; doing the close faster — all these priorities are intended to either put more cash in the treasury or tell management where cash is when they need it.
But finance doing finance better is not a new priority. What is capturing more CFOs’ attention is the call to help the rest of the organization perform better.
How’s that? By giving unit managers and top executives alike visibility into the daily decisions that impact financial position while the cash is being earned or spent. Every hour, people across the organization are taking action that affects the availability of resources in the organization. Over a period of time the collective impact of these individual events rises to the surface in the form of consolidated financial reports.
The problem is that by then it may be too late. The initiative is already lost. Even worse, it’s often difficult to know — strictly by looking at consoli¬dated reports — where the money came from or went. That makes it tough to manage many specific areas of the business well.
In many companies, what managers lack are not the detail artifacts or the high-level rollups. What they need is to be able to make explicit correlations between the two in a clear and timely way. They need to break through the barriers between the day-to-day decisions that impact financial performance and the financial reports that simply aggregate them. Then they can determine the best approach and take action toward improving the real results that determine company success.
This is not an easy task as the barriers are centered in technology and process. Not surprisingly, most financial systems are designed to help the finance department — but what CFOs need now is a bridge to operations from finance.
That calls for the careful selection and tailoring of a new technology approach and for adopting new business processes — all of which inevitably involve at least some risk. It also calls for people on both sides of the bridge to be willing to cross it — in other words, to share the data, the risks, and the rewards of performance-based finance.