Literally every business function has been impacted by the adoption of new technologies and trends. With a wealth of data at their disposal, the role of CFOs and their finance teams has expanded from managing profit and loss to being able to find innovative ways to help businesses expand and grow.
According to a report by EY, titled The DNA of the CFO, “A relatively recent evolution of the CFO’s role has been the need for innovation and creativity. They are being asked to find innovative solutions to key business issues, such as designing and delivering new digital business models — and this at a time when regulatory scrutiny and the need for proactive risk management is increasing. CFOs have always had to find the right line between risk and reward. However, achieving the right balance between the two has become more delicate yet less distinct as CFOs have become more involved in strategy development and driving growth.”
However, CFOs may ask themselves: Is the return in innovation worth the investment? To what extent does data add value to the business? CFOs, perhaps more so than any other business leader, can ask and respond to both these questions.
For successful businesses, true innovation isn’t just brand new ideas that improve on the original. These ideas must be financially viable and sustainable in the long run. By involving finance leaders at the very start of the innovation process, businesses can accelerate approvals and go-to-market with minimal delay, while eliminating avoidable project failures along the way.
Often, finance acts as a gatekeeper to innovative ideas, testing them for fiscal feasibility and also for risk. In innovation-hungry and fast-growing businesses, feedback from financial leaders can easily be brushed aside as too risk-averse, too conservative – without considering the long-term repercussions of doing so.
How can the balance be achieved?
CFOs must strike a chord between supporting innovation and curtailing excesses that may put the business at risk. This can be done by providing more transparent insights into financial data. By making core metrics like revenue, margins, and operating costs visible to the broader business, finance can invite departments to actively consider financial implications or constraints when pursuing innovation.
In doing so, the CFO’s function begins to shift from gatekeeper to advisor – enabling lines of business to interpret the data and apply it to their thinking.
With access to real-time data, CFOs and their teams can also steer conversations about innovation towards initiatives that are fiscally sound and compliant – helping the business focus on ‘realistic innovations’ that minimise the cost of failure.
A strategic role in the business
For innovation to be effective, CFOs should seek to partner with other business units on strategy and implementation. In doing so, operational data can be used as a tool for efficiency, risk aversion and forecasting, helping the business to move towards operational innovation, while maintaining its usual pace of growth.
By applying the right analytics tools to their ERP data, for example, finance can identify spending trends that allow them to spot areas where the objectives of different departments intersect. This helps to pool resources for better collaboration between business units and enables finance to act as a bridge across the business, raising their strategic contribution.
This aids in reducing the risk of certain compliance breaches, while also freeing up budgets for more ground-breaking business ideas. For effective results, finance should consider using cloud-based ERP platforms that can offer a single view of operational data that is accessible by all divisions and its leaders.
Real-time access to financial data provides a valuable metric for measuring the success of innovation initiatives which can be shared business wide. In turn, CFOs will find it easier to achieve their goals of risk mitigation, compliance, and overall profitability, thanks to the heightened visibility and input they are to gain into innovation projects across the organisation.
The role of the CFO has definitely evolved from just a custodian of finances to a leader with strategic insights to help the business excel. Leaders strive to embrace opportunities to embed greater fiscal responsibility into innovation – without compromising their teams’ ability to test, learn, and improve at speed – from the very start.
Graeme Burt is vice president and chief commercial officer, JAPAC, Oracle Netsuite, a cloud based business management software provider. The views in this article are his own.