The boardroom is the nucleus of an organisation where senior executives make (hopefully profitable) strategic decisions. But as technology has spawned disruptors and new, agile business models, the competitive landscape has changed.
These days boardrooms need different information to make critical decisions. Senior executives need breadth of data, from market analysis to operational scrutiny, but also depth, like multiple scenario forecasting and the ability to drill down to a single cost line, to make the most informed choices.
This requires a high level of data management which draws information from both financial and non-financial sources, and complex analysis of this data to find correlations that provide a competitive advantage. But how willing is the boardroom to invest in new finance systems?
Finance at the forefront
The finance function, as the central repository of business information, is in an obvious position to provide the board with this key strategic information. But most have suffered from under investment and a lack of innovation. Sadly, limitations in the finance function are correlated directly with limitations in the boardroom.
FSN’s 2017 Future of financial reporting survey found substantial gaps in knowledge and data within the boardroom. Only 61% of senior finance executives said the board always has a complete view of business performance. This means many corporate boards are making their decisions with one hand tied behind their back. Half of CFOs can’t immediately answer ad hoc queries in the boardroom, and only 57% had changed the board pack in the last three years despite obvious changes within the market in that time. This means many are basing their decisions on information that may no longer be relevant.
FSN’s 2018 Innovation in financial reporting survey showed that these problems have persisted. The dynamic boardroom, where reporting is fluid and can respond to new agenda items at short notice, remains elusive. Just 32% of CFOs believe they are able to provide this level of insight and value.
Only 54% of CFOs said their boardroom experience is responsive to ad-hoc queries and just 42% say they can provide forward-looking insights and accommodate new information requirements. But the dynamic boardroom is the pinnacle of an efficient and productive finance function equipped with the right tools to deliver insight and value. All organisations should aspire to providing their boardroom with adaptable and relevant insights.
But even if finance functions take the initiative to invest in systems and technology that delivers insight and value across the business, they are still governed by the relentlessness of the monthly, quarterly, half-yearly and annual reporting cycle. Of course, it’s necessary to track and manage these reports, but CFOs should be encouraging the board to focus on a longer term view to ensure the bigger picture is a central driver of decision making.
Nothing can happen unless the finance function is given the right tools – to standardise and automate processes, and collect, collate, sort and analyse the vast quantities of data across every organisation. The boardroom is often the sticking point for finance innovation. When the reporting job always gets done, and the ROI of new finance technology is difficult to quantify, finance loses out to investment in more glamorous customer-facing initiatives. The benefit to the boardroom of relevant and timely insight, informed by all business drivers, should be a good enough reason to prioritise finance investment. It’s time for CFOs to call change.