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Traditionally, the role of achief financial officer hasbeen to look after the com-pany books using spread-sheets and finance modules

built into enterprise resource plan-ning (ERP) suites from the likes ofSAP, Oracle, NetSuite and others.

But that role is changing and nowoften includes helping to define corpo-rate strategy and oversee the transferof business to digital platforms.

“Based on our research, it is clearthe chief financial officer role attoday’s leading companies is evolv-ing,” said a study by Ernst & Youngpublished last year. “Alongside theirtraditional mandate to provide finan-cial insights and analysis, chief

financial officers describe a greaterinvolvement in supporting and evendeveloping strategy, guiding key busi-ness initiatives.”

Rado Kotorov, chief innovationofficer for Information Builders, abusiness intelligence provider, says:“The role is changing due to the grow-ing importance of data assets in theprocess of revenue and profit genera-tion . . . Keeping tabs on informationis no longer enough. To be successfulin today’s economy, organisationsneed to treat their enterprise data asan investment.”

Significantly, when asked byGartner and Financial ExecutivesInternational, 44 per cent of chieffinancial officers said their influence

over IT investment had increasedsince 2010.

“The chief financial officer’sgrowing role in IT decision making isnot primarily around cost manage-ment; rather, it’s related to makingsure it’s a key strategic enabler, andensuring that IT is in step with otherefforts,” said Gartner.

Steve O’Neill, chief financial officerof northern European operations atEMC, an IT services company, says:“As the individuals who are mostoften tasked with the stewardship ofour own corporations, it is incumbentupon us to ensure that we keepabreast of this fast-moving environ-ment to maximise the benefits andminimise the potential risks.

“We can no longer absolve our-selves from engaging in this techno-logical revolution and assume otherswithin IT, legal or management havecovered all the bases from an opera-tional risk and reward perspective.”

While he admits it is not necessaryfor every corporate finance chiefto understand the intricacies of

implementing a particular IT strategy,he says: “I would challenge a chieffinancial officer to have at least aworking knowledge of IT to enablethem to make informed investmentdecisions for their business and toweigh up the pros and cons and risksand rewards of chosen IT strategies.

“Understanding the [overall] picturewill enable you to make much moreinformed business and investmentdecisions and leverage new opportuni-ties, while minimising your exposureto previously unaccounted-for busi-ness risk.”

Forward-looking finance chiefsargue that while they need IT tools tomonitor and run the finance function,

Continued on Page 2

New IT toolsaid evolutionof financechief’s role

The job ofminder of the company books ischanging to amore strategic one and freshanalytics software can help, reportsPaul Taylor

‘I would challenge achief financial officer tohave at least a workingknowledge of IT’

When businesses firststarted to invest in informa-tion technology in the 1950sand 1960s, the financedirector was usually in thedriving seat. The early com-puter systems wereinstalled to carry out taskssuch as accounting or run-ning the payroll. But thechief financial officer is nolonger the main user, letalone the sole custodian, ofbusiness data.

“When businesses firststarted putting in [manual]control systems 100 or soyears ago, they measuredthe flow of goods, thencash, then information,”says Frank Buytendijk, aresearch vice-president atindustry analysts Gartner.

“Even over the past 20years, the chief financialofficer owned the manage-ment information systems.But now it’s marketingdriving a lot of innovation.”

The finance function, MrBuytendijk suggests, ismoving from its role asowner or controller of datato a consumer of informa-tion. But, he points out,finance and accountingsystems now offer richertools for forecasting, analys-ing and reporting data, withfinance teams able to domore of their daily forecast-ing and planning withoutexiting their finance orenterprise resource plan-ning [ERP] software.

Companies such as Oracleand SAP have investedheavily in business intelli-gence applications, in partto boost those capabilities.And it is becoming easier toexport data from financialsystems, either to a cloud-based application, or evenjust to look at the numbersin Microsoft Excel.

But for larger, and morecomplex businesses, mostfinance directors will needto bring data into a special-

ist business intelligencetool, either for their ownuse or so a business intelli-gence specialist can carryout the analysis. Largerfirms continue to invest inthese specialists, sometimessetting up a business intelli-gence competency centre, tomeet the board’s need formore accurate and timelyanalysis and forecasting.

“Chief financial officershad large amounts of infor-mation in ERP systems, butbecause of their complexityit wasn’t accessible to thebusiness,” says PeterLumley, a business intelli-gence expert at PA Consult-ing. “There is a need tovisualise what the data aretelling them.”

The need to share morekey business data with thewider business is one of thedrivers for finance depart-ments to make more use ofanalytics. The chief finan-cial officer should be pro-viding a “sanity check” forthe wider business, accord-ing to Tony Baer, a princi-pal analyst at Ovum.

Often other businessunits’ forecasts or analysisare not cross checkedagainst the company’sfinancial records, nor anydecisions tested for theirimpact on the cash position.

The subprime mortgagecrisis in the US is an exam-ple of the risks of putting

market share ahead of prof-itability. Using businessintelligence to give morepeople in the businessaccess to finance-based datacan only help.

Mr Baer says chief finan-cial officers remain heavilyinvolved in decisions aboutwhere a company shouldinvest and finance teamsneed to look at widerranges of data. He says:“Chief finance officers arewidening their view point,

looking at macro trends andlooking for signals.”

Investment decisions willbe made in light of financialdata, but also customer andsupplier information, eventhird-party data sources ordata from social networks.

Fortunately, industryanalysts point out that therange and quality of busi-ness intelligence and ana-lytics tools is improving,with more sophisticatedalgorithms, more powerfulcomputers and techniques

such as in-memory data-bases speeding up analytics.

Finance directors mightnot always need real-timeinformation but quickerreporting and the ability torun multiple “what if”scenarios, without heavyinvestment in IT, is improv-ing decision making. Analy-sis tools are also becomingeasier to use, with thegrowth of visual analyticsand applications designedfor tablet computers inparticular making it easierfor senior managers to viewreports and drill down intothe data.

But some barriers remain.Variable data quality, andthe difficulties of creating asingle master data record,can hamper the financedirector’s ability to use awider range of data.Finance analysts aretrained to deal with highlyaccurate data from systemsof records. Making use ofnew data sources and bigdata can mean dealing withincomplete or less accuratefigures. This requiresfinance directors to changetheir approach.

According to Leo Sadovy,a former vice-president offinance who runs the per-formance management divi-sion of SAS, an analyticssoftware vendor, just about15 per cent of companiesare carrying out “transfor-mational work” with busi-ness intelligence. In a largenumber of finance depart-ments they are still tryingto improve their ability tohandle the basics, such asmanagement reporting.

Businesses, he says, arealso held back by a lack ofstatistical knowledge, aswell as by issues of dataintegrity. Paul Dennis, anadviser at the CorporateExecutive Board, a member-based body, says the ques-tion of skills becomes evenmore acute as financeteams start to use morepowerful tools to draw on awider range of data.Improved analysis tools andbetter visualisation areimportant, he says, but soare the people.

“If you are going to investto make more of data, itmakes sense to have theexpertise in place,” he says.

Better accounting systems offerricher forecasting resourcesInformation services

The need to sharedata is one factordriving the use ofmore analytics, saysStephen Pritchard

‘Chief financialofficers had largeamounts of data insystems, but itwasn’t accessible’

Good old days: a typical office computer circa 1954 Getty

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ILLU

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IVINDHOVLAND

2 ★ FINANCIAL TIMES WEDNESDAY MARCH 27 2013

When the credit crunchfirst bit in the UK in 2007small businesses felt thepain and, despite muchpolitical pressure, banksremain stubbornly cautiouswhen it comes tocompanies with irregularturnover.

Gritit, a wintercontingencies companythat has grown rapidlysince it opened in 2005, hasto contend with thevagaries of British weatheron top of expanding andcontracting its workforceto meet seasonal demand.

Matt Benham, financedirector of the Uxbridge-based business, says itpays to produce reportsyour bank manager cangrasp instantly.

He says: “Banks arerequiring reporting fromsmall businesses that goesfar beyond what many ofthem are capable ofdelivering. Your bankmanager is not necessarilyan accountant, but youneed to have a reportingproduct that can give theman instant picture of whereyour numbers areheading.”

Gritit has bolted twocheap, effective cloudproducts together to createmanagement accountspacks so its bank candigest with ease.

Xero, a popular cloudfinancials package fromNew Zealand, is at theheart of Mr Benham’s dailywork. Another product,Spotlight Reporting, takesreporting data from Xeroand presents it in a fiscallyfriendly way that avoidsspreadsheets, which do notsuit everyone and can bechanged by third parties.This is a new cloudphenomenon, withcompanies in the software-as-a-service sector, whichhost services on the web,spotting a market forutilities written to ride onthe back of products fromother players.

Spotlight Reporting costsGritit £30 a month, saysMr Benham, while he pays£50 a month for Xero. Headmits to initial fearsabout the quality of suchlow-priced software, butrelied on the experience ofother financial directorswho had switched to Xero.

Mr Benham has beendown the route of usingcompanies such as SAPwhen implementing largesystems with otheremployers, and says theycan change the entire waypeople work. But this wasnot appropriate for Gritit,which has 35 full-time staffbut expands to 300 in thewinter months, when itkeeps forecourts andpavements clear forcommercial clients andpublic bodies.

Mr Benham has a creditcontroller and a part-timeaccounts payable worker.This team of two and ahalf has to be able tomaster astonishing peaksand troughs. This JanuaryGritit sent out 2,000

invoices, nearly half of itsannual total, in just onemonth. Cash flow can becritical in a severe winter,with a welcome demandfor its servicescounterbalanced bypayments for salt and fuel.

This lean operationdepends on Xero beingfully integrated with itsfront-office software,Microsoft Dynamics, whichis also accessed via theinternet. In the franticwinter period, clients mustbe billed immediately toprevent costs mounting up,so front and back officehave to work as one.

Cash management is keyto Gritit’s success, its riseto a turnover of £8.6mmirroring close control ofoutgoings. “We have 200vehicles on the road inwinter and I can see theirfuel costs at any time andrun reports,” says MrBenham.

His one regret at beingin the cloud is that thecustomised adjustments aclient can request from alarge enterprise resourceplanning software providerare not available.

He says: “With the cloud

you get what they giveyou, you can’t go into thesystem and tweak it.”

Gritit is a business thathighlights why cloudfinancials suit any concernwhere human resourcesare limited. The Xero-Spotlight Reportingcombination has allowedMr Benham to keeptechnology under controlwhile addressing thecritical question of cashmanagement.

Gritit has passed a seriesof milestones as turnoverexceeded the £1m, £3m and£7.5m marks. Being able topresent these figures in away that explained howprofits are gathered in justhalf a year was crucial.

The turnover thresholdsall required externalinvestment, and Gritit hasused a selection of cloudtechnologies to illustratehow and why a ratherunusual business has beenworth the support of thebanks.

Cloud helps tomake most ofheavy weatherCase studyGritit

Clear financials arekey to banks’support, saysMichael Dempsey

‘Banks arerequiring reportingthat goes beyondwhat most SMEscan deliver’

manage risks, ensure dataare secure and assist themin their role as strategicadvisers, they also need abasic understanding of ITtrends such as cloud com-puting, data sets so largethey can become impossibleto manage (big data) andthe influence of mobiledevices. This will enablethem to work with IT lead-ers to use technology to thebest effect

Kate Butler of RussellReynolds, an executiverecruitment firm, says: “Wehave seen a demand trendfor chief financial officerswho have already led trans-formation projects.”

She says that while adeep understanding offinance is usually still arequirement, a growing

Continued from Page 1 number of candidates havebackgrounds in consultancyand MBAs. This shift is alsoreflected in the IT toolsthey use.

Although many stillprefer to use simple spread-sheets to pose “what if’”questions, many now alsouse more sophisticated soft-ware and cloud-based toolsincluding business analyt-ics, demand forecasting andbig data.

Miss Butler says: “Theuse of data and analytics ata corporate planning levelis straining big organisa-tions. Where chief financialofficers previously had 18-24months to build a strategicplan, now they have areduced planning cycle of 4weeks, forcing them toconstantly adjust financialforecasts. That puts a hugestrain on them.”

Fortunately for execu-tives, not only have themain vendors of ERP toolsrapidly expanded theirfinance offerings to meetsuch requirements, but avariety of relatively youngspecialised software andservices companies, manyof them cloud based, havealso developed products tar-geting treasury and financedepartments.

For example, SAP haslaunched a fraud manage-ment package built on itsHana platform designed tolet enterprises in industriessuch as insurance, banking,healthcare, utilities and inthe public sector detect,investigate, analyse andprevent irregularities orfraud in sectors where thesheer amount of data mayallow them to go unnoticed.

Examples of executives

who have turned the newbreed of tools to theiradvantage can be found inmany different sectors.

Jared Waterman, directorof financial planning atPandora Media, the internetradio company, faced aproblem because of thegrowth of the business.“One of the biggest chal-lenges was bringing struc-ture, infrastructure andanalysis to key areas of thebusiness,” he says.

To accomplish this, Pan-dora built its entire finan-cial system, including long-range planning, currentmonth performance, cashflow, headcount and otherkey metrics, using Anaplan.This is a cloud-based model-ling and planning platformthat includes an in-memorydata processing engine,which allows information to

be processed more quicklyby those needing it.

Pandora is now integrat-ing the system across thecompany via tools such asdashboards and pushing thedata across other depart-ments.

“Anaplan allows us towork with most of the flexi-bility that Excel allows butin a structured manner sowe can collaborate on amodel in real-time,” saysMr Waterman.

Meanwhile Fred Jezouit,vice-president of financeand treasurer for US-basedSouthern States Coopera-tive, an agricultural supplybusiness, is using big dataanalytics tools offered bya company called Alteryxto drill quickly into com-pany data and extract vitalinformation. “Our businessis highly dependent on

seasonal changes thatimpact inventory,” he says

“The main challenge wasidentifying the root causesof our slow-moving product,which was eating up work-ing capital that could other-wise be used for businessgrowth.

“Alteryx gave us insightinto seasonality trends foreach of our stores as well aspredictive modelling capa-bilities to help ensure wehad the right amount ofproduct available at theright time.”

In six months, the co-op-

erative’s retail division haskept revenue of seasonalproducts constant whilecarrying 31 per cent lessstock. That translates to a$20m change in stock levels,and allows more workingcapital to be freed up todevelop other projects andproducts that will improverevenues and aid growth.

Mr Kotorov of Informa-tion Builders says: “Dataare a company’s greatestasset, and often the mostunderutilised. Big data inparticular holds vital powerfor the chief financialofficer, as it gives new con-text to financial and opera-tional data.

“The latter provide statuson what has happened, butbig data provides the ‘why’– and this is why it offerssuch potential for learningand innovation.”

Improved IT tools aid evolution of finance chief’s role

Risk management and com-pliance are growing bur-dens. According to oneindustry statistic, a newregulation is publishedevery 22 days.

For businesses trying tooperate globally whilestreamlining their systemsand improving efficiency,this can amount to a signifi-cant challenge. The need tocomply with myriad andsometimes widely differinglaws and financial regula-tions can go against effi-ciency measures, such as anintegrated supply chain oreven a single financialrecord system.

Since the financial crisis,however, companies havealso increased theirown scrutiny of financial

compliance and risk man-agement.

John Smart, head of thefraud investigation and dis-putes services team atErnst & Young, says:“Questions about risk arecoming from two directions:external environments andinternal audit committees.”

This, he says, means com-panies are spending moretime and money on compli-ance. And, even wherefirms have good systems inplace, compliance can pullin the opposite direction togood business practice.

“You can end up with aconflict between the opera-tional part and risk man-agement part of the busi-ness,” says Mr Smart.

Avoiding these conse-quences means the chieffinancial officer not onlyhas to run a tight ship –with automated risk man-agement tools playing anincreasingly important role– but he or she has to takea wider view of risk thanpure financial compliance.

Recent events in the UK,where several multinationalcompanies came underscrutiny for their tax prac-tices, show a business canbe legally compliant but actin a way that creates realreputational risk. Busi-nesses are also looking atnon-financial risks, espe-cially in the supply chain.

The chief financial officerwill usually have to takeresponsibility for the com-pany’s overall approach torisk, even if the risks them-selves are managed byother business units.

“The chief finance officeris the originator of report-ing and management infor-mation,” says Tim Thomp-son, a partner in risk andregulatory analytics atDeloitte. “It is the financedirector who is telling theboard what has happened.”

The finance or risk man-agement department willneed to pick through rulesand regulations to establishwhat is likely to affect thebusiness.

If a regulation is pub-lished you need to abide byit, but the effect on thebusiness might be minor,says Loren Padelford, exec-utive vice-president atActive Risk, a risk manage-ment tools supplier.

“The emphasis is shiftingfrom risk management andcompliance to understand-

ing what the real risk is.”This shift also needs to be

made with care. Mr Smartsays that, in some recentcases, businesses actuallyidentified the risks cor-rectly but failed to act toprevent the damage.

Sometimes this is a resultof a lack of resources, a

lack of automation, or toomuch focus on the minutiaeof regulations, with execu-tives losing sight of the bigpicture.

“We coach clients to takea broader, risk-basedapproach,” says JohnWheeler, a research directorat industry analyst Gartner.“You have to have a singlegovernance, risk and com-pliance system and a singlesystem of record. Once theyhave that [companies] canbetter understand their riskprofile [and] make surethey operate within theirrisk appetite.”

Bob Stark, vice-presidentfor strategy at Kyriba,which supplies treasuryservices and technology,says: “Teams are spendingtoo much time on manualtasks and not enough timeimproving visibility of riskexposure.”

This is understandable asbusinesses have faced awave of regulation, includ-ing Sarbanes-Oxley, Dodd-Frank and measures such

as Basel II and III. Often theonly practical short-termsolution is to throw peopleat the problem.

But finance directors donot always go back later tosee if tasks can be auto-mated. Also, some compli-ance measures, whetherautomated or manual, canstifle legitimate activities.

“Compliance can over-control,” says RichardHunt, managing director ofTurnkey Consulting, whichspecialises in risk manage-ment based on technologyfrom the company SAP.

“You can put your busi-ness operations at risk byadding unnecessary compli-ance activity. But, [in] a lotof cases, there is now anautomatic control optionthat there wasn’t [before].”

The good news is more ofthese tools are availablewithin, or as add-ons, tolarge enterprise resourceplanning and financial soft-ware applications, and theyhave matured during thepast few years.

Biggest challenge is not to stifle legitimate goalsRegulation and risk

Stephen Pritchardfinds new rules canlead to conflicts

So far, big data has mainlybeen a toy for the chief mar-keting officer to play with.Companies are using toolsfor analysing large volumes

of data to refine their product offer-ings, their marketing message or eventhe positioning of their goods on theshop shelf. The chief finance officer’sinvolvement, in general, has been toapprove the spending on suchprojects, which can cost from $200,000to tens of millions.

But chief finance officers too arestarting to see big data technologiesas something they could use to get abetter handle on company accounts,manage regulatory reporting require-ments and identify cost savings.

“We have not seen chief financeofficers getting a lot of limelight inbig data yet. We have been seeing thechief marketing officers getting intoaction, and a lot of activity comingfrom the chief information officer,”says Narayan Sivaram, global clientpartner at Infosys, the IT consultancy,which advises clients on big datatechnologies. “But chief finance offic-ers are starting to be interested. Athird class of project is emergingaround regulatory reporting.”

One large financial services com-pany that Infosys worked with, forexample, was collating financial datafrom operations in 120 countries. Notonly was this creating huge costsbecause the company needed vastdata warehouses to store the informa-tion but they were worried aboutwhether the data were accurateenough. With ever stricter require-ments to calculate exposure to risk,the financial services company fearedthat even a small amount of incorrectdata could be damaging.

Because the company had alreadyinvested in some big data applicationsfor analysing its clients, it decided touse these also for financial reporting.Using high-speed tools for handlingdata, it was able to take samples ofvarious business metrics from acrossits operations, and run checks to seeif these were in line with historicalperformance and what was expectedof that unit. Any anomalies could bespotted and corrected more quickly.

George Davies, chief executive ofMooD International, which providesmanagement software for companies,says big data tools can help chieffinance officers to have fewer sur-prises in financial reports. “We canmodel in real time the impact of thedecisions they are making,” he says.

“It’s not just understanding thefinances of the past or guessing at thefuture, but looking at real impact. Puttogether orders, revenue, operatingprofit and put in your forecast basedon what you can achieve. What if Iput more people in, can I drive uprevenue? It is possible to do a reviewat any point of what is going on.”

This should mean an end to thesudden profits warning, because theoutcome of any change can be see farin advance, Mr Davies says.

Chief financial officers can also usedata analysis to identify ways toreduce costs. Mike Connaughton,director of big data for Oracle’s

Europe, Middle East and Africa opera-tions, relates the example of one cus-tomer, a large European telecomsoperator, which was looking for waysto reduce the number of customersleaving the network, known in theindustry as “churn”. Even a 1 per centincrease in churn would translate to a5 per cent reduction in the company’sprofitability, so it was crucial to findways to reduce this.

Historically the company hadlooked at call details and network per-formance figures but it was not get-ting accurate predictions of customersat risk of leaving. Using big data tech-nology, the company started to alsoanalyse the audio files of complaintsmade to its call centres. Cross refer-encing those with other factors, it wasable to predict with 75 per cent accu-racy if a customer was about to leave.

“It seems obvious but they had notbeen able to cross reference the audiowith data sets before,” Mr Con-naughton says. The call-centre staffdealing with the complaints had,without the cross referencing, onlypicked up on 20 per cent of customersat risk of leaving.

Being able to put often subjective,disparate data, such as audio files,

into the system for analysis is whatmany executives are finding helpfulabout big data. Søren StaunBiangslev, chief technology officer atPFA Pension, the Danish pensionfund, used big data analysis toolswhen he was looking for ways tostreamline the company’s IT systems.

“It’s against my nature to look atsubjective answers . . . But we startedasking people what they thoughtabout the computer systems andputting that into the analysis too.”

Mr Biangslev and his team mighthave once puzzled over sheets of A3 towork out usage patterns but the datatool, provided by MooD, gave aninstant visual analysis and surprisinganswers. The oldest technologies werebest liked, still worked well and werecheapest to run, so PFA shed some ofits little-used newer software. Theexercise shaved about 20 per cent offthe IT budget.

Mr Sivaram of Infosys says there isa potential for a 60 per cent reductionin data handling costs when adoptingbig data technologies. Whether theyhave discovered big data yet or not,these are the sort of numbers chieffinancial officers might start to takean interest in.

Cash savingsare to be foundhiding amongthe big data

Analysis strategyFinance officers find freshways to extractmore information out of theircompany accounts, reportsMaija Palmer

‘Teams are notspending enoughtime improvingvisibility of riskexposure’

Dashboard dream:modern softwaremakes it easier forcompanies tocompare datafrom a variety ofsources Dreamstime

‘The oldest technologieswere best liked, stillworked well and werecheapest to run’

The Connected Business

Matt Benham: ‘200 vehicleson the road in winter’

FINANCIAL TIMES WEDNESDAY MARCH 27 2013 ★ 3

The Connected Business

Paul TaylorEditor, TheConnected Business

Maija PalmerSocial MediaCorrespondent

Charles BatchelorJane BirdMichael DempseyStephen PritchardJessica TwentymanFT Contributors

Adam JezardCommissioning Editor

Steven BirdDesign

Andy MearsPicture Editor

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Bombast may be par for thecourse for interdealer bro-kers, the middlemen whomatch buyers and sellers ofcomplex financial products.But at Swiss firm Tradition,Steve Umpelby, chief finan-cial officer for Europe, Mid-dle East and Africa, prefersto rely on robust datarather than boasts to assessthe performance of traders.

“They’ll all tell youthey’re the best thing sincesliced bread,” he says.“That’s the industry we’rein and we operate at apretty aggressive end of thefinancial services mar-ket . . . Part of my job is toacknowledge what they say,then compare it with fact.”

In a sector where tradingvolumes have declined andthe scrutiny of regulatorshas intensified since the2008 financial crisis, suchperformance managementhas never been more impor-tant. At Tradition, salariesand bonuses paid to front-office employees, about 70per cent of 2,400 staff,account for some 62 percent of overall revenues, sothe firm has to be certain itis getting a good return onits investments.

Since last year, MrUmpelby and his team havebeen using business intelli-gence (BI) tools from IBMCognos to create a profit/loss statement for eachtrader that enables thetracking, on a month-by-month basis, of the reve-nues brought in by thattrader and the costsincurred, from what thetraders are paid to whatthey spend on entertainingclients.

Most traders, he says,have contracts that give thecompany the right to cut

their salary, or end theiremployment if they do notbring in at least two and ahalf times their salary inrevenue.

In almost any corporateenvironment, performancemanagement tools, basedon BI technology, are amust, says Mr Umpelby.“No chief finance officerI’ve ever heard of is short ofdata . . . The difficulty liesin getting it all into oneplace, checking it’s rightand presenting it in wayspeople elsewhere in thebusiness can understand.”

Addressing that challengewill only become moreimportant in the yearsahead, says Patrick Fenton,a partner at consultancyand accounting firm KPMG.While the chief financialofficer has long had the role

of internal “scorekeeper” inmany organisations, theiroversight is expanding toinclude non-financial met-rics, as well as those relat-ing to outsiders such as cus-tomers and suppliers.

“The finance leader willneed the ability to under-stand data but more impor-tantly extract intelligencefrom that data, in a farmore holistic and simulta-neously deeper way thanmost do today,” he says.

KPMG anticipates theemergence of a new breedof finance professionalswho occupy a strategicchief financial intelligenceofficer role. “The chieffinancial officer will becomean information broker onbehalf of the business,”says Mr Fenton. For that tohappen, finance heads will

need better corporateperformance managementtools and the ability to usethem effectively.

A study in March 2013from consulting firm theAdvanced PerformanceInstitute and BI tools sup-plier Actuate shows there ismuch work to be done here.The organisations polledbusiness leaders from about3,100 companies worldwideabout approaches to meas-uring and managing per-formance and found 5 percent say they had no orvery little performance dataat their disposal. Afurther 15 per cent saidtheir approach to managingand measuring performancegenerated “some facts anddata, but the collection andusage is ad hoc, sporadicand uncoordinated”.

This leads the study’sauthors to conclude that, 20years on from the introduc-tion of the balanced score-card approach by renownedmanagement thinkers Rob-ert Kaplan and David Nor-ton, one in five companieshave not truly benefitedfrom the availability ofbusiness performance man-agement (BPM) tools.

However, those that douse BPM tools rely on themto create a broad range ofkey performance indicators,dashboards, scorecards andbenchmarks, with financialperformance the most meas-ured aspect of any business.Some 87 per cent ofrespondents measure this,compared with operationalperformance (measured by75 per cent), customermetrics (69 per cent),employee metrics (68 percent) and sales and market-ing (53 per cent).

The finance departmentmay be ahead of everyoneelse when it comes to per-formance measurement butif chief financial officers areto establish true oversightof company performance,they will need better under-standing of all aspects ofthe business.

Bosses turn to metricsto gauge performanceManagement

Programs can aiddata search, writesJessica Twentyman

‘No chief financeofficer that I’veever heard of isshort of data’

Steve Umpelby,Tradition

The rise of the online shopperhas hit traditional retailershard. But what cheer, if any,can chief financial officersextract from the plethora of

technological propositions jostlingagainst hard-pressed outlets?

The mobile phone is feted as a per-sonal shopping assistant but Deloitte,the management services company,thinks the hype around mobile pay-ments, known generically as m-com-merce, conceals a far more importanttruth. “People look at m-commercebut not at the way mobiles can beused to influence the consumer,” saysBen Perkins, head of consumerresearch at Deloitte.

Mr Perkins’ point is that while UKretail sales using the mobile phone asa payment device totalled £1.5bn in2012, this figure is eclipsed by the£15.2bn Deloitte calculates was spent

as a result of consumers being guidedto a purchase by online informationdelivered to smartphones. “Everyfinance director is looking for onething, the holy grail that is profitablegrowth. And this is definitely an areawhere mobile technology can deliver asignificant impact. But it’s aboutinfluence, not about transactions,”says Mr Perkins.

Across the Atlantic, Deloitte thinksmobile influence on store sales in theUS in 2012 hit $159bn. It forecasts aUS market for such sales reaching$700bn in 2016, against an expectedUK figure of £40bn.

These are numbers that could revi-talise traditional shopping venues butonly if the technology is exploitedwisely.

In its report, The Dawn of MobileInfluence, Deloitte puts the case forthe mobile device as a mini-shop

window that allows consumers toresearch a brand or compare productsand prices with items in other storesor online. This is not about firingadverts at consumers as they pass aspecific location, a tactic Mr Perkinsdismisses as “pretty crude”. Smart-phones have to give the consumer asense that their personal queries arebeing answered, with highly focusedsales promotions replacing blanketdiscount campaigns.

The aim here is to engage with con-sumers and prevent their businessevaporating into the pure onlineworld. In Deloitte’s view the mobilephone can keep them in-store andspending as long as the retailers learnto build messages that appeal tosmartphone-wielding shoppers.

Swedish company Pricer sees thetraditional price tag as a vehicle forkeeping shoppers in stores. Pricer

installs digital price displays that canchange in an instant and respond to acustomer’s mobile phone via quickresponse codes that link to productreviews.

Niclas Qvist, global partner man-ager at Pricer, says: “The idea is touse the electronic display as an inspi-ration to the customer to shop in adifferent way.

“The challenge for the traditionalstore is not to become a showroomwhere people just look at productsand then go away and order online.”

How much of this threat is recog-nised by the retailers Mr Qvist meets?He says: “They realise they need tochange the way they do business inorder to survive, especially the elec-tronic retailers in Europe who sit onhuge stores that don’t match thegrowth of online sales.”

Deloitte’s US research indicates

consumers are most likely to use asmartphone when shopping in elec-tronic and appliance stores.Switched-on retailers can updateprices over wireless connections toguarantee they will match onlinecharges, says Mr Qvist.

For Pricer, the name of the game isto make consumers feel confidentabout their purchase and not fretabout potentially better deals thatmight be found online.

Original approaches to the role oftechnology can be seen at Hakkasan,an upmarket Chinese restaurantchain that has opened across theglobe from an early start in London.

Paul Deeming, the group’s interimchief financial officer, faces thechallenge of promoting the brandname as it rolls out across LosAngeles, Shanghai and Dubai withoutdiluting Hakkasan’s hard-won air ofexclusivity. Staff use iPads to gatherdata from Hakkasan’s diners in a waythat suits the venue, says Mr Deem-ing. “The iPad looks professional andslick and we can get customer infor-mation on the spot. That is added toour database straightaway via a por-tal on the iPad.”

The email addresses gathered byHakkasan do not provoke a torrent ofmoney-off deals. Instead, the chaincontacts diners with invitations tospecial events at its venues such asmusic evenings.

Hakkasan’s contacts are only usefulif they are farmed imaginatively andMr Deeming has strong views on thepredictable discounts that character-ise much of his trade’s marketingefforts. “You have to add value, givethe customer an incentive and makepeople feel they are part of a selectclub of like-minded people.”

Hakkasan is steering away from thescattergun application of technologythat can actually undermine profits.

Mr Deeming notes that some popu-lar food chains are so associated withmoney-off deals that they have turnedinto discount destinations where itbecomes difficult to persuade dinersto pay the full price for any meal.

He says: “This can hit the marginsof a big chain and it’s hard to turnthat around because the deal becomespart of the customer expectation.”

Targeted mobileuse can achieve‘holy grail’ ofprofit growth

RetailFinance directors need to think aboutengagingwith consumers in store, not turningoutlets into showrooms, saysMichael Dempsey

Strategic dining: the Hakkasanchain has adopted a differentecommerce route tomoney-off vouchers Bloomberg

4 ★ FINANCIAL TIMES WEDNESDAY MARCH 27 2013

The Connected Business

While many chief financialofficers and finance direc-tors have begun to takea more sophisticatedapproach to outsourcingfinance functions they stilldo not get it right everytime. Cost overruns andwrangles over the scope ofoutsourcing deals continueto trap the unwary.

“They have got a bitcleverer and can see whatbits can be efficiently out-sourced and what cannot,”says Colin Rowland, headof European operationsat Apptio, a supplier ofbusiness management soft-ware.

“They break the contractdown and hand bits out tothe specialists. Desktopswill go to vendor A andbusiness process to vendorB, for example.”

Shamus Rae, head ofEuropean shared servicesand outsourcing at KPMGManagement Consulting,says: “The generic offshoreoutsourcing players arestruggling to maintainmarket share while compa-nies with a strong financialcapability are winning busi-ness.”

Many deals struck in theearly 2000s were aimed at“labour arbitrage”, forexample, relocating jobs tolower cost areas of theworld such as India butwith no strategic aimbeyond cutting costs.

However, says Mr Rae,managers are now taking amuch broader view of whatfinance departments needto deliver.

“They are creating avision and then breakingdown what needs to be doneto support that,” he says.

Many multinationalshave created shared serv-ices operations that bringtogether financial andsometimes other back officefunctions into one centrewhere they can be moreefficiently managed. Chieffinancial officers have toask themselves whetheroutsourcing this operationcan put a further squeezeon costs as well as improv-ing efficiency or whetherthey have gone as far asthey can already.

The first step to be takenis to understand the costsbeing incurred when aparticular function is beingmanaged in-house, says MrRowland. “Managers getsold on making a massivereturn on investment.”

But unless the scope ofthe outsourcing deal, andthe scale of demand thecustomer expects to put onthe outsourcing supplier,are precisely calculatedadditional services may berequired. Costs may riseand anticipated savings willnot be made.

“Businesses change andthat needs to be takenaccount of in the contract,”Mr Rowland says. “Thatcan lead to incrementalcosts that the outsourceprovider will put on you.”

Simon Tennant, sharedservices and outsourcingexpert at PA ConsultingGroup, identifies the keyissues that must be clarifiedbefore a decision to out-source is taken.

“You must have a clear

objective. Is it to save costsor to achieve an improve-ment, by, for example,providing headroom forpeople to do what they aregood at rather than fillingin expense claims?”

Managers should takestock of where they are interms of the state of theirmanagement technologyand the degree to whichthey have already devel-oped a shared services plat-form in-house. An outdatedenterprise resource plan-ning system might beexpensive to upgrade in-house, for example.

Highly integrated compa-nies may find it easier tooutsource financial func-tions than companies thatallow a greater degree ofoperational freedom to

subsidiary companies anddivisions. “The more diffi-cult it would be to integratesystems the less you wantan outsourcing provider tobe involved because you aregoing to have to pay moremoney for the complexity,”says Mr Tennant.

Finally, any outsourcingdecision needs to have top-level support to induce asense of urgency andensure that targets andtimetables are met.

Outsourcing is not theonly option for a chieffinancial officer seeking tocut costs and improveefficiency. Companies canachieve both by standardis-ing business managementprocesses across all theirmarkets and geographicalareas of activity. Oftenareas of business are leftout of such plans becausethey are perceived ashaving special characteris-tics that make them toodifficult to integrate.

Companies can broadenthe range of activities cov-ered by shared service cen-tres to include humanresources or IT alongsidefinance, operating with asingle helpdesk, the samesoftware package and thesame procedures for dealingwith suppliers. Shared serv-ices centres need not belocated near head office butcould benefit from beingclose to the fastest-growingmarkets, often in emergingcountries.

Common mistakes madeby financial chiefs who signup to outsourcing dealsinclude failing to measurethe starting point, failing tobenchmark performanceand failing to manage boardexpectations of what can bedelivered.

“One client told me thatthe outsourcing playerswere now delivering whatthey had promised fiveyears ago,” says Mr Rae.“So what they are promis-ing now we may see in fiveyears' time.”

Broader view requiredon when to outsourceFinance functions

Charles Batchelorsays companies mustlook beyond simplycutting costs

Call centres: many jobs were sent abroad in the 2000s Getty

‘Finance directorsare creating a visionand then breakingdown what needsto be done tosupport that’

Treasurers within companies –the centres of financial man-agement – are under pres-sure to keep a firm grip onthe corporate purse strings.

This means avoiding surplus fundssitting in low interest accounts, spot-ting overdue payments promptly andminimising transaction costs.

But downsizing in financial depart-ments is making such tasks difficult.Treasury managers are being asked todo more with less, says Cindy Murray,head of global treasury product, plat-forms and e-channels at Bank ofAmerica Merrill Lynch (BoAML).“What they need is more automationto make their activities more effi-cient,” she says.

Cash management is the key build-ing block, says Paul Bramwell, seniorvice-president for treasury solutionsat Pennsylvania-based SunGard. “Theaim is to show treasury managers justhow much cash they have in the busi-ness and where it is at any time.”

Some groups want daily or hourlyupdates on their financial position.One BoAML client has updates everyfive minutes showing assets and lia-bilities in all subsidiaries. For organi-sations with overseas operations, thiscan include multiple currencies andpayment formats. “Many [countries]expect you to have a local bankaccount to pay suppliers or staff, espe-cially in emerging countries such asChina,” says Mr Bramwell.

Dealing with international curren-cies and payments is difficult becauseof multiple file formats, such as thoseprovided by Society for WorldwideInterbank Financial Telecommunica-tion (SWIFT) and Bank Administra-tion Institute (BAI).

Some countries, Brazil for example,

have their own formats. Others con-form to proprietary standards fromcompanies such as SAP and Intuit.

BoAML’s Ms Murray says some for-mats only allow 15 to 20 characters tobe attached to the data. This canmake it difficult to recognise whatdata refer to when, for example,matching a payment to an invoice.“Once it is multiplied by the numberof transactions in a day, the challengeis formidable,” says Ms Murray

BoAML’s automated treasury serv-ice augments payment transactionswith data from clients and puts it into

a format that complies with the Inter-national Standards Organisationguidelines. This enhances the recon-ciliation statements and helps auto-mate processes, improving operationalefficiency, says Ms Murray. Automat-ing reconciliation frees treasurers tospend more time on analysis.

Mr Bramwell agrees having data ina standard format is crucial foranswering “what if?” questions.

This helps manage risk, whichtreasury is increasingly about, saysPaul Tivnann, global head of foreignexchange and commodity electronic

trading at Bloomberg. The more cur-rencies and interest rates you areexposed to, the more your riskincreases because of the price varia-tions. “Treasurers need to understandthe world in which they are tradingand what the expectations are.”

Bloomberg’s FXGO service com-bines international news analysiswith the ability to execute transac-tions with more than 300 banks.

It helps judge the right moment tobuy or sell currency and to pick thebest price from a choice of counterpar-ties, Mr Tivnann says. “In the past,

you might have called five banks for aquote and, by the time you got to thelast, the first could have changed.”

FXGO simultaneously requests theprice from multiple banks and calcu-lates the cash difference in dollars.“At the click of a mouse, you can spotthe best deal, execute the transaction,and have your positional risk systemupdated,” says Mr Tivnann.

By avoiding the need for humanintervention, automated processingreduces error. It also provides anaudit trail and helps with compliance.

“You can prove you went to themarket, looked at an appropriatenumber of counterparties and exe-cuted transactions at the best priceinstead of going to the same one allthe time,” says Mr Tivnann.

Treasury managers need to thinkmore strategically than in the past,adds Ms Murray. Organisations wantto look beyond the traditional 30-daytimescale to plan up to a year ahead.“Before the financial crisis, theyfocused more on operational aspects,with tools for reconciliation and cashpositioning. Now, a lot more forecast-ing is needed.”

BoAML’s CashPro Accelerate canextrapolate trends based on a com-pany’s historical information. It“locks” the core data so it cannot bechanged or manipulated. This avoidsthe common problem of managers cre-ating individual spreadsheets basedon inconsistent financial data.

More treasurers are likely to keepfinancial data in the cloud in anaccessible form. This would enablemore people, such a sales or opera-tions staff, to view it. The resultwould be a wider, deeper view of anorganisation’s cash position, givingtreasurers more control of the coffers.

Automation drives treasury efficienciesCash managementKeeping an eye on howmuch there is in corporate coffers is becoming easier, writes Jane Bird

Global finances: keeping track of what cash companies hold overseas can be made easier with the right software EPA

‘Treasurers need tounderstand the world inwhich they are trading andwhat the expectations are’