Burn those spreadsheets - and 4 other ways that treasurers can help their CFOs sleep better
Fact. Your CFO is losing sleep at night because he or she is worried about your organization’s financial reporting processes.
Fact. Your CFO is losing sleep at night because he or she is worried about your organization’s financial reporting processes.
Fact. Your CFO is losing sleep at night because he or she is worried about your organization’s financial reporting processes. According to the Future of Financial Reporting 2017 survey, conducted by the FSN Modern Finance Forum on LinkedIn, 97% of CFOs are being kept awake by a host of reporting-related concerns, from inadequate controls, to the prospect of having to face “unanswerable questions” in the boardroom and finding that serious errors have cropped up on critical spreadsheets.
So, based on the research, what can treasurers do to help their CFOs sleep more soundly?
This might sound like a drastic course of action, but actually it isn’t. You really don’t need those spreadsheets anymore. In fact, not only do you not need them, by continuing to use them as a primary treasury solution, you are exposing your organization to serious risk, something that your CFO won’t thank you for.
Worryingly, almost half (43%) of the senior finance executives surveyed for FSN’s research admitted that they don’t even know how many business-critical spreadsheets are in use in their organization. On top of that, separate research by Dr Ray Panko, of the University of Hawaii, found that the vast majority (88%) of spreadsheets contain errors. “Spreadsheets, even after careful development, contain errors in 1 percent or more of all formula cells,” he says. “In large spreadsheets with thousands of formulas, there will be dozens of undetected errors.”
So spreadsheets are unreliable and error-ridden, but, sadly, the problems don’t even stop there. Other risks and problems include key person risk (the risk that the person who is in charge of the spreadsheet leaves suddenly or is otherwise unavailable); inadequate security controls (what controls exist to stop anyone in the organization from accessing or downloading the spreadsheet from the server?); double-keying (having to take data from another source and manually input it into the spreadsheet); and business continuity planning (the information on the spreadsheet may not be accessible if the organization’s systems are brought down by a cyber attack). All round, a cloud-based treasury management system is a far more efficient way than spreadsheets to manage both treasury and the risks associated with performing treasury activities. That’s why it’s time to burn those spreadsheets.
EY’s 2016 research, The DNA of the CFO, found that today’s finance leaders are under intense pressure to balance their responsibility for financial stewardship with their role in developing the organization’s future strategy in an age of increased regulation and widespread digital disruption. Yet, the difficulty for CFOs is that they often lack both the information and the resources to help the organization navigate the way ahead. Almost half (47 percent) of the CFOs surveyed for EY’s research said that their current finance function does not have the right mix of capabilities to meet the demands of future strategic priorities.
This is a great opportunity for the treasurer to step up – if he or she hasn’t done so already – since treasury is responsible for the financial outlook of the organization. The treasurer can help the board to make informed decisions by reporting on cash projections, risk exposures and the impact of regulatory compliance. Treasury understands and can communicate on optimal financing methods, ability to repatriate overseas cash, strategies to prevent fraud, and volatility in currency markets. Armed with this insight, the CFO can support strategic decisions, such as how to finance a new acquisition or to enter a new market.
Finance teams like their reports, but do they understand the pain they are inflicting on everyone else in the organization with the volume of reports? FSN’s research found that half of finance teams do not remove redundant information from their reporting packs, while 41 percent don’t cut out reports that are no longer used, even as the number of reports grows.
Quality reporting is a core requirement of treasury, as treasurers are asked to deliver a wide range of reports for management and oversight. But as FSN’s research uncovered, 41 percent of finance teams retain reports that are no longer used, even as the number of requested reports increased. The result is that CFOs are bombarded with useless reports that can mask the more relevant and helpful information that is actually needed to run the business.
Business intelligence helps solve this problem by relying on data visualization instead of displaying rows and columns of data. Dashboards enable business conclusions and outlying information to (figuratively) pop out of the screen, drawing attention to the KPIs and explanatory information that the CFO really wants to see. Instead of forcing executives to scan through reports, business intelligence tools leverage visual features in addition to offering a dynamic “on the fly” interactivity that static reports can never offer.
Business intelligence is an opportunity for treasurers to set an example to the rest of the finance function. They can help their CFOs by identifying, integrating and analyzing the information that best supports decision making and presenting it in dynamic visual dashboards that bring the most powerful statistics to life.
When CFOs think of automation, they expect solutions to deliver time savings. While productivity is a benefit that treasury systems offer, it is data accuracy that offers more strategic value to the CFO. The possibility that human error could jeopardize the reporting process is an ever-present threat. Spreadsheets include errors – many of them, in fact. This is in addition to the dependence on individuals who built the complex formulas that support the spreadsheets. When it comes to making strategic decisions based on liquidity forecasts or projections of excess cash, spreadsheets offer too much risk instead of reliable insights for the comfort of CFOs.
On top of this, CFOs are increasingly being presented with lower cost solutions –delivered through the cloud – that represent cost savings over existing installed systems that are supported by in-house IT staff.
Finance teams that are bold in their use of automation can help their organization to be more competitive by reducing costs and managing risk. The greater the level of automation, the less duplication of effort there will be and the smaller the chance of the organization’s reporting process being jeopardized by a human mistake.
FSN’s research found that the majority of CFOs (54%) are wrestling with fragmented systems that require data from different sources. This magnifies the risk for error, limits the usefulness of the information provided by the system in terms of decision-making and serves as a drain on productivity.
For CFOs to play the major strategic role that is expected of them in the future, they must have confidence that their core financial systems are efficient, secure, transparent and under control. By investing in modern treasury and risk management solutions, the CFO ensures the treasury and finance teams can perfect cash visibility, improve the certainty of free cash flow projections, and more effectively manage risk. This allows the organization to generate additional cash flow and deliver meaningful bottom-line value.