TechTalk Blog -- CFO MAGAZINE: FINANCE TEAMS TRANSITION OVER TO STEWARDS OF NONFINANCIAL DATA

By David Colgren posted 02-08-2017 11:46 AM

  

Great article in CFO Magazine by Russ Banham on the quickly expanding role CFOs and their finance teams are now assuming beyond the management of financial information critical to the operation of the enterprise they pilot.

The Finance team is quickly becoming the “de facto” manager of nonfinancial data analytics critical to the operation of the companies they serve – Modified Chief Data Officer…

As CFO Magazine describes:

“About three-quarters (76%) of finance teams currently track some nonfinancial metrics, according to a November 2016 survey of about 300 global CFOs by Adaptive Insights.

Nearly half (45%) of the respondents say they now act as their companies’ de facto chief data officer—reporting on a range of KPIs, including nonfinancial metrics.

That storehouse of nonfinancial information represents 20% of all the KPIs tracked today. Looking ahead a mere two years, however, 48% of the CFOs project that nonfinancial metrics will comprise 30% of the total volume of KPIs they track.”

What is nonfinancial information?

The article describes nonfinancial information to include performance indicators related to customer satisfaction, employee engagement, brand loyalty, market share, and pipeline throughput. I also believe this information includes (depending on your industry sector) natural capital metrics such as energy usage and certain environmental disclosures such as carbon footprint. 

According to a recent survey from the IMA (as reported in Accounting Today) – management accountants are beginning to gather, review and disclosure this information to various stakeholders:

 “About a quarter of them have done that, and 18 percent of them are measuring their carbon footprint, so there is movement in that direction,” said IMA vice president of research and policy Raef Lawson. “If we dig a little deeper into the data, we see that measuring the carbon footprint, for example, varies around the world. Europe has been way ahead of the United States, for example, in terms of integrated reporting and measuring the environmental impact. We saw that indicated in our survey. Two-thirds of the European companies are measuring their carbon footprint. We see evidence that integrated reporting and sustainability reporting are becoming more of an issue for U.S companies, with an average of 17 percent of U.S. companies measuring their carbon footprint. I expect to see that grow in the coming years.”

Unlike financial information that tells a company management team how well the organization DID – nonfinancial data helps a company better understand how well it is DOING... With this additional information – the finance team can help management better manage the “course of the ship” so it can make better “productive decisions” as it moves forward and/or looks at medium to long-term goals and objectives. 

Role of the management accountant?

The CFO is therefore becoming the “chief data officer” of the company because they have demonstrated the ability to both manage and consult to company leadership on financial data. They are now assuming a greater amount of management and consulting skills related to nonfinancial data needed to pilot the organization. As “Big Data and Data Analytics” technologies become more mainstream with organizations – the finance team is a logical place for this data to be analyzed and reported back to senior management. Clearly management accountants can play a greater role in the understanding the significance of nonfinancial by transitioning their skills in financial management to nonfinancial management data analytics.

As referenced in the CFO article:

“The CFO’s job is to synthesize all kinds of information—financial and nonfinancial—flowing into the business to determine their correlations and noncorrelations,” says Michael Blake, president of Arpeggio Advisors.

Why must the CFO and not the chief operating officer, for instance, take on the task? “

Most CFOs have basic skills in statistics to determine if the metrics connect to actual company performance and are aligned with strategic goals,” Blake says.

The article documents that more CFOs are hiring financial managers with data science skills that can be utilized for the analytical skills and consulting they can provide reviewing nonfinancial information.

Neal Williams, CFO Intuit: “Twenty percent of the finance workforce [at Intuit] is now focused on reporting, forecasting, and budgeting,” Williams says. “We’re constantly looking for ways to automate more of the accounting role so that the staff spends less time on manual data collection and working on spreadsheets and PowerPoint presentations, and more time answering the important questions posed by the numbers.”

This CFO Magazine article clearly documents that the CFO and the finance team are in the drivers seat of this nonfinancial data revolution – the question is – will they “step up to the plate” and help the management team transition to an organization capable of focusing on forward-looking strategies using nonfinancial metrics that provide a more accurate, comprehensive perspective of the actual business conditions of the company? Those companies making this choice are actively expanding their marketshare.

The IMA is a active member of the International Integrity Reporting Council (IIRC). The IIRC is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs whose purpose is to establish integrated reporting and thinking within mainstream business practice as the norm in the public and private sectors. IIRC means the integrated representation of a company’s performance in terms of both financial and other value relevant information (nonfinancial). Integrated Reporting provides greater context for performance data, clarifies how value relevant information fits into operations or a business, and may help make company decision making more long-term. 

Stay tuned. 

 



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