Pandora’s box and hope for new CFOs

Recent management change at Radioshack reported in shows just how important it is for CFOs to be able to produce accounts that they can confidently sign off in today’s stricter regulatory environment. An incoming CFO needs to feel absolutely certain that the books are in pristine shape, and may have to produce historical financial information from systems that he or she did not implement and is unfamiliar with. Particularly as in the case of Radio Shack, when the CFO has to deliver reports when they’ve been in the job less than half the fiscal year. Often, a new CFO is faced with a Pandora’s box when they do peek inside the finance systems they’ve just inherited.

How confident can they be given the serious consequences if something turns out to be awry? What if there are acquisitions, which need to be speedily assimilated into the corporate structure, yet in reality take years to convert or replace the acquired company’s incompatible IT systems? When a new CFO opens up the lid on the financial systems on which they rely, what do they uncover? We are all familiar with those scenes in horror films where the victim opens the forbidden door, or the lid on the long-shut chest, and as the audience we think “oh no, don’t open that”. How confident can an incoming CFO be that they are not about to re-enact such a scene?

The unpleasant reality in most companies is that financial data resides in multiple systems e.g. through a series of subsidiaries, or is in transition in the case of acquired companies. As I have written about elsewhere, letting a single and reliable view of corporate performance information can be a thorny problem. If you have to go back over time, as when changes occur to the structure of a chart of accounts or when major reorganisations happen, it is difficult to compare like with like. Moreover, CFOs need to understand the origin of the data on which they rely with a full auditable trail. This means that finance teams need to be active in defining and checking the business rules and processes from which data is derived in their company, and how these processes are updated when changes occur. Relying on the ERP system to do all this is insufficient since many of the business rules reside outside of these systems. This is why modern data warehousing and master data management software can help deliver clearer visibility. Ideally a CFO should be able to gather financial data together and view it from any perspective and at any level of detail – without having to standardise operational systems and business processes. The most intelligent software uses a model of the business, not the data or the supporting IT architecture, as its blueprint. Such a business model-driven approach insulates the company from change, since the reporting formats change immediately in response to changes in the business model. Using such intelligent software means that business change – such as re-organisations, new products, consolidation programs, and de-mergers – should no longer be feared.

Leading the organisation throughout change provides a real opportunity for the data-driven CFO to make his or her mark. By using the most modern technology available they can do this safely and without becoming a compliance victim. Good luck to all newly appointed CFOs!