The Forecast for the CFO: Improving the Outlook of the Finance Function

The Forecast for the CFO: Improving the Outlook of the Finance Function

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  The Forecast forthe CFO: Improving the Outlook for the Finance Function This guide will explore the ever-changing role of the CFO and establish how software can help CFOs and finance departments to address challenges.
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  2 Contents 3 Introduction 4 TheEvolving Function of the CFO 5 The range of tasks undertaken by CFO 6 Top Priorities for the Future 6 Information: The “currency” of the finance department 7 Reducing Complexity 8 Comprehensive financial accounting information 9 Addressing Challenges Using Software 9 Supporting international growth 10 The importance of flexibility 11 Procurement and operating costs 12 Summary 12 The overall potential of software 13 Checklist: Choosing the right software for your needs 14 Introducing Sage ERP X3 14 The ERP solution that sets the foundations for international expansion and growth
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  3 Introduction The Role ofCFO As Chief Financial Officer or CFO, Commercial Manager, Head of Accounting or Head of Finance, of a mid-sized to large business, you will be responsible for the finance department, as well as a key member of the senior management team. Your daily operations will cover a broad range of tasks, including both internal and external accounting. Your workday is also characterised by many challenges such as altered refinancing and investment conditions, internationalisation, technological developments and changing markets, in addition to the substantial demands of your daily operations. Your tasks are complex, your workload and level of stress are correspondingly high. You decisions and findings are based on in-depth analysis into; market or competition, specific business data such as sales, revenue and costs, figures such as sales targets or key performance indicators such as customer satisfaction. It is on this basis that the company management make decisions about the company's future, for example decisions about investments, acquisitions, relocation abroad or restructuring. You have to report in detail on the strengths and weaknesses of your company, critically review strategic projects with regards to their (financial) feasibility, safeguard the profitability and assets of your company, negotiate with investors and creditors, build confidence and much more. To do this, excellent financial reporting is a requirement, as well as a high level of specialist expertise, an analytical way of thinking with strategic open-mindedness and good communication skills. The efficiency of your department as well as the depth and quality of the information, all highly depend upon the IT solution you use. And this is often an area in which huge improvements are necessary. Some IT solutions are highly functional, but not designed for international use. Others are too extensive for a mid-sized business or do not meet current technological standards. Furthermore, some cannot be adapted adequately to the requirements of your company. It can also be that the provider does not possess sufficient expertise, its distribution channels are complicated, or its processes are not flexible enough. Due to the large range of software providers and solutions on the market, it has become difficult and time-consuming to find the right solution for your needs. How are you, as a finance, but not an IT expert, expected to negotiate your way around this market? Initially, it is advisable to work with your IT department to create an integrated technical concept that describes as precisely as possible the requirements of your company and your department with regard to IT, and then to research the market on this basis. The following guidelines are intended to help you to understand: how software can help you overcome challenges you face, the considerations when choosing the software that's right for your needs and the questions you should ask suppliers and your IT department.
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  4 The Evolving Functionof the CFO The workload and range of tasks of the CFO have also, and increasingly in mid-sized businesses, greatly changed in the last few years. You are now more than ever required to be a strategist as much as an executive and controller for your company. You have to drive forward and advance the company – but do so without any risks or side effects! In economically turbulent times in particular, cost management and risk evaluation move more sharply into your focus. You also have to look at specific market requirements, for example partial invoices, imputed depreciation, different evaluation methods, as well as implement legal changes in Germany for external accounting, such as the transmission of your balance sheet (electronic balance sheet), or changes in taxation and bank guidelines such as SEPA at a European level. In mid-sized businesses especially, conflicts of interest frequently arise between entrepreneurs that are sometimes too visionary, or between those that are too cautious, and the corporate interests that they represent. In these cases, your role is often that of a mediator. Internationalisation is beneficial – Particularly in mid-sized businesses A large number of successful mid-sized businesses are niche players with high value added density and, at the same time, global market leaders in their field. This means that you also have to facilitate technological progress from a financial perspective, secure long-term success and expand into new markets. Research has shown that international mid-sized businesses are more successful than those that are restricted to only one or few markets. Most CFOs see expansion and internationalisation as the major challenges of the future. Internationalisation and sector know-how are therefore part of the core expertise of CFOs in mid-sized businesses.
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  55 The Evolving Functionof the CFO The range of tasks undertaken by the CFO Strategic Operative Communicative Annual financial statements including auditor's certificate Strategy implementation Cash flow Negotiations with investors and creditors Development of financial strategy Risk evaluation Involvement in overall strategy Analysis Supplying findings and analyses for Reporting, quarterly, half-yearly and annual reports Media Contact management decisions Financial planning including feasibility and plausibility checks Reporting Controlling Cost management Development and evaluation of scenarios Building the financial organisation Budgeting and planning Compliance with legal provisions, taxes Internationalisation Reporting Creation of forecasts
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  6 Top Priorities forthe Future Information: The "currency" of the finance department To produce excellent financial reporting that satisfies the demands of both internal and external accounting, and therefore of the company management and divisions as well as investors and creditors, you need the right information at the right time and, above all, on a daily basis. You are responsible for managing the complexity of the accounting system, for example cost accounting that extends to all variants (cost categories, cost units, cost centres) and internal and flexible controlling and, on the other hand, book-keeping that takes account of legal or taxation requirements as well as national and international accounting standards, for example. Your daily work is often more difficult or more time-consuming than you would like. There are many reasons for this: • Distributed and heterogeneous IT systems that do not communicate with each other properly lead to complicated accounting procedures, increased effort and higher costs. • Process structures that have evolved over the years, but are somewhat outdated and above all not automated hinder the flow of information and communication within the financial organisation. • Inconsistent data and information management, sometimes still in complex Excel tables, is a source of potential error and lack of transparency. • Inconsistent figures and key performance indicators make analysis difficult and prevent clear statements. • Limited contact with operational teams. • The dependence of IT analysts on the procurement of information, for example obtaining specific data evaluations, delays processes. • An organisational structure that has expanded nationally and internationally, but has never been properly consolidated, hinders the consolidation of corporate key figures with the consequence, for example, that clear statements regarding the profitability and cost-efficiency of individual areas cannot be made. • Markets that are growing in complexity and speed as well as new legal provisions and guidelines require adjustments and changes, i.e. change management. • Changes in refinancing and investment conditions need yet more decision-making effort, and therefore even better financial communication.
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  7 Top Priorities forthe Future Reducing complexity When CFOs are asked about their core tasks, controlling, financial management, as well as strategy and planning are often top of the list. Looking at the actual work distribution, there is frequently a different picture: based on this information, day-to-day activities take up so much time that other important core tasks often fall by the wayside. This is mainly because you have to work within the constraints of the difficult conditions described previously. The main priority for a business software solution must therefore be to remedy this situation with the aim of minimising the discrepancy between the defined tasks and actual activities in favour of strategic work. That is, to take the strain off your day-to-day activities and reduce complexity. If you or another specialist department has to collate information manually in an arduous way – which in an international practice can even take several days – you find that the information is already outdated and unusable, and generally 20% presented in an inconsistent manner. The task of the software should be to provide you with the necessary information clearly and at the level of detail you require – and at the press of a button, in real time, and from all necessary departments, locations or subsidiaries. The software should also eliminate or alleviate certain tasks. The best way to achieve this is with integrated and international software. The following section describes how this can be done. Proportional time budget per task area Day-to-day activities Responsibility for results (broad term) Controlling Controlling instruments Agreement with board of directors/company management Project management Internal and/or external communication Strategy and planning Mergers & Acquisitions Management tasks (broad term) Financing 0% 5% 10% 15% 20% 25% 30% 35% 40% Average time budget Software should bring relief and reduce complexity 36% 28% 24% 24% 23% 22% 21% 20% 20% 19% 19%
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  8 Top Priorities forthe Future Comprehensive financial accounting information Comprehensive financial accounting It goes without saying that good financial accounting that covers all internal and external financial tasks forms part of a good business software solution. This may include accounts payable and receivable, payment management, cost and budget accounting with investment accounting, as well as controlling functions for key figure analysis, key performance indicators, plausibility checks or risk evaluations, for example. Most of the solutions available on the market cover these areas but differ in terms of the depth of their functionalities and whether they can integrate the individual requirements that are specific to your company. It is therefore important that you check carefully how flexible the solutions are in this respect. Comprehensive information leads to the right decisions Inter-site collaboration Very few companies have an organisational structure with only one company and only one accounting system. The structures of most mid-sized companies are more complex, for example a holding or a group with several independent subsidiaries. You are responsible for providing a realistic picture of your entire company as well as of the individual subsidiaries both internally and externally, for example as a representation of the results of operations, financial position and net assets. Ideally, your software will be set up in such a way that all companies and subsidiaries are displayed within one solution and evaluations can be carried out across all companies. This facilitates comprehensive cost management and the preparation of financial statements, for example, and therefore satisfies both your Managing Director and external investors because they both expect you to produce clean, clear, consistent and comprehensive information – each with a different focus. Software intended for this type of use is based on standardised master data across clients and company codes. Thanks to multi-company or multi-site functionality, it is able to reflect complex relationships between corporate entities and also make it easier for you to carry out comprehensive controlling and global management.
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  9 Addressing Challenges UsingSoftware Supporting international growth Legislation If your company is already successful on an international scale or you are planning to expand internationally, it is important that local legal conditions, tax provisions and the respective local legislation are observed. Business software solutions that integrate different legislations (multi- legislation) are specifically designed for this scenario. You can use these solutions to manage the full accounting process for many countries, including the reporting required at a local level such as tax returns, a profit and loss account, the balance sheet, as well as the electronic payment run and specific accounting processes in the financial statements, for example. They comply with national as well as international accounting and auditing standards. The latter – as you are in the best position to know – are gaining in importance in the context of economic globalisation, because they make an important contribution to the harmonisation and regulation of markets and the removal of entry barriers. International software solutions support legislation, for example according to DRS, IFRS, FRS, FAS, etc., enabling you to use one solution to comply with all disclosure requirements. It is important that you consider the certification of the software and the corresponding test seal, which confirm if the software is subject to relevant (local) standards and legislation, for example if you comply with the principles of data access and verifiability of digital documents (GDPdU) in Germany. You also need to consider whether the software solution includes predefined charts of accounts and bank files that are adapted to respective national formats, as well as input tax and tax on sales and purchases in the corresponding documents and forms for the target markets. This guarantees you the highest level of timeliness and accuracy and thus relieves some of your administrative burden. International also means supporting different legislations Multilingualism and currency systems In order to execute business transactions at an international level, an IT system must also support different currencies and exchange rates, so that you can carry out a conversion between currencies, or post or transfer transactions such as invoices and payments directly in the relevant currency. It goes without saying that the same applies to your reporting: with a multilingual software solution you can prepare and issue your reports in the relevant language and currency; the software should also take into account exchange rate fluctuations. User interfaces and master data in the relevant country language also speed up data entry and therefore increase efficiency. Multiple languages and support of different currencies creates more simplicity and collaboration
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  10 Addressing Challenges UsingSoftware The importance of flexibility Covering current and future requirements As a result of the financial crisis, it has become even more important for you, as CFO, to generate reliable information basis for decision-making in order to restore any potential loss of confidence in your company. You now have to analyse, check, control and manage more than ever. In this context, new long-term key figures or key performance indicators are increasingly gaining importance as measurements of performance and the "overall health" of your company, for example the speed and accuracy of processes as well as customer satisfaction. Consider whether your software enables you to flexibly adapt processes and then immediately implement them, for example for signature regulations or approval processes. Strategy and planning These two core tasks of a CFO require the software to have an analytical aspect as well as planning and budgeting functions. It is important that the solution enables the selection of different perspectives, such as an analysis of sales by distribution channel by product line. Consider whether your chosen software delivers integrated evaluation functions that can be used immediately and to their full extent, and that it allows results to be presented in different formats, dependencies and views. If these business intelligence functions still have to be installed and it is complex to do so, further costs will arise. Ease of operation and implementation The ease of operation of the software clearly determines whether it will be accepted by users and is a decisive factor in the efficiency potential that will be actually realised. The ease of operation is best established by direct use of the software. To do this, contact manufacturers directly, for example at trade fairs, congresses and customer, interested party and partner events. Flexible technology Technology is also important in the context of flexibility. Does your software support modern standards? Is it flexible in terms of the use of different database systems? Does it have integrated development platforms, in order to adapt and create objects, screens and tables individually? How flexible is it in terms of its integration with other solutions? Do not underestimate how open the software is in comparison with existing systems. Can it also be easily used online, on mobile and on desktop? Discuss these topics with your Head of IT Consider flexibility in terms of technology and function
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  11 Addressing Challenges UsingSoftware Procurement and operating costs Costs are your area of expertise and therefore require particular consideration. However, do not simply calculate the procurement costs, but compare the total cost of ownership (TCO) of different solutions. Consider: • How often are new (payable) releases issued? • How much effort will be required for the implementation? • How flexible is the software to use? • How easy is it for your own IT department to implement changes without having to consult the manufacturer or partner? • How compatible is the solution with existing systems such as database systems? • What are the costs of consulting, training and optimisation? The savings potential that you may be able to realise if you replace several local financial solutions with integrated international software is harder to calculate but still very important. If, for example, you operate separate accounting software systems in each country, the costs will be several times higher compared with a comprehensive international solution that integrates countries and legislations. This is due to the synergy effects that arise if only one installation is used and the reduction in adaptation, update and maintenance costs. Furthermore, you speed up your processes and achieve greater transparency and quality of information. It is also beneficial if your software is set up in a modular manner, because you have access to all functions and applications (production, purchasing and sales, finance, CRM, warehousing and inventory, etc.), but only use them as required. The implementation is then gradual, with predictable costs and realistic goals. In addition, modular software also enables you to respond quickly to strategic changes, by easily adding new modules. Modular software protects the IT budget
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  1212 Summary The overall potentialof software A business software solution that integrates the "classical" applications of internal and external accounting for both domestic and international locations including legislation, currencies and languages is the ideal tool for international mid-sized companies. Furthermore, the software must offer the necessary scope of functionality to enable you to manage your tasks, such as analysis, controlling and planning, in a straightforward manner. As a result, you can realise huge efficiency potential by means of IT alone and once again carry out your strategic work more effectively. You achieve an improvement in quality, because you can access information more rapidly, clearly and in a consolidated manner with an integrated and comprehensive solution. Last but not least, the work burden is reduced in the long term and your stress levels fall, as the software reliably provides meaningful information at any time. Solution selection checklist The following checklist is intended to provide you with an overview of the key criteria for an international solution that also meets the requirements of mid-sized businesses. It is designed to help with your market research.
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  13 Summary Checklist: Choosing theright software for your needs Provider: Yes / No / Notes Functionality Are all your key basic applications integrated (financial accounting including accounts receivable and payable, investment accounting, cost accounting, controlling, consolidation, etc.)? How much expertise does the provider have with regard to finance? Multi-Company Does the software allow all company divisions (finance, purchasing and sales, CRM, inventory, production) and subsidiaries to be integrated? Internationality Multilingualism: How many languages does the solution "speak"? Currencies: Does the software support different currencies and enable the management of exchange rates? Legislations: Does the system integrate various legislations, including accounting standards, reporting, forms, etc.? Countries: In how many and in which countries is the solution available? Flexibility Does the solution have a modular structure, and does it allow a cost-efficient, phased implementation? Is the solution designed to expand, and is it therefore scalable? Does it allow simple customising at a reasonable cost? Can individual adjustments be made to processes, for example? Operation Is the software easy to operate? Does it offer clear analysis in the form of dashboards, for example? How much training effort is necessary for users/employees?
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  14 Summary Checklist: Choosing theright software for your needs (continued) Provider: Yes / No / Notes Technology What is the underlying technology platform? Does the solution support modern technology standards? Does it support different database systems or is it limited to one system? Can third-party systems be linked seamlessly via available interfaces? Investment security How long has the provider been on the market? Does it offer investment protection? How good are its references? How much attention does it pay to the further development of its software? What is its product strategy with regard to the future? Provider To what extent does it specialise in mid-sized and large companies? What is the sales process? Does the company have a direct contact for its customers or do they operate via partners? Support What is the provider's support network like, is it local or global? Remember to discuss service level agreements with the provider, for example regarding the international availability in the event of support queries.
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  15 Introducing Sage ERPX3 The ERP solution that sets the foundations for international expansion and growth Sage ERP X3 is a business software solution specifically designed for mid-sized companies as well as for subsidiaries of groups and large companies that have to fulfil international requirements. The product has been proven as a comprehensive solution for more than ten years. To date, over 3,700 customers in 58 countries and from a variety of sectors ranging from production and services through to logistics have chosen Sage ERP X3. Thanks to its up-to-date technology, the solution helps companies remain efficient and flexible in global business. This is because Sage ERP X3 is simple, fast and cost-efficient to use and can be adjusted on an individual basis to meet the requirements and challenges of mid-sized companies. Furthermore, Sage ERP X3 is geared to the specific requirements and challenges of the financial reporting and accounting of mid-sized and international businesses. To this end, the solution supports many languages, currencies and legislations. A pan-European organisation within the Sage Group, which specialises in products and solutions for the mid-sized business segment, operates behind Sage ERP X3. It realises joint activities and initiatives, for example in research and development, sales and marketing, or implementation and support. At the same time, Sage relies on and continues to extend its local expertise in the respective countries. As a result, Sage customers not only have access to global resources and contacts, but Sage unites a high level of national and international expertise, ensures that solutions are constantly up-to-date and accelerates development in line with legal conditions and technological progress. If you have any questions about Sage ERP X3 or would like to arrange a free demonstration of the product, then please call: +44 (0)800 952 0082.
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  16 Sage ERP X3globally 3,700 customers 58 Countries Sage North Park Newcastle Upon Tyne NE13 9AA United Kingdom Telephone: 0800 952 0082 Email: UKEME@sage.com www.sage.co.uk/sage-erp-x3