The adoption of new technologies and trends has redefined almost every business function’s roles and responsibilities. With the wealth of data at their disposal, this certainly applies to the Chief Financial Officer’s (CFO) job and nowadays, it is expected that the finance team not only endorse but contribute towards innovation.
However, CFOs may ask themselves: is the return worth the investment? And to what extent does applying data add value to the business? Rather than impacting the momentum of innovation, this should play a critical role in how growing businesses define their direction. CFOs, perhaps more so than any other business leader, can ask and respond to both.
Injecting realism into innovation
For successful businesses, true innovation isn’t just birthed from ideas that improve on the original; these ideas must be financially feasible and sustainable in the long run. Often, finance acts as the sole gatekeeper to these ideas, testing them for fiscal feasibility and also for risk. Yet in increasingly innovation-hungry and fast-growing businesses, feedback from financial leaders can easily be brushed aside as too risk-averse, too conservative – without considering the long-term repercussions of doing so.
CFOs must recognise the need to strike a balance between championing innovation and reining back excesses that may put the business at risk. One way to do so is by providing more transparent insight into financial data. By making core metrics like revenue, margins, and operating costs visible to the broader business, finance can invite departments or teams to actively consider financial implications or constraints when pursuing innovation. In doing so, the CFO’s function begins to shift from gatekeeper to advisor – instructing other lines of business how best to interpret the data and apply it to their thinking.
With access to real-time data, CFOs and their teams can also steer conversations about innovation towards initiatives that are fiscally sound and compliant – helping the business focus on ‘realistic innovations’ that minimise the cost of failure. By involving finance at the very start of the innovation process, businesses can accelerate approvals and go-to-market with minimal delay, while eliminating avoidable project failures along the way.
A bigger role in the business
Even as they make data more accessible, CFOs should seek to partner with other business units on strategy and implementation. In doing so, they should position operational data as a guiding force for more efficient and effective innovation efforts, helping the business maintain its pace of growth even as it experiments with new ideas and ways of operating.
By applying the right analytics tools to their ERP data, for example, finance can identify spending trends or insights that allow them to highlight incidences of overlapping purchases or spot areas where the objectives of different departments intersect. That, in turn, reveals opportunities to pool resources or broker collaboration between business units. This enables finance to act as a bridge of sorts across the business, raising their strategic contribution in the eyes of others.
It helps reduce the risk of certain compliance breaches, while also freeing up budgets for more ground-breaking business ideas. For this to work, finance should consider using cloud-based ERP platforms that can offer a single view of operational data that is accessible by all divisions and its leaders.
Real-time access to financial data provides a useful metric for measuring the success of innovation initiatives– one which finance could share with others in the business. By doing so, CFOs will find it easier to also achieve their own goals of risk mitigation, compliance, and overall profitability, thanks to the heightened visibility and input they are to gain into innovation projects across the organisation.
While some CFOs may maintain the status quo, the role of the finance function has evolved. Leaders strive to embrace the opportunity to embed greater fiscal responsibility into innovation – without compromising their teams’ ability to test, learn, and improve at speed – from the very start.