FP&A Innovation, Issue 6

Issue 6 | theinnovationenterprise.com

managing tsunamis of data in finance Big Data has reshaped almost every industry, we see how finance professionals can manage this influx effectively

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Smart CFOs not risking mother nature’s wrath We look at the impact sustainability is having on the CFO role

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Four free ways to improve your financial close The author discusses four ways accountants can make their end of year close smoother

letter from the editor

Welcome to the sixth edition of

process run that little bit

FP&A Innovation.

smoother.

The last edition of the magazine

As always, if you are interested in

was a great success, and we’re

contributing or have any feedback

really grateful for the feedback it

on the magazine, please contact

received across social media.

me at jovenden@theiegroup.com

Covering a wide array of different topics, including the impact of data science and the importance of sustainability, this month’s edition has a varied theme.

P.J Simmons looks at the importance of sustainability to the CFO’s role and how recent events, including the California water crisis, can have a substantial impact on the balance sheet.

In addition to this, I explore how finance departments can

James Ovenden Managing Editor Are you are looking to put your products in front of key decision makers?

For Advertising contact Emily at

Managing Editor James Ovenden

Assistant Editor Simon Barton

Art Director Chelsea Carpenter

ekutchinsky@theiegroup.com

Contributors P.J Simmons Aaron Fraser Emma Taylor

incorporate data science into their processes, and how CFOs can use data to improve their teams.

General Enquiries

The skills gap present in the

jovenden@theiegroup.com

finance industry is much discussed and in this month’s edition Aaron Fraser examines the role that organizations should take in order to bridge this gap.

The end of the financial year is the most stressful time for accountants and Emma Taylor looks at four ways finance departments can make the

2015

contents

9 MANAGING TSUNAMIS OF DATA IN FINANCE

Big Data has reshaped almost every Industry, we see how finance professionals can manage this change effectively

5

13

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SMART CFOS NOT RISKING MOTHER NATURE’S WRATH

INTEGRATING DATA SCIENCE INTO THE FINANCE FUNCTION

FOUR FREE WAYS TO IMPROVE YOUR FINANCIAL CLOSE

We take a look at the importance of finance professionals respecting mother nature

Managing data is one thing, but turning it into effective insight is an entirely different task. This article explores how companies can act on Big Data

This article discusses four ways accountants can make their end of year close smoother

20 THE FINANCE SKILLS GAP Finance has become one of the most I can go out and find complex organizational functions and a good accountant, but I’m not the looking for that. skills gap we evaluateI’mwhy current looking for someone going toiffill manager must be who’s bridged it’s alsoroles to be one in three to five years, somebody who thinks the of the most effective right way.

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smart cfos not risking mother nature’s wrath by pj simmons chairman corporate eco forum

What would your CFO do if

Or worse, what would you do if

Mother Nature showed up with

Mother Nature sent lawyers to

a bill for everything she does for

sue your business for the harm

your business?

it’s causing her?

What would happen to your

Sound academic?

bottom line if she called in

Think again.

sick or went on strike, as she appears to be doing in California with water?

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SMART CFOS NOT RISKING MOTHER NATURE’S WRATH

“embedding sustainability

thinking into the finance function is also helping Kuehn and his CFO peers at global companies like Unilever, Walt Disney, and Ecolab to deal with shortterm pressures to cut costs

”

More and more analysts, investors

economic decision makers

and activists are crunching

can understand.

numbers around these questions.

So too are some of the world’s biggest companies, including Dow Chemical and accounting firms like KPMG.

- water contamination, soil erosion, deforestation and overfishing - is already costing companies around $7 trillion every year, or about 10%

isn’t pretty.

of global gross domestic product

It turns out that Mother Nature’s natural systems produce about $33-$72 trillion worth of ‘free’ goods and services annually, which on to fuel the global economy.

This includes purified drinking

today. Under business as usual, this could balloon to $28 trillion by 2050. Those numbers don’t even include the impacts of adapting to disruptive weather events and rising sea levels due to climate change.

water, breathable air, supply

In 2012, KPMG and Trucost

chain commodities, fertile soil,

estimated that if companies had to

food stocks and protection from

pay their true environmental bills,

extreme weather.

they would lose 41 cents for every

Because markets generally don’t

$1 in earnings.

price these goods and services,

The challenges are only escalating.

most companies don’t account for

The World Economic Forum’s

them in financial forecasts,

2015 list of Top 10 Risks to the

risk assessments, or on

global economy, in terms of

balance sheets.

impact, included three related to

This is starting to change, as a rising number of troublesome events, like California’s water crisis, have spurred a global movement to assess the financial value of

environmental damage. These included, water crises, failure of climate change adaptation and biodiversity loss and ecosystem collapse.

healthy natural ecosystems to

What does all this mean for

businesses and also to monetize

businesses and CFOs?

the damage these companies cause to those systems.

In other words, translating the value of Mother Nature into a language that businesses and

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mismanagement of natural assets

The emerging financial picture

businesses and society depend

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The UN estimates that

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SMART CFOS NOT RISKING MOTHER NATURE’S WRATH

Quite simply, it means a rising tide

A new report from Corporate Eco-

Embedding sustainability thinking

of potential exposures threatening

Forum and World Environment

into the finance function is also

to increase on-balance sheet risks

Center, ‘Sustainability and the

helping Kuehn and his CFO peers

down the road, including;

CFO: Challenges, Opportunities

at global companies like Unilever,

and Next Practices’ highlights

Walt Disney, and Ecolab to deal

how several farsighted CFOs are

with short-term pressures to cut

Price volatility around energy

responding to these trends and

costs, unlock new opportunities

and commodity prices

changing the way they work as

for greater capital productivity,

a result.

and strengthen the foundations

Impact from more stringent

The report explores why and

regulations

how the CFO and other senior

for business innovation and growth.

corporate finance executives

Today’s farsighted CFOs see the

should care about ‘sustainability,’

potential for sustainability-related

a term with many definitions

challenges to fundamentally alter

but which is quite simply about

the economic, environmental and

Lack of access to key product

protecting and strengthening

social landscape within which

development inputs

foundations for long-term success.

business is being conducted. As

Supply chain disruptions

‘A sustainability lens presents a Damage to reputation,

new way of looking at forecasts

brand, stock value, or license

and risks’ says UPS CFO Kurt

to operate

Kuehn, who recently spoke on sustainability at CFO Rising East.

Unilever CEO Paul Polman recently put it, companies that can get out ahead of these trends will thrive, whereas those that don’t “will be dinosaurs — outdated, outmoded and out-of-business.”

Future exposures and losses related to stranded assets.

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managing tsunamis of data in finance by daniel miller

Big Data and analytics are now

head of finance channel

part of every finance function in the world, and in future they will have an impact on the implementation of every new system that is introduced.

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MANAGING TSUNAMIS OF DATA IN FINANCE

a system in “having place that allows

the department to make quick changes without affecting the stability and performance of the department is key.

�

This impact could be anything

allowing the finance department

from the thoroughness and

to be flexible.

speed with which audits can be undertaken, through to how investments and risk are assessed.

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allows the department to make quick changes without affecting

Over the coming years finance

the stability and performance of

departments are likely to become

itself is integral. This essentially

more directly involved with Big

changes the way the finance

Data as the merits of its use

division works, and acts as a

become more relevant to those

catalyst for the success of a data

working in the finance division.

programme.

So what do companies and finance

For this to work effectively there

divisions need to do in order

also needs to be an understanding

to prepare themselves for this

of data from those within the

transition?

department.

Firstly, and most importantly, it is

The finance team is generally

vital to remember that data itself

working in the area because

changes nothing. Data allows

they have an effective grasp on

people to see what has happened,

numbers, which many believe puts

what is happening, and what could

them in a strong position when

happen. The key to making sure

dealing with data.

that this has an impact is by

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Having a system in place that

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MANAGING TSUNAMIS OF DATA IN FINANCE

However, when dealing with

In order for the data to work

millions of data points and entries,

properly for you, in any discipline,

much of the analysis will be

the most important aspect is

through the use of visualizations,

asking it the right questions.

something that needs additional

To find out which questions

understanding and almost an

are the best is not a case of

entirely new mindset. This needs

knowing exactly what needs to

to be taught and understood by

be asked first time, but instead

each member of the finance team

to experiment until the correct

in order to make the most of the

question is being asked in the

data available.

correct way.

Finance tends to be a very

Ultimately, Big Data will herald

structured discipline. This is simply

a huge change in the way that

because the ultimate goal is

finance departments work and it

accuracy, meaning that processes

could become one of the most

and actions need to be established

important ways in which data is

and understood in order for them

used in the next few years. How

to work properly. Big Data requires

companies and divisions react to

the opposite, the idea of it being to

this is going to be vital to making

find out new processes and ideas.

sure that it is a success in the long run.

dealing “when with millions of

data points and entries, much of the analysis will be through the use of visualizations, something that needs additional understanding and almost an an entirely new mindset.

�

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integrating data science into the finance function by james ovenden managing editor

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INTEGRATING DATA SCIENCE INTO THE FINANCE FUNCTION

Big Data is now more than just hype. The companies who have fully implemented it and are making decisions based on their

Continuous Forecasting

data are now the ones making the biggest moves in the markets.

There are opportunities for the use of Big Data and Analytics across the entire enterprise, but none more so than in the finance function.

Rolling forecasts are not a new idea, they are something that most will have heard of and the majority of progressive companies have already implemented. This allows

Yet many companies have not fully

them to change their forecasts

implemented this, meaning that it

within certain timeframes.

is yet to reach its full potential in the division.

With the use of Big Data, it becomes possible to create

One of the main reasons that

continuous forecasting. This

finance would benefit so much

means that rather than adapting

from Big Data is that the finance

a forecast for the next 6 months

function works across the entirety

based on data from the last 3

of the organization, so the data

months, the forecasts can be

that can be pulled to assist with

made with data as it is coming in.

the finance team can come from multiple areas.

The power that many Big Data forecasting technologies have

The question is, what kind of

allows this real time analysis to

benefits can Big Data give

take place. Where rolling forecasts

to finance?

could take weeks to create, these can be done in seconds using effective algorithms and powerful systems.

The benefits of this are obvious.

Rather than being hit by a sudden warning of what could be coming, it allows companies to see in real time what is happening, then adjust accordingly to either avoid problems or maximize opportunities.

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INTEGRATING DATA SCIENCE INTO THE FINANCE FUNCTION

Better Investment Decisions

Well Rounded Skill Set

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In addition to creating opportunities for finance departments, it also means that those working within it are required to have a more rounded set of skills, rather than

Enriched Reports

the traditional finance centric requirements.

If we have learnt one thing from the financial crash over the last 8 years, it is that investments need to be made on solid grounding.

At the moment many financial reports work purely with numbers.

This could be ‘the sales team are selling well this quarter’ or ‘our outlay is similar to previous years‚‘ It does not take into account the ‘why’ behind these trends.

With the deeper insight that having terabytes of data brings, it is possible to not only see what is happening, but why.

They need to be looked at in detail to make sure they are what they seem. Companies like Enron and schemes like Bernie Madoff’s have shown that in depth data is key to being able to make correct decisions on investments.

Big Data has allowed companies to dig deeper and take a more holistic view of all aspects of an investment. From the way they are discussed on social media, to the

This means reports with far more

accuracy of their forecasts, it can

insight that give considerably

all be incorporated through the

more information to those who

use of data mining, allowing for

need it. It is far more useful for

better investments with less risk.

companies to see why something

Therefore, not only are they required to have the usual basic accountancy skills, but they also need to be able to analyze data and associate it with other areas of the company. This translates to knowing more about the company as a whole and having more flexible skills that can translate across various parts of the business.

It is this element that will cause the biggest changes within finance departments, as those working within them will need to adapt their skills accordingly, and when looking for new recruits it will be important to look for these kinds of skills as much as the traditional ones.

is performing the way it is, then

Overall, we are likely to see big

either change it to improve or

changes when the adoption of Big

adopt a similar approach across

Data within finance departments

other departments.

hits its peak. These will allow finance departments to have a considerably larger impact on the rest of the company, as well as being able to perform better internally.

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four free ways to improve your financial close by emma taylor director, finance events

The end of the month can be hellish for accountants, the end of the year even worse. The reason for this is simply that closing is often one of the most painful and frustrating processes of the year.

Roadmap One of the main facets that people

One of the key elements to closing

become frustrated by is the speed

that people find most frustrating is

of closing, with one element

that it is essentially one long chain

holding up the entire process,

that needs to be followed in order

slowing every other person in the

to get to the end point. Through

team down. It breeds frustration

setting out clearly what should be

and employee discontent.

done and by when, it becomes

There are other ways of making this process quicker than those outlined below, although these

clear where the process is being clogged and could do with an improvement.

are the ones that will ultimately

Equally, speeding up the process

improve your closing process

comes down to improving

without impacting your

existing systems, which are often

bottom line.

deeply ingrained. The roadmap

We’ve outlined four key ways below in which companies can improve their financial close, without excessive spending.

can be created as a baseline to performance that should be built on every month until the time frame is more manageable and less frustrating for all those involved. It will allow for a combined effort to improve and continue improving.

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FOUR FREE WAYS TO IMPROVE YOUR FINANCIAL CLOSE

Make Everything Electronic

Accountability

Establishment Of Key Areas

It is depressing that in 2015 there

Accountability in the process is

are still people who claim that they

a key component to its success.

cannot get a certain document in

Simply put, people will be more

“

electronic form. There are people

inclined to do a better job on their

who are willing to wait for days

part of the close process if they

to receive something through

have responsibility for it.

the post in order to complete an element of the close.

This seems obvious, but with many companies the delegation is often

If anybody says this, it is simply

different each month with different

not true, I can’t think of anything

people sent to do different things

that could realistically not be done

on an as-and-when basis. Having

in electronic form. Unless your

one person responsible for

company deals exclusively with

specific items within the process

the Amish there is no excuse for

will mean that they will both

this to be the case and it will only

become better at it quickly and will

slow down the process, wasting

also do it quicker.

time that you should be using elsewhere.

It also means that with each person knowing the other’s place and role, a dynamic is created

in any process there will be pinch points where it does not work quite as well as it should do. if these can be established within the closing process then it becomes possible to reduce the pressure on these areas and allow others to move quicker.

”

This comes from investigating the timings of what is taking a long time and then establishing how this can be fixed.

where the individual does not

It is not simply a one-time exercise

want to let down the team, further

either, it is something that

increasing the chances of a fast

needs to be undertaken on an

and successful close.

ongoing basis. Once the roadmap discussed earlier is established it becomes easier to identify problem areas and then fix them.

In time, this identification will shift from areas that were bad and now good, then to improving all other areas.

Through this kind of work it is possible to streamline the closing process and improve the performance of the wider finance team too, without needing to spend thousands on new technologies or systems.

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the finance skills gap

I can go out and find a good accountant, but I’m not looking for that.

I’m looking for someone who’s going to fill manager roles in three to five years, somebody who thinks the right way.

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THE FINANCE SKILLS GAP

by aaron fraser

director, finance events

In today’s finance function we

A recent survey from IMA

have some of the most complex

and APQC found the same

technology in the world. We

issues. Although candidates

have algorithms that can predict

who are hired are technically

our P&L 6 months in advance,

capable of the basics needed

identify anomalous transactions,

to be a top quality accountant,

and conduct full year analysis

many lack the leadership and

in seconds.

enterprise knowledge to become

There is little argument that

management.

this has helped the accounting

With the improvements in

profession and the capabilities

technical teaching and simpler

that we all have, but technology

interfaces across the board for

can only go so far in terms of

accounting software, the skills

running a department.

needed to stand out from the

According to multiple reports, we are seeing a considerable gap in the skills that are needed by entry level graduates and the skills present in many who are being hired. The Robert Half ‘2014 Financial Services Salary Guide’,

crowd are leadership and strategic thinking/execution. These are not aspects that are commonly taught in accountancy courses at university, so frequently they are not something that entry level candidates will be familiar with.

found that 99% of the firms they

According to Ben Mulling, the CFO

surveyed reported that hiring

of Tente Casters, ‘I can go out and

skilled financial professionals had

find a good accountant, but I’m

become more challenging.

not looking for that. I’m looking

So why is this?

for someone who’s going to fill manager roles in three to five years, somebody who thinks the

Sandra B. Richtermeyer, Chair of

right way. Nobody’s going to come

the Department of Accountancy in

in with all the skills you want, but

the Williams College of Business at

it can be difficult to find a person

Xavier University in Cincinnati, says,

who has the frame of mind to see

‘I get concerned that students do

things from a macro level and take

not receive as much preparation

charge’. These are the people that

for management accounting roles

are difficult to find in the current

inside organizations, where they

job market’.

will be working in functionally specific accounting and finance positions where they need an enterprise-wide lens’..

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THE FINANCE SKILLS GAP

the moment, a lack of information “at from companies is forcing educational

establishments to teach based on assumptions as to what companies want, rather than the realities of what companies actually need.

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There are numerous consequences of these recruitment challenges, from higher spending - on both the hiring process and in job training - to lower productivity and a drop in the quality of work produced.

The ramifications for the economy as a whole are also potentially severe, with the financial sector a major driving force behind many economies.

There are a number of changes required to rectify this situation, the first of which being that educational institutions must know what to teach their students so that they enter full employment with the adequate preparation. For this to happen, companies have to share the skills and knowledge they require.

At the moment, a lack of information from companies is forcing educational establishments to teach based on assumptions as to what companies want, rather than the realities of what companies actually need.

So the best best way to bridge this gap? Transparency and a willingness from educators to adopt new teaching areas.

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