Category: Corporate Performance Management

As with any area within a business organization, corporate performance management (CPM) has its own set of complexities and characteristics that must be taken into account not only when choosing CPM software, but also when choosing the consulting firm that will implement that precise software.

Let us see in this article the parameters that should always be evaluated before selecting the consulting firm that will best be able to guide and support you in the set-up phase and throughout the process of customizing and maintaining the corporate performance management software you have chosen.

CPM software: 3 questions to select the consulting firm that is right for you

1. Executor or Partner?

The first question to ask is about the approach. Is an application consulting firm that is used to working as an “executor” required or a consulting firm that can play the role of “partner” for the company? There are big differences between the two options.

Often, companies think they have hired a “partner” and instead find themselves working with an “executor.”

Working with an “executor” means not questioning what has been done so far, not confronting the experience of other projects or best practices in both process and solution implementation. It means overdoing it with customizations, often unnecessary, resulting in entrenchment in the organizational and process changes that the company will undergo in the future. How do you identify an “executor” or “partner” during a selection process for implementing your CPM software?

Someone who will propose a blank sheet of paper for you to fill in with your model will probably be an “executor”; someone who, by contrast, will bring to you the experience of one or more processes, best practices, and critical issues that others have had before you, even challenging your current model, will probably be a “partner.”

2. A technical or functional consultant?

Setting up a corporate performance management solution is nothing complicated. Transforming a functional design to a technical model that reflects the features of the CPM software solution is a bit more elaborate.

The real complexity, however, is guiding the customer in making a functional choice that not only meets the needs of the business but also succeeds in reducing the risks of excessive maintenance effort, performance problems, and inadequate user experience.

Having the skills to be able to do this requires a profile with a mixed growth path between technical and functional skills. Does the consulting firm you are choosing have resources with these characteristics, or does it have distinct profiles between technical consultants and functional consultants?

3. People first: pay attention to the turnover rate

Many consulting firms have very high turnover rates.

In corporate performance management projects, where the right mix of functional and technical skills is extremely important, it can be a major risk to the success of the project.

How much is the indirect cost and inefficiency of starting a project with a team that loses resources along the way that will need to be replaced? How do you quantify the company’s loss due to the relationship that was formed and that has to be rebuilt from scratch?

A consulting firm that is unable to retain its talent means that it does not invest sufficiently in the quality of its delivery. What is the turnover of the consulting firm you are about to hire?

In conclusion, the quality of the consulting service is of paramount importance to the success of a CPM software implementation project. Choosing a partner goes beyond technical expertise; it should also be based on their experience, which creates added value from the outset.

“Nothing is built on stone; everything is built on sand, but we must build as if the sand were stone.”
(Jorge Luis Borges)

The highly dynamic market environment and the rapid evolution of technology now have a constant impact on the transformation needs of business processes in companies.

Although this context is extremely variable and mobile as “sand,” the need to build a “solid” process such as Closing, nevertheless remains a business priority in order to chart a proper course for the future. It is now well known that the Closing/Fast closing process is only one of the pieces of a puzzle that is completed with the iterative processes of planning, but it however remains a fundamental element of it in order to be able to build and hypothesize a complete design.

As we had mentioned in a previous article “Fast Closing and ERP: is it time to rethink boundaries?“, it also becomes a fundamental element to establish the boundaries of the various applications within the Closing process. In this regard, what we would like to show you is a real case of a home appliance manufacturing company in which, using a well-established methodology, we set ourselves with the client two fundamental objectives: to rethink the closing process and to optimize all the activities related to it.

The project, which we will briefly describe to you in its macro-phases, leveraged four key areas:

• Processes: total and/or partial revisiting of the processes involved
• Organization: realignment of the responsibilities of the key figures involved in the Closing processes
• Technology: identifying the capabilities of existing or “new” applications for proper coverage of the Closing process steps
• People: identification of competence and/or role gaps of the people involved within the process and activation of an appropriate change management program

Fast Closing: identification of Key Principles

In this first quick assessment project phase, the client’s board supported by the AKC team identified change guidelines such as:

• The key business performance indicators and the supporting control model
• The main responsibilities within the organization in the Closing process with approach: central VS local
• The responsibilities/boundaries of the application perimeters involved

The unification of the models

In this second project phase, the goal achieved was the unification of the cascading control/dimensional models:  

• The business control model aimed at representing the performance indices identified in assessment
• The dimensional model of the transactional/management system (ERP) in which the core administrative/accounting processes are recorded
• The dimensional model of the corporate performance management (CPM) system aimed at the data closure and consolidation process

Maintaining consistency among the above three models ensures that there was a uniformity of language among top management, day by day activities carried out by operational staff, and controlling people dedicated to the data closure and consolidation process.

This uniformity of language implicitly allows processes throughout the chain to be carried out more effectively.

The realignment of the management system (ERP).

In this third project phase the ERP was realigned in order to properly “map” within its dimensional model the needs of the control model. The main elements analyzed and realigned to the model were:

• all control model objects: profit centers, cost centers, internal orders, job orders, statistical allocation and/or allocation drivers
• the product cost structure: cleansing and revisiting the cost elements according to a net allocation approach between fixed and variable costs.

The implementation of the CPM system

Since the company lacked a full-fledged CPM system, a specific tool was implemented in this fourth project phase in order to cover some important process steps so far not covered by structured applications (closing and consolidation activities until then had been carried out on office automation/excel tools).

The main pillars on which the implementation of the CPM tool was developed were:

• Definition and implementation of the CPM dimensional model.
• Definition and implementation of closing processes by individual Company with related operational tasks
• Definition and implementation of Group closure processes
• Definition of the reconciliation process at both the individual Company and Group level

Change management

In order to operationalize the change, with the changes made within the ERP system and the implementation of the process broken down in a structured way into steps/tasks supported by a workflow within the CPM tool, a specific staff onboarding plan was activated that was based on three areas of work:

• revisiting procedures with clear distinction of responsibilities with central VS local approach
• training plan to engage staff by leading them to have a complete understanding of the closing process
• operational training on applications to enable proper maintenance of the data over time and proper performance of operational activities.

Conclusions

The closing project, with even its acception/declination of Fast Closing, is by its nature a complex and articulated process. In order to enable companies to create value by making available the necessary information in a clear and comprehensive manner and simultaneously within the timeframe of a precise Corporate Closing timeline, it must be designed in a detailed and coherent manner.

No aspect of this must be overlooked: organizational model, technological landscape, processes and procedures, but above all, awareness of the context in which people perform this activity by providing them with all the skills they need.

In times of high volatility, such as those we are currently experiencing, companies face the need to quickly understand current phenomena and make timely and correct decisions.  The ability, therefore, to have reliable information in a tight timeframe becomes a crucial aspect of business life, and shortening the timeframe for reporting results (so-called fast closing) can be the answer to this need, provided that the reliability of the data on the basis of which to make relevant decisions is maintained.

However, no matter how fast the processes of consumptive accounting can run, there comes sooner or later a time when they appear incompressible, except by accepting an increasing approximation of information. Approximation that, beyond a certain limit is unacceptable when communicating information externally (so-called financial reporting to the market) or internally as part of the corporate incentive system (so-called MBO).

A blurred boundary: data reliability

The unreliability of data represents a boundary that should not be crossed, so it is necessary to understand where to set the bar. Once that boundary is drawn, one can reason about how to shorten the closing-the-book processes in order to have the information available as quickly as possible to be conveyed to the market or used internally. According to Art. 2 point 16 Directive 2013/34/EU, information is material when its omission or misstatement could reasonably influence decisions made by users of financial statement information, and according to Art. 2423 of the Civil Code, what influences the fairness and truthfulness of financial statement representation is material.

Therefore, in general, it is possible to say that information is material where in its absence, due to its absence or unreliability, it is not possible to effectively make decisions geared toward creating value and/or reducing risks. It therefore seems foolhardy to adopt an approach aimed at reducing the timeframe of the closing-the-book process within an ERP by moving part of the fast closing processes to personal computing media (i.e., Excel) and then simply decanting the results into the ERP, which then becomes a container of externally originated and therefore not reliably certified data.

On the other hand, an ERP guarantees data according to rigorous and certified logic unless it is increasingly fed with externally produced data (i.e., Excel files or other tools) that is not integrated with the ERP itself. Finally, consider also the aforementioned increasing volatility that requires greater flexibility in data processing and analysis. An ERP requires quite significant costs to be adapted to changing needs so data reprocessing ends up falling back on the aforementioned personal computing tools.

Rethinking the Fast Closing process in a CPM system

We can therefore try to rethink the closing-the-book process by starting with an analysis of the significance of individual data for internal and external reporting purposes and then consider a solution that sees this process move to Corporate Performance Management (CPM) systems. It is then necessary to identify the data with the highest significance and within that the data with the lowest data source traceability. The latter are those that create the greatest concern at fast closing and risk not being effectively manned with personal computing solutions.

In this critical area may fall processes whose impact on financial reporting can be significant e.g., management of leases under IFRS 16, of incentive & compensation systems, trade promotions, fleet management, rate adjustments based on actual volumes and costs, management of agency relationships, etc… vertical needs that an ERP can cover, but with high costs and generating increasing time incompressibility, while with departmental solutions costs and time are definitely more affordable.

The belief that ERP must necessarily cover the entire closing process in an integrated way is thus called into question, a false myth if there is widespread use of personal computing solutions. It is therefore appropriate to begin to consider moving the closing process to a CPM system, interfaced not only with the various departments but insistent on the ERP itself.

ERP, CPM system, or both?

The CPM system would then be deputized to go the so-called last mile, drawing from ERP at a certain date prior to closing and from departmental systems. Closing and settlement entries would therefore take place within the CPM system, which could easily handle the process of preparing consolidated financial statements.

Immediately prior to closing, reperforming activities could be thought of in relation to relevant processes based on deviations of ERP data from those obtained from the initial extraction and in relation to the relevance of the closing period (i.e., semi-annual and annual reporting). Finally, variance analysis would take place directly in the CPM system, the location where forecast data are processed.

In conclusion, the reduction in closing time, while maintaining the high reliability of the data obtained, seems not able to be effectively verified by moving certain processes to personal computing solutions that then pour into the ERP. The ERP is the indispensable seat of transactional processes, but the closing-the-book process can be effectively rethought, in relation to the so-called “last mile,” by making use of CPM systems, also supported by specific departmental solutions, which ensure high traceability of data formation processes and the ability to process them flexibly and accurately.

Today the Office of Finance is facing new challenges; requests to CFOs are increasing every day, together with the request of decision-making capability and visibility on operational processes.

In this phase, the selection of the right software, along with a design phase aimed at optimizing processes, can maximize the results in the CPM (Corporate Performance Management) area. One of the best software vendors on the market is undoubtedly CCH^® Tagetik Expert Solution from Wolters Kluwer, which has continually improved its position over the past few years. Let’s look at its strengths for the Office of Finance.

CCH^® Tagetik: what it does and why it’s important to have CPM Software

The choice of CPM software represents an important step for a company because an inappropriate evaluation can cause serious consequences and repercussions both internally, i.e. on people and therefore on company performance, and externally, i.e., on business performance.

In a CPM software, the following activities can be carried out:

• budgeting;
• planning and forecasting;
• consolidation;
• closing;
• reporting & analytics.

We should remember that the above actions have an impact on medium-long-term strategic plans and visions. Especially in the last period, also due to the Covid-19 pandemic, the ability to remain competitive at the market level, gaining shares, is also due to the company’s ability to meet business needs with applicative responses.

In an increasingly challenging environment, at least at an economic level, these applications have become more important, allowing the streamlining of many processes in the Finance Area making companies more “agile”, which means more able to respond properly to the changing markets.

In this context, CPM software, if well implemented, can really give a boost to the performance of a company, and make a difference in many processes.

In our experience we have seen several Planning or Consolidation projects taking increasing time (and costs!) of implementation, without even going live or going live but with a low level of satisfaction for the users. To avoid this kind of outcome as much as possible, here are several factors that can contribute to the successful implementation of CPM processes.

Implementation of CPM processes: success factors

It is practically impossible to analyze in detail every single factor that can determine the success or failure of a process in the field of Corporate Performance Management since it is composed of a large number of elements. However, we can summarize the most important ones in our opinion:

Choosing the right consulting firm

Engaging a consulting firm means being supported by Industry Experts and therefore getting a critical analysis of current business processes, understanding how to transform and evolve them according to the market, and implementing best practices. be careful to choose a partner and not a simple executor.

Not software features, but process requirements

The selection of software should always be driven by the process you want to manage in your organization. However, the attitude is often to adapt the process to the software chosen for the implementation with negative impacts on both day-to-day operations and maintenance costs.

Given the facts, the software solution that is more suitable to obtain a given result given in each business context is clearly CCH® Tagetik CPM software.

CCH® Tagetik expert solution: top 7 capabilities to strengthen the Office of Finance

CCH® Tagetik solution adapts to business processes while minimizing the TCO (Total Cost of Ownership) and meets the needs of finance users. Here are the 7 strengths of CCH® Tagetik for the Office of Finance:

1. CCH® Tagetik, as confirmed by leading analysts, is one of the few market leaders in both Planning and Financial Close that allows you to manage both Actual and Forecasting processes within the same tool, which by their nature has many points of contact and intersection. The possibility of having a single software to manage these two types of processes allows easy comparison of results, ensuring a common data model and therefore a meaningful comparison.
2. From a technical point of view the solution is deployable both On-Premise and on Cloud and it is the only software certified to run also on the SAP Hana database, leveraging all the benefits also in terms of performance. For companies that already have, or are about to pass, to the new SAP S4 this feature can be a definite advantage in terms of integration with the ERP.
3. The ability to use an open and unencrypted database allows CCH® Tagetik to easily interact with all Business Intelligence systems on the market (MS Power BI, SAC, Qlik, and others) which, as confirmed by our experience in the field, are very often already present and used in of many companies, and therefore safeguarding the investment made in this area.
4. Product Capabilities: both in the Financial Close and Planning fields, the CCH® Tagetik suite is outstanding for its many built-in features (i.e. allocation, spreading, double-entry bookkeeping, etc.) that allow you to model complex processes. The use of native functions eliminates the need to develop ad-hoc code (customization vs. programming) and makes the solution maintainable directly by the business, reducing maintenance costs.
5. Analytic Information Hub: the addition of an analytical layer allows the flexible management of operational processes where an unlimited number of dimensions and a high granularity of data are used. The native integration with the financial layer allows an automatic reconciliation between operational and financial data.
6. Predictive Intelligence: the new engine with Artificial Intelligence integrated into the Analytic Information Hub offers the possibility to automatically interconnect historical series, capture trends, and business drivers, and give the best solution for the future.
7. Customer Experience: last, but not least, is the point referring to Customer Experience and Satisfaction. The suite, according to all the major analysts, is positioned in the top position of this ranking.

In conclusion, the CCH® Tagetik Expert Solution from Wolters Kluwer stands out for its ease of use and implementation – a feature that should not be underestimated, especially when it comes to restructuring the Finance department’s processes. However, to achieve the company’s goals, a design phase is also needed to optimize the underlying processes and make them more efficient.

Industrial accounting plays a vital role in business management since it enables the determination of production costs, a key factor in guiding strategic business decisions. Given the importance that this analysis has within business margins, it is necessary to make use of processes and tools capable of providing reliable data and reports that can guide management decisions. 

There are several software programs on the market that allow for optimal management of industrial accounting, however, choosing the best solution may not be as easy as one might think. So let’s take a look at what industrial accounting is used for and what are the benefits of its optimal management. 

What is industrial accounting

Before delving into an analysis of the advantages of proper management of industrial accounting, it is necessary to dwell on the elements to be taken into consideration. As is now well known, industrial accounting has the task of evaluating what are the costs of production of a given good or work order through data on the activities carried out in individual departments and the corresponding material consumption. 

Thanks to industrial accounting, side by side with analytical accounting, it will be possible to get a complete picture of the company’s status and it will also be possible to examine and reshape future business development actions with the intention of achieving the set goals and maximizing results.

Cost accounting and industrial accounting: the differences

Very often the terms “industrial accounting” and “cost accounting” are used synonymously, however, this is incorrect, since they are two processes that partly overlap but do not completely coincide. In fact, industrial accounting, as anticipated earlier, takes into account data related to production processes. Then, by integrating balance sheet data with production data, production costs can be determined.

Analytical accounting, on the other hand, focuses on indirect costs which do not relate to a specific product or service finding a way to identify and allocate them in the most correct way, very often making use of aggregation by cost centers, one of the most widely used methodologies in this type of accounting. Although these two processes refer to different concepts, frequently in the business environment these two terms are mistakenly used as synonyms because they are two closely related aspects. In fact:  

• the calculation of production costs can only be done using data from cost accounting;
• in order to estimate margins on sales, it is necessary to have production costs.

What is the purpose of industrial accounting?

Within different companies, industrial accounting takes on different characteristics that are adapted to the needs of different businesses. In fact, in this area of responsibility of the Finance department, it is not necessary to submit to the requirements imposed by standards, and therefore the choices on the system to be adopted are dictated by other factors, including the sector in which the company operates and the size. 

In any case, regardless of the sector in which it is applied, industrial accounting has a very specific purpose: to produce timely data and reports to guide the company’s strategic decisions in the medium and long term. Going into detail, through industrial accounting it will be possible to have greater control:

• Of production costs and sales margins;
• Of inventory values.

Calculation of production costs and sales margins

The main task of industrial accounting is to define what the production costs of various goods or work orders are by means of information on the individual activities carried out in the different departments and their material consumption. This process makes it possible to implement a control mechanism on the various margins, which increases its validity proportionally according to the number of businesses owned by the company.

Thanks to industrial accounting, in fact, it is possible to have an accurate estimate of what are the production costs and the related sales margins based on the price of the finished product, which, however, know that they do not depend solely on production costs, but also on the market.

Going into specifics, we speak of industrial margin, meaning the difference between selling price and the related production costs. For the company to generate earnings, the industrial margin must also be able to cover the business costs that will arise as a result of the production phase; should this not occur, the company would have an unsustainable business. The only way to avert this situation is through the proper calculation of production costs and the subsequent development of an efficient industrial accounting system.

By combining economic accounting data with data derived from industrial accounting, it is possible to have information not otherwise obtainable through general accounting alone. These data and reports can then allow an assessment of the efficiency of each production line in the company and its profit capacity. Once the costs of the various product lines have been delineated, greater control can be gained through: 

• the calculation of the margins of each product: this will allow one to push harder on the most profitable ones;
• the evaluation of different pricing strategies;
• the evaluation of the cost-effectiveness of in-house production against contract work.

Having reliable final information, it will then be possible to make reliable statistical analyses and forecasts, which will also allow anticipating events with the construction of economic, capital and financial budgets. Of course, the program drawn up at the beginning of the year, during the budgeting phase, will then have to be constantly monitored, correcting, if necessary, the shot with budget review or forecasting operations. 

Stock assessment and control

Finally, industrial accounting also makes it possible to evaluate and control inventory, an area that produces a few effects not only on the operational side, but also on the economic and equity side. Although it is easy to imagine that an overstock ensures a better supply to the various departments or to the sales, an overstock can produce several critical issues first of all an excessive use of financial resources and the economic risk of depreciation due to various factors, such as the perishability of products. Hence the need for an industrial accounting system capable of producing precise and accurate information to optimize the risk of stock holding.

Finally, industrial accounting also allows for the valuation of inventories, a practice that every company must perform at least once a year at the stage of annual financial statements. The valuation of inventories in the absence of an efficient and optimized industrial accounting system turns out to be very complicated, but above all, it risks providing approximate data that do not allow to know accurately the real value of inventories and therefore also the related risk component. 

The types of industrial accounting

Depending on the industry and the needs of various companies, it is possible to opt for different types of industrial accounting. These include:

• standard cost industrial accounting;
• actual cost industrial accounting. 

Let’s see what they are in detail and when it is preferable to choose one or the other.

Standard Costing

Standard cost industrial accounting is the optimal solution for businesses in which the cost of production remains constant over time, or at least undergoes minimal variations. Within this context, in fact, it will be necessary to calculate the cost of production only once, in the budget period, based exclusively on data that do not change over time, and revise it only the following year by updating the values if there are any changes. This solution, however, cannot be chosen by companies that have a production cost that varies significantly throughout the year.

Actual costing

Actual cost industrial accounting, on the other hand, is the best solution for companies that have to undergo market fluctuations and therefore need to review the cost of production on a constant, even weekly basis. This is the case, for example, for all those companies that process products in which the raw material fluctuates greatly throughout the year. In the case where this calculation is not done in a constant and periodic way, one could have untrue margin values, which could lead the company to make unprofitable, if not even counterproductive, choices. In any case, in general, almost all companies, in order to have more accurate and detailed information, opt for both solutions, making a standard cost calculation at least once a year and a final cost calculation monthly. 

What are the advantages?

Having an efficient industrial accounting system, flanked by a strong cost accounting system, is the only way for a company to govern market fluctuations by ensuring a product and service proposal in line with the company’s cost and margin requirements. In fact, by periodically keeping track of the price trends of the materials used in production, it is possible to have an accurate and timely estimate of production costs as well, consequently, one can adjust one’s pitch should one be faced with market fluctuations.

In conclusion, companies without an efficient industrial accounting system are more susceptible to market volatility and should changes occur in the price of materials used they may not be able to implement choices aimed at limiting the negative effects of this situation. On the contrary, companies with a timely accounting system have the ability to adjust their focus because of the more accurate margin indications that will be able to guide business decisions in the immediate future.

The increasing market volatility and the resulting difficulty in planning, along with the ever-pressing need for updated and reliable information in a short time frame, the proliferation of risk factors to monitor and manage, and the necessary oversight and development of sustainability issues, have over time increased the centrality and complexity of the CFO (Chief Financial Officer) role within a company.

Moreover, the pandemic crisis has been a further, terrifying accelerator of this process already underway, so much so that, having overcome the most acute phase of resilience to the crisis, it is now necessary to consider how the role of the CFO should be played in the hoped-for restart.

In doing so, it is important to keep in mind that, if the pandemic leaves behind a world characterized by greater unpredictability, risk, and social distancing, changing the way companies operate, the ultimate goal of any company remains unchanged, which is to create sustainable value over time in light of the risks assumed.

In essence, the keywords remain value, risk, and sustainability, and it is appropriate to reflect on whether the role of the CFO has changed as a result of the pandemic crisis and what possible consequences can be imagined.

CFO: key-role in decision-making

Value means cultivating profitable businesses and generating cash flow through them. To this end, the CFO continues to play a key role, providing reliable information through budgeting and reporting processes for making operational and/or strategic decisions. What changes is the speed at which all of this happens; information is required in increasingly short timeframes and, given the greater uncertainty that characterizes the contexts in which companies operate, it becomes more complex to provide useful estimates and projections for making these decisions.

Beyond the internal implications, it should also be remembered that poor reliability of financial information provided to external parties places significant responsibilities on the CFO. Therefore, the analytical and traceability of data within the information systems supporting the CFO appears decisive.

Nor can it be thought that identifying a few measures and focusing on those in planning and control is enough. Certainly, there are summary measures (such as free cash flow, but also measures of profitability) on which objectives are normally assigned to management, but then it is necessary to go deeper to analyze more complex phenomena.

Furthermore, in the context of a post-pandemic recovery, the CFO’s contribution should not be limited to providing information for someone else to decide, as they could play a valuable proactive, if not propulsive, role in rethinking strategic choices, production processes, work organization, cost allocation in a “zero-based” logic, and all of this thanks to the information that the CFO can draw on firsthand and the overall view of the company processes that they are called to have.

The CFO as an ally of digital transformation

In light of what has been described, there is a need for greater reliance on solid planning and control systems in analytical construction and data traceability, while at the same time being quickly adaptable to changing contexts. Similarly, it becomes important to be able to develop business performance management systems useful for defining paths and objectives and measuring their achievement, adapting them over time in line with changing dynamics. In general, the increasing digitization of processes can be a valuable ally for the CFO in a context of often reduced and often distant resources.

And an ally of Enterprise Risk Management

But the greatest factor of change is undoubtedly the greater emphasis on risk management due to the increasing volatility and unpredictability of the contexts in which companies operate. In this area too, the CFO – in addition to being the risk owner of some risks, including those related to financial information – also ensures the planning and control of OPEX and CAPEX aimed at mitigating risk consistently with the company’s risk appetite, taking care to avoid periodic phases of cost rationalization, especially if developed with unfortunate linear cuts.

The CFO becomes a valuable ally – if not directly responsible for this role – of ERM (Enterprise Risk Management) for the purpose of an adequate mapping of risks within company processes and their consequent mitigation through actions taken by risk owners, often responsible for both profit and cost centers.

In search of sustainable growth

Lastly, sustainability. Assuming that the “G” point of sustainability is Governance, which is also expressed through budgeting and reporting processes as well as risk management, it should be emphasized that non-financial reporting continues to play a crucial role in achieving sustainable growth in the medium to long term. Certainly, during the worst period of the pandemic, in the phase of pure resilience for companies, the focus on various sustainability issues may have diminished. However, during the recovery phase, these issues become central again, and their management by the CFO remains crucial.

Risk management, profitability planning and control, especially cash generation (and therefore value), and non-financial reporting are all issues that the CFO must govern jointly and in-depth, quickly and effectively during the recovery phase. To this end, the digitization of administration, finance, and control processes becomes an essential lever to ensure the management of the three corporate pillars (value, risk, and sustainability), especially in a phase of hoped-for recovery.

Collaboration between CIO and CFO has become an indispensable factor in achieving business goals. In recent years, due in part to the Covid-19 pandemic, business processes, especially in the Finance department, have been accelerating technologically at a much faster pace than in the past, and this has inevitably forced a revisiting of them. 

In this context, the ability to maintain and gain market share is a reflection of the company’s ability to combine business needs with application responses. This can only be achieved if there is a close collaboration between the CIO and CFO capable of adding value to the business.

The importance of collaboration between CIO and CFO

As Sheri Rhodes, Chief Information Officer at Workday, also recently said, “Modernizing and automating financial operations is now one of the priority digital activities of today’s companies, in fact I would say it is the top priority. Collaboration between the CIO and CFO has become imperative to achieve business objectives.“

Of course, it is important to point out that not all companies operate in the same way, and in fact it is not uncommon to find situations where communication between the CIO and CFO is not perfectly transparent and where the communication model is unidirectional, one way or the other. In fact, a vertical division of departments, i.e., silos that do not communicate with each other adequately, continues to persist in many activities. In our experience in the field over the years, we have found communication difficulties in both SMEs and listed companies. Although this model allows the company to move forward, revisiting it with a view to greater synergy could allow for more beneficial and more successful results.

The risks of an absence of synergy

By now it seems clear that the absence of synergy between the CIO and CFO can undermine results and the achievement of business objectives. Although in some cases the CIO and CFO manage to arrive at a compromise that can satisfy both, in most cases what results is a clash between the two figures capable of wrecking the spirit of collaboration that is being sought. 

In essence, analyzing the issue on a purely operational level, should the CIO and CFO fail to arrive at a close collaboration two possible scenarios will play out. The first sees a prevailing of the position advocated by the CIO, who will most likely go for one of the best technological solutions on the market. These solutions, although perfect for the technology project of the CIO and the consulting firms that support him in his activity, may not be able to adequately support the activity of Finance users, not meeting their needs. In fact, CIOs often tend to adopt solutions at the ERP and CPM level that favor the choice of the same vendor in an effort to seek integration that, if it is possible at the horizontal level, is not possible at the vertical level.

In the event that the CFO’s position prevails, it is easy to assume that the company adopts a solution that meets the needs of Finance users but lacks adequate integrations between the ERP and CPM levels with non-negligible effects at the TCO level of the solution. The collaborative process between the CIO and CFO must have a single goal: to choose a software capable of adapting to the business processes (perhaps revisited as a result of a BPR operation) while minimizing the TCO of the entire project. Faced with the complexity of this choice, it is necessary for the Chief Information Officer and the Chief Financial Officer to work synergistically in the interest of the company, free from possible constraints imposed from within or from outside companies.

The benefits of a collaboration between CIO and CFO

Very often when a company is faced with the choice of new software, it tries to prefer solutions that can guarantee high levels of integration so as to significantly reduce maintenance and interfacing costs. However, to date, as we explained earlier, there are no vendors offering truly integrated solutions between the CPM and ERP layers (vertical integration).  

The issue changes if we analyze the situation from a “horizontal” perspective. In this sense, in fact, it is possible to find software that can adapt to process needs and at the same time manage to integrate optimally with each other. Integration, therefore, should not be sought on the vertical axis, but on the horizontal axis, and the real breakthrough in achieving business objectives lies in the collaboration between two key figures namely the CIO and the CFO.

The necessary requirements for successful collaboration

In the quest for synergy between the CIO and the CFO, for successful collaboration to be achieved, it is necessary for the relationship between the two figures to be based on certain prerequisites. Going into specifics, it is necessary for the CIO to be able to evaluate the best application solution, without making philosophical choices that often do not minimize project TCO or even meet business needs. On the other hand, the CFO must disengage from what is a user issue and move to a process issue.

In fact, very often it happens that users who have always worked with the same program become reluctant when considering an alternative solution. In fact, updating a software inevitably also implies a change in the way of working. Although new things can invariably generate fear and uncertainty, it is nevertheless of paramount importance to keep in mind that business processes over the years may have changed from what was analyzed in previous implementations. For this very reason, it is necessary to reevaluate the process and evaluate the software that best fits the new business needs. Within this framework at first process analysis and then comparison activity with the software turns out to be crucial. Remaining anchored to the patterns of the past in fact runs the risk of making choices that are not win-win for the company and of not seizing the opportunities that projects of this type are able to offer, thus missing an opportunity for growth and development.In essence, for a successful collaboration to take place between the CIO and the CFO, it is necessary for both to abandon the beliefs of what could be the advantages of their own office with the intention of adding value to the company. Through the right collaboration, the CFO and CIO will enable the company to continue to thrive in a rapidly changing marketplace that along with the associated risks, however, also offers great opportunities.