Improve the timeliness, reliability and transparency of your cash-related KPIs
Key performance indicators (KPIs) provide CFOs with access to fast, accurate information about the financial health of their organization. They help CFOs see at a glance important details such as how much cash and credit is available, how long it takes to convert a sale into a payment, or how many customers are at risk of defaulting on payments.
In 2020, KPIs have become an even more important part of the CFO toolbox because of the sudden and wide-ranging impact of the corona virus crisis. The steep decline in sales and the supply chain disruptions that were caused by the global pandemic forced CFOs to focus on liquidity and financial solvency rather than EBIT. KPIs helped CFOs keep a close watch on these metrics and they had to adjust the frequency and focus of their reporting to support corporate decisions during this unusual year.
Is it Time to Rethink Your Financial Reporting Strategy?
Based on this experience, many organizations are starting to rethink their financial reporting strategy. They want to facilitate more flexible and agile decision making and they need solutions that will provide them with faster, more accurate information and greater transparency into cash flows.
For example, spreadsheet-based reports, which are still the backbone of every finance department, are difficult to update and maintain, especially when market conditions are changing rapidly. The process of manually collecting and updating data from various sources (i.e., banks, different business divisions) is not automated, and if teams are working remotely it can take longer to collect the necessary data. There is also a risk associated with using spreadsheets. Manually maintained spreadsheets are susceptible to data entry errors and only a few specialized individuals have the in-depth knowledge of the complex formulas contained within.
Customized reporting solutions can also prove to be troublesome. They are difficult to adjust without IT assistance, which makes them less useful during times of rapid market upheaval. In some cases, these reports are built on datasets that are either too small, incomplete, or outdated and do not accurately reflect the company’s actual financial situation. Therefore, whenever market conditions change, organizations should review their customized reports and metrics to determine whether they still provide the organization with the information it really needs to support the business. For example, do you have the latest the information you need to maintain liquidity and financial solvency? And with so many finance employees working from home, do your reports help the department focus on resolving its most critical cash and liquidity issues?
10 Tips to Improve Transparency for the CFO
If your organization has experienced similar reporting challenges and is looking to improve the timeliness, reliability and transparency of your financial KPIs, here are 10 tips you can use.
- Use best-practice metrics – Ensure your reporting solution supports the latest best-practice metrics for each area in finance : order to cash, procure to pay, treasury and cash visibility. Using a library of pre-built reports and KPIs from a knowledgeable provider will saves users a lot of time and effort and ensure your organization is aligned with the latest industry reporting standards.
- Automate data gathering and validation – Eliminate tedious and error-prone manual data gathering steps by integrating data directly from your ERP system, banks and market data providers. Use technology to validate data automatically.
- Establish a single source of truth for reporting – Reconcile your reporting needs and establish a single source of truth for financial KPIs. Ensure that data is timely and that all reports use the same underlying data set. For the most accurate reports, ensure the data is taken directly from your core financial systems as frequently as possible.
- Give users on-demand access to reports – Choose a solution that makes reports easy to share with stakeholders. Instead of emailing report updates to users, look for solutions that provide them with web and mobile access to reports and enable users to refresh data on demand.
- Empower users with flexible reporting options – Ensure reports provide ways for users to sort and filter data according to their needs. Reports with multiple dimensions and time periods will make it easier for users to uncover the information they require.
- Enhance understanding with data visualizations – Don’t bore your users with large, dense tables full of data. Instead, provide them with attractive visualizations that demonstrate the most important aspect of the data being analyzed.
- Detect patterns and trends with AI and ML – Accelerate decision making by using artificial intelligence and machine learning to help detect patterns and trends across large data sets and extended time periods. For example this technology can help predict whether a customer is likely to pay on time or not.
- Dive into detailed data – Explore the data behind the KPI by ensuring users can drill down into detailed transaction data. This data will enable users to analyze the KPI performance and identify potential underlying issues as early as possible.
- Incorporate simulations and modeling – Go beyond point-in-time financial reporting with solutions that incorporate simulations and modeling. Finance teams can stress test their plans and model different liquidity scenarios to optimize cash flows in any circumstance.
- Be prepared to scale – As more reporting demands are placed on finance teams, they should be prepared with solutions that can scale to meet those demands. Cloud solutions enable teams to process massive amounts of data quickly without the limitations of on-premise systems.
Choose the Right Solution to Accelerate Decision Making
To make fast, accurate decisions that will safeguard the liquidity of the organization and enable future growth, CFOs need to put a reporting solution in place that will be resilient enough to handle any crisis. Therefore, the goal should be to choose a solution that increases transparency and maximizes business value to the organization. CFOs should ensure that any solution they use can process large volumes of data across the entire finance value chain. It should be able to support a broad set of operational and strategic KPIs, intelligently automating tasks wherever possible and using the latest visualizations to facilitate discovery and accelerate decision making. By using standardized metrics and solutions, built specifically for finance organizations, companies can easily adapt to changing conditions and move their reporting strategy towards a more sustainable and responsive model in the future.
Build a Game Plan how to Gain Transparency on Cash-Related KPIs
Using KPIs and analytics to monitor the various demands on liquidity across your organization, in an automated and systemic way, can help CFOs make the right financial moves for the future. Serrala has developed a CFO Playbook to help you manage the complex decision required by CFOs. This set of interactive virtual events and vast library of assets will provide CFOs – and their finance organization – with the guidance they need to achieve best-in-class cash visibility and finance process efficiency. It includes expert advice and real-world customer scenarios so you can build a game plan to position your company to win in the current and to restart for the post crises economy. Discover our CFO Playbook and how to ensure liquidity for the organization today.
Learn more about Transparency on Cash-Related KPIs here.