CFO Secrets of Analysing under Pressure

The CFO and their Finance Department are under more pressure than ever before as a result of cost-cutting, staff cuts and an ever increasing demand for analysis to support business decisions like:

What are the cost synergies if we acquire X?
What if we cut projects A & B, but still keep C?
What if we change the business model like this or restructure it like that?
What are the implications of this pricing model vs that one for a new product/service?
How much cash is required if we pursue strategy A vs strategy B?

If it feels like you’re getting swamped with requests like these, you’re not alone!

Research and advisory firm, CEB, recently released some research that found a 10% increase in the volume of requests like these from 2014 to 2015. An increase that is likely to be equal to or greater in 2016.

This isn’t surprising given that the CFO and their Finance departments are playing an increasingly important business advisory role during these times of economic stress because the need for decisions based on quality analysis is also rising dramatically.

Whereas in the past, business decision-makers may have been able to hide poor decisions in naturally rising sales and profits, this is no longer the case.

Quality decisions backed up by solid analysis are more critical than ever.

“It’s your job to Control Costs”

A recent survey by Barcanet found that 80% of companies around the world have cost reduction as a major strategic priority this year.

Furthermore, the C-level executives in those companies believe the responsibility for a cost reduction of up to 10% lies with the CFO.

The pressure is really on to find savings and get them done both quickly and correctly!

The Forecasting Paradox

This highlights the forecasting paradox: when business conditions are stable, it’s relatively easy to produce accurate analyses … but no one really needs these much because the business is so stable.

Conversely, when business conditions are volatile or difficult, it’s much harder and more time-consuming to produce accurate analyses (plus they’ve probably cut your staff numbers) … but everyone in the business wants these (yesterday, if not sooner!).

So what is a CFO to do?

Less Staff + More Demands = Creative Solution

Aside from trying to make Finance staff work longer hours (which only works for relatively short periods of time) the only real way for a CFO to solve this problem is to either employ more staff (good luck getting approval!) or make more use of consultants and “rent” the expertise you need on an “as-required” basis.

Using external consultants provides the CFO with a number of benefits:

No increase in head-count: their cost also comes from a different budget line
Significantly easier & faster approval process compared to hiring new staff
Access broad experience: consulting staff have very useful experience across a wide range of clients that they bring to your projects
No long-term cost commitments: turn them on or off when required without the need for hiring & firing
Focussed: the consultants have a single purpose while they’re working for you
Reduced risk: the consulting firm provide ongoing support for the models they produce even if their staff leave