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Finance`s Role in Driving Profitability

In 2015, Tagetik had its 14th consecutive year of profitability. Naturally, we’re very proud of this record, especially considering the economic crises the world has weathered over the last years.

Our profitability track record is an accomplishment shared by all Tagetik employees. And, I give great credit to our CFO, and the Tagetik finance team. They have helped us maintain our profitability, even as we transitioned into cloud technology and services, broadened our global footprint, and encountered increased competition.

In my view, the Tagetik finance team exemplifies the role of modern finance: To be the champion of corporate profitability. This new role requires finance to be more forward-looking, much more collaborative with functional and business unit leaders, and more strategic in terms of time and activities.

 

Tagetik for corporate profitability

 

Following are several areas I see as critically important to becoming a profitability champion.


Providing Education and Insights into Profitability

Most employees have a good grasp of the revenue and expense equation. But typically few have a true understanding of their company’s profitability drivers. So, for instance, sales managers may structure incentives that compensate sales reps for all sales equally, even though some customers may actually cost the company money to serve.

As a champion of profitability, finance has to be proactive in educating leaders at all levels of the organization – not just those in the C-suite – about the true profitability drivers. Business leaders also need to understand how these drivers factor into their functions and business units and get ongoing, easy-to-decipher updates on how they are performing against these drivers.

Therefore, finance’s relationship with business leaders across the enterprise must be highly collaborative. The traditional top-down, one-way street of communication has to go. In its place, finance needs to build two-way, open channels of communication with real opportunities for input, questions, and explanations from business leaders at all levels. Modern profitability champions don’t stop at showing business leaders where they’re coming up short; they work directly with them to achieve results that positively impact overall profitability.

 

Bringing Visibility into Cost and Performance Data

These days, most companies are swimming in data. Frequently, CFOs and their teams are being charged with making sense of it all. I, personally, rely on our finance team to sift through data from all of our business units, identify the most important positive and negative changes, and recommend the most appropriate responses.

We work together to identify the KPIs that need to be continually monitored to ensure we’re moving toward our strategic objectives. I then rely on finance to ensure business leaders understand these metrics and get the data they need to keep them posted of progress.

Our finance team also helps develop the dashboards, reports, and presentations that keep our senior team and board informed. Just as important as the numbers in these documents is the story behind them. I look for explanations that tell me why a number is down or a chart that shows me a trend.

To meet these expectations, finance professionals must become skilled in information management and data analysis. They must make time for scenario planning and risk assessment. And they also must deliver consistent and accurate data in order to earn the trust of business and senior leaders, as well as to meet compliance requirements.

 

Using Technology to Greatest Advantage

As one who has been in the technology business for many years, I admit I am probably more open to the advantages of technology than some CEOs. But practically, no senior executive can expect finance to absorb and perform the tasks needed to keep a business on a profitable course without technology. Systems and Excel-based processes designed to support the finance function of 10 or 15 years ago simply can’t meet the needs and expectations of modern finance.

So, yet another job of today’s finance leaders is to stay abreast of the technology and tools that can help them perform their responsibilities efficiently and effectively, and, when needed, to make the business case for applicable investments.

Cloud services, analysis tools, data integration – these are just a few of the areas in which finance now must become conversant in order to understand the options now available on the market. When making a technology selection, finance professionals also should have the ability to objectively prioritize needs, evaluate usability, and assess ecosystem fit in order to make the right decisions for their companies.

And when a new technology is introduced, finance must also work with others in the enterprise to adopt the new system or tool. This includes ensuring that users learn how to use the new technology to its fullest potential, as well as have an understanding of the benefits behind the change. Given that self-service and user input and collaboration are hallmarks of most modern technology options, this work is absolutely essential to finance's success.

 

Conclusion

Achieving profitability is hugely challenging in today's complex, highly volatile, and global business environment. But with sustained profitability comes the financial freedom to invest in research and development, new products and markets, and customer satisfaction and retention. By becoming profitability champions, CFOs have a significant hand in leading their companies into the future.

 

Tagetik corporate performance management software

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