Don’t dribble away the value of the figures in your financial reports

That’s pretty much what monthly financial reports look like in many companies. The finance department closes the books at the end of each month and sends a number of aggregated income statements to the rest of the organisation. The problem is that these do not contain any information about how things are going for “my” customers, products or services, in other words my team! It’s a summing-up of the month’s total transactions where the “objects” that generated these transactions are concealed. We simply import the account details into the financial statement, but that lacks crucial information. In fact, it prompts more questions than it delivers answers!

Why do we continue to handle the source information from our base systems in this way? Instead of focusing on creating reports with content that means something to the recipient, we believe they will be more satisfied if we can deliver the report within 5 days after closing the month’s accounts instead of on day 7. Nobody benefits from knowing that a total of 90 points were scored this month compared to 85 last month, just so they can get this minimal information 2 days earlier!

We should be able to deliver reports that show net profits per customer and product/service using the information in our systems. What the net profit is right now and over time, when the customer became a customer and when the product/service was launched, to what the situation looks like right now. Pretty much corresponding to a soccer league table or marathon table showing results over a period of time where it is easy and clear to see the placing of each team or runner. We need to chart net profits in product and customer life-cycles.

We should also supply the organisation with the right KPIs (Key Performance Indicators) that show current trends and what the likely future results may be if we do the right things. Compare once again with soccer. There we monitor the number of goals scored, conceded goals, goal differences, number of yellow/red cards, injuries/suspensions per player, and differences in points between home and away matches. Coaches and trainers have access to each individual’s minutes played, the overall distance run, number of passes and shots. They adapt each player’s training session to enhance his or her performance potential using the data they have available on each player. Everything from pulse, strength and speed to diet and other factors that impact performance. Based on this and on analysis of the competition, the game strategy and match plans are adjusted to suit. In the same way we can clarify which incomes and costs each customer or product/service generates and use this information to adapt our strategy, tactics and operations to reach our goals.

Many companies treat their own data as though they were participating in an enjoyable corporate sports event. It’s high time for the CFO Office to enter the match and deliver data-driven insights that actually mean something for the line organisation so they have the chance to trim the team and improve performance on the field/market. They need to know if it actually makes sound financial sense to sell a given product/service to a particular customer at a given price. Do we make a net profit on this deal after we have deducted all the costs of delivering on this particular agreement? What can we do to ensure that the deal is profitable on the bottom line? Begin by obtaining the right figures, because the information is available in your systems! By way of reference, football league results are updated in real time during each and every match and I can follow my team’s position over time any day of the month.

Actions to perform!

Step 1 (here and now): Ensure that your monthly financial report contains information about net profits for your customers and products/services. It’s not enough to report the half-time result (gross profit), because it’s the final match result that counts (the net profit)! However, we can in the meantime live with receiving it once a month.

Step 2 (in a somewhat longer perspective): Get used to the idea that in the future, information about your net profits must be available at a detailed level in real time and that we do not need to ”close the books” at the end of each month. What will this mean for the economy department, as regards demands on expertise, what will our operational methods and processes be, which system investments will be needed to get there?

Get in touch with us at Capgemini, Insights & Data to secure the services of an assistant trainer who will coach you to become the best team you can be!

About the Author

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Lars Rosengren

lars.rosengren@capgemini.com

Lars has worked with CFO Office change management for more than 25 years, in a variety of roles. For instance as Head of Advisory Services, Advisory Manager, Management Consultant, Sales Area Manager and Business Controller. Lars’s focus is always on implementing strategy in the best possible way for the operation to secure business benefit from the CFO Office perspective. He works to spotlight underlying factors that generate growth, profitability and capital efficiency so as to boost ownership value. The key to successful change projects is to dare think in new ways to identify better working methods that harness modern technology and knowhow. Lars gained his experience together with his customers’ project members and colleagues from more than 100 change projects, so he has considerable practical experience of what works well or less well.