Business Performance Management - As a Tool to Become an Effective CFO

Seda Bayraktar
  • Seda Bayraktar, CPA
  • Partner
  • Accounting Compliance & Reporting
  • E-mail to Seda

If we regard the contemporary finance function as a consulting entity to the firm, CFOs should act like the CEO of this consulting entity. Thus, it involves not only performing the operations of the entity’s finance function but also managing sales, marketing, human resources and technology of these operations.

According to Sharman (Strategic Finance, April 2016), CFOs specifically need to:

  1. enhance organizational alignment by integrating planning and reporting to create “one version of the truth” that unifies all decision makers,
  2. facilitate informed decision making to increase organization value, and
  3. manage the impact of change and volatility to ensure stability and business growth.

Creating a robust business performance management (BPM) system is an essential part of performing all consulting activities of CFOs. It is used as a marketing platform to communicate the results of their work. BPM uses the historical data produced by finance operations; thus, it is a beneficial tool to present the knowledge of CFOs about the company and it helps improve her/his impression as an overviewing entity. The capacity and ability of finance function to analyse data is through technology and human capital, and CFOs are responsible to raise the need to supply these inputs into the operations in order to improve the quality of BPM.

Construction of an efficient BPM is the strongest opportunity for a CFO to be an influential leader in the organization, since she/he will be the one who presents what has happened, where the company stands relative to the plans, what will be the result under the current assumptions, what may happen with different set of assumptions etc… The answers to these questions help CFOs role enrich as an integral to the development, execution, and monitoring of the institution’s vision and strategy.

A well constructed BPM enables CFOs to increase and reflect their current abilities as leaders. It is crucial for companies to understand how each entity in the organization (i.e. products, customers, channels, employees) contribute to the net profit. The key performance indicators is an objective way to measure the effectiveness of this contribution. 

The determination of the indicator should be done under the natural leadership of CFOs since they have the superior knowledge of the determinants of net profit. A well-established BPM helps the ability of CFOs amplify as a leader.

For a timely reaction to anticipated and unanticipated changes, modern techniques like forecasting, what-if scenario analysis, machine-learning should be used, and these activities should be a part of a robust strategic planning and reporting process supported by high quality data and analytical tools which support leadership’s ability to make strategic decisions.

As the profile of CFOs changes, the dependency on technology and well-established BPM systems become inevitable. BPM should widely use technology and data, CFOs should be aware of those technologies and should verify the quality of data to be used in BPM systems. By doing so, they can have a powerful tool to show how they are the keys to the success of the overall company.