Great CFO's shouldn’t pay for commodities
Posted by Sjoerd-Jaap Westra
CFO's - elite performers of the future Great CFO's and controllers are the ultimate business partners. They provide business managers with valuable and actionable business information and optimize the quality and efficiency of their financial and reporting processes. Both in-house processes and processes that have been outsourced to financial specialists and accountants, for example the annual report. The annual report - mandatory for controllers, commodity for accountants Recently I wrote a blog for accountants about the risk of commodity services in a highly digitized and standardized reporting world: Give your clients a fishing rod and teach them how to fish. My main recommendation was based on a fishing metaphor: "If you need to sell fish below your cost price, why don't you advise your customers to buy a fishing rod and start teaching them to catch fish?". Charge them for the lessons. But accountants are not fishermen, rather financial professionals transforming financial data into financial reports. And these reports are evolving toward standardized commodities. So my recommendation towards them was: "If the annual report is becoming a commodity, why don't you recommend that your clients buy a best-in-class reporting tool and advise them how to generate the annual report themselves?" I received two different reactions to my post. Some accountants said: "Annual reporting is and will be our job." Other accountants said: "When the annual report becomes a highly standardized document, our annual reporting service will indeed become a commodity. And our clients do not want to pay a lot for a commodity. Furthermore, a lot of our clients already have finance & control departments generating management reports. Why shouldn't we advise them to generate the annual report with the same dataset...in the end it may be better for them and for us." Accountants - from number crunching to process advisory This second group started to visit those clients - that already generated the annual report in spreadsheets themselves but without specific tools - and recommended they use the tool they use. This makes sense because the tools that accountants use themselves are built for compliance, quality and efficiency. One year later, many of these clients were generating their annual reports with higher quality and lower costs, while the accountant still earned revenue by providing advisory services. Some of them are even considering recommending this approach to the clients they are still generating annual report on behalf of. They recognise that process advisory is a higher value service for their client - and for themselves - than generating a report that is becoming very standardized. In the end, this second group of accountants acknowledge that focusing on higher value services results in a major win-win in the end. I was thinking about this blog recently and what the recommendation would have been if I wrote the blog for controllers and CFO's instead of accountants. It occurred to me the recommendation would be exactly the same...in the end it’s a win-win for both parties! Controllers - do your own fishing So controllers and CFO's in the world, if your financial bookkeeping processes are running smoothly in a financial system and if you already generate management reports with the data in these systems, please consider talking to your accountant, auditor or reporting experts about generating the annual statutory report yourself. If you use reporting tools that contain compliant models it may increase the efficiency of your reporting process, lower the cost and increase the quality of your annual report! You may now think: "Is it really just a matter of running the right tool?"...The answer is no. Like catching fish there’s more to it than buying a fishing rod. Generating the annual report for 2015 is still more than just running a reporting tool (though this might change in the next few years). Your financial report should be an accurate representation of the things that happened in the real world...and garbage in is garbage out...in other words, in order to generate accurate financial reports, the financial data that you use from your financial systems should be accurate and complete. Accept fresh fish only! Therefore, when you implement a reporting tool for the annual report, you may want to discuss some topics with your accountant, auditor or reporting expert:
- How do I ensure the financial transactions in my systems are accurate and complete?
- How do I detect errors or possible fraud in my financial transactions?
- How do I roll up all my financial data to group level (if you have multiple entities)?
- How do I make sure all closing and reporting activities are done in the right sequence by the right people...before the deadlines!
In a next blog I will cover these topics in more detail. In the meantime, feel free to contact me if you want answers before then. And ask yourself: do I want to pay someone to fish in my pond, or can we hook them ourselves?