Addressing today's financial consolidation and forecasting challenges

The role of CFO has always been strategically vital, but in the past, your focus likely was on ensuring regulatory compliance and the financial stewardship of your company. Today, the scope of the CFO’s role has expanded significantly, becoming increasingly complex and demanding.

Our recent research shows that 98% of finance leaders have taken on extra responsibilities outside of their original remit*. For many, the scope of their role has expanded to include – among other things – supply chain and operations, company-wide innovation initiatives, and customer experience strategies.

But complexity in your role as finance leader is not only a result of an expanded remit and responsibilities. There are also significant technological, organizational, and cultural factors to content with alongside your core duties. It’s no surprise that many finance leaders are struggling to generate accurate, up-to-date financial forecasts in a timely manner to support strategic business decisions.

In this blog, we’ll explore the barriers to forecast accuracy and discuss how you can strategically tackle them at an organizational level.

Data visibility and accuracy are low

In an ideal scenario, finance leaders need a multi-dimensional view into historical performance to generate a “single version of the truth” for forecasting, modelling, and planning. But this single version of the truth isn’t a reality for many organizations — not yet anyway.

Often, crucial information is compartmentalized and inaccessible across businesses, putting the validity and accuracy of your forecasts at risk. According to our recent research, 79% of finance leaders are impacted by data silos when trying to generate organization-wide insights and 83% lack confidence in their forecasts, often due to issues with data accuracy, relevancy, and timeliness*.

Globalization has compounded the issue. In the last 30 years, mergers and acquisitions have grown by almost 400%. This has made it easier and more attractive for organizations to operate multi-nationally. In these circumstances, manual consolidation is time consuming, and every additional entity, geography, or currency presents fresh opportunities to make spreadsheet and reporting errors.

It's no surprise that improvement of the financial consolidation process ranks high on the agenda for finance leaders looking to get in front of their strategic mandate.

Speed of financial decision making is too slow

The acceptable timescale for closing the books has shortened dramatically. While organizations once aimed to close their books in 20 days, now anything more than six days can present a competitive disadvantage.

The goal for top performing businesses is to generate interactive, real-time data. This makes sense in a world in which consumer demand and market forces change by the hour and static month-old data is no longer enough to make accurate decisions.

The concept of “one version of the truth” is becoming increasingly elusive and a bone of contention for finance leaders, with 76% saying that without this single view across business units, their organization will struggle to meet objectives.

The stark reality for your peers is that only 7% can forecast in real time and 87% acknowledge that their forecasts might be out of date by the time they are presented to cross-functional stakeholders. These are not the strong foundations CFO’s require in order to make informed strategic decisions for the business.

Tightening regulations add to the complexity

As a finance leader, you must navigate many regulations that impose stringent deadlines and standards for financial reporting, which if not adhered to can have very serious consequences. Depending on where your company operates globally, these can include:

• U.S. Generally Accepted Accounting Principles (U.S. GAAP)
• International Financial Reporting Standards (IFRS)
• Securities and Exchange Commission (SEC)
• System for Electronic Document Analysis and Retrieval (SEDAR)

This pressure to comply doesn’t just have an impact on your organization – it can also have a personal consequence for you as an individual. Already under scrutiny to act as a strategic advisor to the CEO, all eyes are on you keep track of the shifts and to protect the business.

How do you respond?

The challenges in accessing and verifying accurate financial data can be broadly categorized into three groups: Trust, lack of alignment on goals, and data security. Addressing these challenges requires strategic initiatives to steer organizational culture and behavior.

• Trust: 41% of the finance leaders we surveyed cite a lack of trust across the organization as a concern when accessing data for forecasting*. Building a culture of trust requires consistent communication, transparency into financial processes, and the establishment of robust internal controls to ensure data accuracy.
• Internal alignment: 41% of research respondents call out poor interoperability of tooling across departments as a barrier to reliable forecasting*. Achieving cross-departmental alignment requires close collaboration and the integration of financial and operational systems to ensure accuracy in financial reporting.
• Data security: 45% of finance leaders we surveyed acknowledge that improper access and data security hinder data consolation for accurate forecasting*. Ensuring data security involves implementing strong access controls, regular audits, and the use of encryption and other security measures to protect sensitive information.

Take the first step

Modern CFO’s must adopt a new approach to succeed both professionally and personally. Doing things “the old way” is no longer an option.

Siloed, manual, spreadsheet-based processes won’t generate the quality of insights needed for strategic decision-making and value-creation Instead, they negatively impact your organization’s performance and bottom line, leading to stale data and employee retention issues.

While the business case for finance modernization and real-time forecasting is compelling, only 35% of organizations are actively taking steps toward enhancing their forecasting capabilities.

The problem is complex, but the solution is clear. CFO’s need a connected finance organization that can deliver faster analysis and better-informed insights, to help decision-makers anticipate market trends and uncover hidden opportunities.

* We surveyed 1,000 finance leaders across various industries in association with Wakefield Research in 2023.