CFOs should be on top of tech, says Graham Shapiro

Today’s world requires innovation to remain competitive, and with the changing nature of consumers, businesses cannot afford to be on the wrong side of technology. CFOs need to be on top of tech.

By Graham Shapiro

A few years ago, when I returned from my travels, I did a short internal audit contract at one of the big banks. To my shock, they were maintaining very important client information with advanced calculations on Excel. From my Big Four training, we didn't even waste our time doing control testing on Excel documents. In fact, during my three years of articles, I hardly remember clients presenting anything other than supporting schedules on Excel. The reason being that, despite Excel's powerful functionality, there is no guarantee on the quality of the inputs. While this may have been the way things were done at the time, that attitude wouldn't fly today.

The accounting profession should be at the forefront of processes and control to avoid error. We should understand, coming from auditing, the importance of accurate information free from human intervention. Today's world requires innovation to remain competitive, and with the changing nature of consumers, businesses cannot afford to be on the wrong side of technology.

I am reminded of a picture I saw depicting accounting in the 1940s. A lady sat copying information off a piece of paper onto a typewriter, while someone is looking over another lady's shoulder checking her piece of paper before it is retyped into the typewriter. Sound familiar?

The world is changing rapidly. As of 2014, the number of connected devices per person in the United States was 2.9, which was below the highest average of 3.6 in the Netherlands. In the world of business, this is also so.

Companies are spending more on technology today than they ever have in the past. The Big Four banks spent in excess of R30 billion on information technology from 2015 to 2016, representing 16 percent of total operating expenses.

What does this mean for the CFO? The CFO has an interest in technology spend beyond approval from a budgeting and cash flow perspective but also from a financial and operational reporting perspective. Despite the value in the new integrated report, shareholders, directors and business owners are looking to their numbers as the final destination of the company information. Did we make a profit or a loss? Is our GP up or down? Which product performed well, which did not? How's our cash flow forecast looking? Do we require cash or are we expecting a surplus?

Today, information is power; the quicker you can make a decision, the more competitive you can be in the marketplace. Technology is the key to more accurate information accessible much quicker. We are not just talking about basic management accounts generated off the accounting software. For real decisions, we need a sophisticated mix of financial and non-financial information which accurately depicts the state of the business and gives enough information for decisions. The best placed person to handle this is the CFO.

A CFO will have the big picture view on all reporting. This is not to say that a sales manager cannot see value in sales reports but the CFO can see beyond the sales data and tie the information together to comment on the bigger picture.

Large companies and SMEs are becoming more complex, with more KPIs than ever before. One company can have the following elements to report on, over and above pure financial data. A company will have a website and want to monitor the web analytics and the success of various AdWords marketing campaigns. A company who uses social media will have a cost and will want to monitor social media spending. Sales teams will need to be monitored not only for the sales they bring in but the cost they are incurring to bring in those sales. Consulting firms will want to know that they are using their consultants effectively and maximising fees earned from such employees.

Today, systems are used for all of this, and they should all be syncing with the accounting platform. SMEs can also use such technology. The introduction of the SAAS model (Software as a service) has opened the door to powerful, cloud-based programmes that can do everything large enterprise software can, for a fraction of the price.

As the CFO, it is their responsibility to be involved in every system and how it interacts with accounting and reporting. The CFO must not only be involved with signing the cheque for the software but also with the investigation and appropriateness of the intended support systems. The CFO must understand from all departments what the outcome of the system must be, and how this lands up in an effective and informative report or dashboard. All too often, the CTO takes the lead on the system, citing technical reasons and functionality, sometimes ignoring the company's need for such functionality. A company could be in a trap where they commission expensive software, pay a fortune but only use ten percent of the fancy functions.

To achieve this, it is critical for a CFO to understand the technology that is out there. He or she needs to keep current with developments and reporting tools that can assist with quicker and more accurate information collation from various different systems.

Graham Shapiro, CA(SA), is the owner of Shapiro Advisory, a Johannesburg-based company which focuses on financial solutions for SMEs.