“For a CFO, confidence in the accuracy of an enterprise’s financial results is as important as a tightrope-walker’s confidence in the strength and stability of his wire. Without that clear certainty, the CFO can’t take a single strategic step forward, let alone embark on a complex journey to support business growth.” So says Stu Lucko, CFO at insightsoftware.com, the creators of Hubble, a business performance management solution offering real-time reporting, analytics, and planning. Lucko has a unique perspective on this topic, based on both his experience as a CFO of a growing company and a view into the critical issues that finance professionals face.
As finance data is exported, manually manipulated, and shared, errors get introduced – it is inevitable, despite the best processes, management, and intentions. And the knowledge that those errors exist in the finance function eventually leads to:
- Second-guessing of results – “This just doesn’t seem right to me.”
- Slower decisions – “We should wait to make sure that this is right.”
- Wrong decisions – “We have no choice but to move forward.”
“Just what is the price you put on having confidence in your results?” Lucko asks. When nobody in an enterprise feels confident that they have correct, complete information, there is a cost in accuracy and productivity. When it takes a long time for data reconciliation, the opportunity cost of being able to use that data productively is lost. And when shadow data systems exist that provide different answers for a given question, the CFO is put in the uncomfortable position of “placing a bet” on one of several data sets. All these issues add up to a “confidence tax” being paid by an enterprise.
One CFO nightmare is a data accuracy issue that requires a major adjustment or restatement of accounts. Another is being unable to communicate the root cause of business performance. The only way to get a CFO to sleep soundly is to give him confidence in his data.
Data-doubt can appear out of nowhere. Have you ever been in a meeting where two people reported different numbers for the exact same metric? You can see the confidence tax bill rising with each question that is raised. The confidence tax bill also goes up every time there is a reconciliation issue, and every time an executive has to wait to get a number or issue confirmed.
The (Confidence) Taxman Cometh
Lucko helps quantify the amount of confidence tax that many finance functions are paying. He cites recent findings that:
- The average planning cycle takes more than 120 days (PwC). And the average 120-day end-result can be useless. That’s because…
- Only 45% of businesses believe their own forecasts (PwC). There’s no better feeling than spending four months on a budget and then throwing it away.
- Lastly, an incredible 88% of spreadsheets have errors (Ray Panko, U of Hawaii). How many spreadsheets is your finance team using for critical reporting processes?
Lucko also shares the case example of Hubble client Zuffa, which promotes Ultimate Fighting Championship (UFC) events. Zuffa didn’t know how much the confidence tax was costing them, but during management meetings Zuffa’s CEO would ask for UFC fight revenue and receive five different answers from five different sources. Decision making was delayed and derailed until the data was agreed upon.
Zuffa’s answer was to implement the Hubble solution that everyone in the enterprise could use, from the C-suite to the operations team. The key to re-capturing the confidence of all users was the Hubble system allowing them to drill down to the transaction level, so it was clear that all results were based on a single, correct data set.
As finance professionals are increasingly being asked to inform decision-making, it’s time for a confidence tax cut. For more information, go to www.gohubble.com
Next in the series: The Responsiveness Tax.