How can the finance function of the future combine analytics and gut feel to best effect?

13th September 2016

You did not get to be senior finance professionals by shying away from challenges, says Lesley Meall, FSN writer.  You are masters of complexity and multi-tasking, practitioners of a discipline that requires vast amounts of historical and contemporary subject matter expertise, and the proud possessors of a respected professional qualification. 

Your entire career has been spent acquiring experience of its practical application, while also developing a broad understanding of business, along with sector, company and role-specific knowledge. So when you make a decision based on ‘gut feel’ you are making a professional judgement that is informed by all of this – plus the available data.




Or are you? When FSN conducted research, The Future of the Finance Function, among the 47,000 members of its Modern Finance Forum on LinkedIn, it found a big gap between idealised ambitions and what is happening on the ground. There was a widespread appreciation of the importance of data in the finance function and beyond – and 81% of senior finance professionals believe that the CFO will ultimately be responsible for corporate data in the future. However, almost two thirds believe that an inability to master the variety and volume of business data is a threat to the future of the finance function, while a third admitted that their decisions rely too much on ‘gut feel’ rather than on ‘hard data’. 

“It’s all very well relying on ‘gut feel’ but there is a time and place for it. There is also a time and place for hard data and hard facts,” says Michelle Fabian, group controller at FSN (and the brains behind our research). So, why are CFOs and other senior finance people relying so much on ‘gut feel’? What is creating, sustaining or even widening the gap between what they want to achieve and the reality on the ground? “CFOs are struggling to make best use of the technologies out there,” says Fabian. In our survey, a third of respondents admitted to this and many cited insufficient time as a reason for not focussing more on getting the right technology in place. 

In a perfect world, all CFOs, their teams and those they partner with would have access to the latest and greatest technologies; they would have the time and the resources to standardise processes, then automate them; they would have connectivity across their front and back office systems; they would be spending more time on analysis and strategy and less time on transaction processing; and all of this would be improving the quality and speed of their decision-making. Back on planet Earth, myriad factors shape the struggle to balance ‘gut feel’ and ‘hard data’ to best effect – not least the technology being used to attempt this. 

In the real world, many finance professionals have no option but to make the best of whatever is within their reach. For interim treasurer Chris Fell, this has meant getting the most from ubiquitous Microsoft Office tools, including Microsoft (MS) Excel spreadsheets. “Most people still view them as little more than a piece of paper you populate with data,” he says. However, during his career, Fell has continually developed his knowledge of the formulas and functions of MS Excel and honed his ability to write code for Visual basic routines, and he has combined this with data from various other systems to pull off some impressive analytical feats. 

Fell has been helped by working in the property sector and dealing with high value rather than high volume transactions. The opposite situation exists as Nittu Creations, which is in the business of garment trading. “We have outgrown or recent software solutions, consisting of various and somewhat disconnected solutions like Microsoft Excel,” Arun Gupta, managing director and founder; and the need for access to real-time data and analytics has led to Nittu’s first installation of an ERP, SAP Business One. “At the forefront is the benefit of one centralised system, which gives us insights across all functions within our business,” says Gupta. 

The manufacturer, Allied Glass Containers, has opted for a different solution. It is using a system from BOARD – which unifies business analytics, budgeting, planning and forecasting functionality – to get insights into data that resides across Allied’s multiple systems, including spreadsheets, a bespoke manufacturing system, bespoke SQL databases, Sun Accounts plus departmental systems. Finance director James Hart says: “It’s enabling us to analyse our information in a more flexible and usable manner,” and he expects it to drive better business decisions. 

So how can CFOs get the most from the analytics they have at their disposal? Lisa Vormittag, CFO of VAI (a provider of ERPs) emphasises the importance of recognising and leveraging three key benefits that analytics can offer: real-time data access, visualisation and the ability to analyse large amounts of data. Real-time data can enable faster and smarter decision-making by CFOs, their teams and those they partner; visualisation can make it easier for them to analyse, share, understand and gain insights into information; the ability to effectively analyse and leverage the huge (and expanding) amounts of data out there, is key to staying competitive. 

This will become more important as the volumes and variety of data grow. “Instinct can point you in the right direction and help you to ask the right questions, then it is necessary to perform the analysis to confirm your views,” says Fabian. Our research shows that CFOs who rely too much on ‘gut feel’ are more likely to respond too late to market trends and by almost twice as much. So if you want your decisions to stand up to scrutiny during and after the event, you will need to find the optimal combination of ‘hard data’ and ‘gut feel’ – even if the complexities of finance do tip the balance in the direction of experience and professional judgement.