Historically CFOs are defined as Custodian of Finance & Accounts Function. However in today’s fast changing Business Models the CFOs Roles are evolved and now involved in all key strategic areas across the Organization. They often lead the Business Operations as Business Head; assume the responsibilities as CIOs(Chief Information Officers), CPOs (Chief People Officers) and more. The reason for this evolution is because CFO is the only Functional Head who is having the comprehensive understanding of the entire operations of the Organization. Running a Business efficiently, especially, during the highly competitive market, advanced infrastructures and tools are also required. One of such key tool is Enterprise Resource Planning (ERP) Software that integrates the core business functions such as Finance, HR, Supply Chain, Procurement and more. Implementation of effective ERP software enable the smooth data flow, which in turn, optimize the key results and profitability of the Organization.
Therefore, CFOs role in choosing the right ERP system is very crucial as they will surely asses and ensure that system aligns with the Company’s Goals and Growth.
In this Blog, we will go through the key aspects of CFOs role and highlight why their leadership is critical in choosing the most appropriate EPP Software.
Transformation of CFOs Role.
As mentioned in the introduction, the Role of the CFOs has been redefined and in addition to their traditional area of Managing Finance, Accounts, Taxation and Compliance Functions, many CFOs are presently involved in key strategic that directly linked to Company’s Goals and Growth. An efficient ERP system provides CFOs with insights and technical support to oversee the Organizational needs and enabling them to take immediate actions for the Business growth.
- Financial Impacts :
Whenever we plan for an expansion or expenditure the first thing come to the mind is about the financial strength. Being the Budget Controller and Cash Flow Head, CFO conducts comprehensive analysis of entire project cost right from procurement to final implementation, training and supports. Based on the assessment if CFO takes appropriate decision whether to go ahead or not. - Benefits of the new Software vs Return of investment :
Implementing a reputed ERP Software requires significant investment in terms of Product, Implementation and maintenance. Therefore, CFO being the financial leader will ensure that the new Software is beneficial for the Business both in terms of financial performance and operational efficiency. As CFOs invariably interacts with the Higher Management, Business Head, HR, IS and others they have comprehensive knowledge about the entire process of the Organization. This insight allows the CFOs to assess how the new system can enhance the operational efficiency, error free reporting, and reducing manual intervention by automation and more. After evaluation of all these factors CFO can determine whether the cost involved for the new software will yield a positive Return Of Investment. On the basis of analysis if CFO feels that the Benefits outweigh the cost, then CFO will give the nod for implementation. - Alignment with Business Goals & Profitability :
When selecting an appropriate ERP Software for an Organization, the CFOs expertise in various Business functions will help him to evaluate whether the ERP includes the mandatory feature to support Company’s Business Goals and drive the profitability. Further, CFOs ensure that the ERP solution has the capability to scale the Business Growth and enhance productivity. - Financial Reporting and Analysis :
Financial reporting of Establishments with complex Business operation and financial structures is a strenuous task in the absence of a robust financial tool. ERP Software strengthens Financial Reporting with data integrity, accuracy and real time reports.
Therefore, CFO’s role is crucial in ensuring that the Software can support various compliance requirements and manage complex financial reporting. Further, CFO makes sure that the system has the features of integrating the cross functional modules to enable real time insight of the happening in the entire Organization. - Ensuring Compliances :
In today’s business environment, the requirements for various Compliance – whether Statutory, Non Statutory, Risk Management or process management – are getting complicated and frequently updated. Non compliances, whether related to Direct or Indirect Taxes or and statutory obligation can lead to huge penalties and legal percussions including imprisonment under various Laws. Therefore, mandatorily CFO to ensure that the new ERP system includes the features that support Compliances and mitigate risks. - Ensuring System Integration:
Many Business Establishments use different Software Modules for various Functions or Departments within the Organization for instance: CRM Software may differ from that used by HR or Finance. A key drawback of operating on separate platforms or software for each Function is the lack of real time data output. For example, if the Software used in other Department is not integrated with Finance, it become challenging to generate financial report that includes data from across departments.
Before finalizing the procurement of a new ERP Software, CFO should ensure that it can be integrated with the Software in use. Further, it is important to confirm that the new ERP is compatible and existing data can be migrated smoothly.
CFO will ensure that the new ERP will take care of the Legacy data and its migration. It should be compatible to be aligned with the data in different formats and platforms used by the cross functions. - Vendor Selection :
CFO plays a very pivotal role in selecting the most suitable vendor through a zero defect process such as seeking multiple quotations, analyzing the credit worthiness and veracity, reliability and expertness in the domain. - Timelines for Implementation :
CFOs interaction with the various Functional Heads and understanding the Organizational requirements, will fix the cost effective time line for implementation and final go live dates. Also put these dates in the Vendor Agreement with a clause of penalty. - Selecting an elite team for Project Implementation :
Choosing the expert team is mandatory for successful ERP implementation. Therefore, a skilled robust team across all Functions who can dedicatedly work in this project to be selected. CFOs comprehensive knowledge in the Organization can assist in forming a brilliant team that understands the features of already working Software and can define the wish list for new ERP system. Further, the responsibility of legacy data migration to new software is a key area for ensuring the bare minimum and only mandatory data is transferred, avoiding unnecessary bulk that could impact system performance.
Conclusions
CFO participation is mandatory in selecting a robust ERP that ensures the Organization’s Financial and operational performance. Their cross functional expertise and knowledge ensures that ERP System align with Business needs, maintain data accuracy and enables real-time reporting to quick decision making. As the Financial Controller, the CFO balances the budget and can ensure that a successful ERP implementation will deliver a positive Return on Investment(ROI).Their involvement ensures the implementation of most suitable ERP System with seamless functionality helping the Business to reduce cost, increase profitability and achieve growth beyond expectations.
