Best Practices in Data Management: A Chief Financial Officer’s Perspective

By Eric Mersch

With the exponential growth of data and its critical importance in driving business decisions, the Chief Financial Officer (CFO) role continues to extend beyond traditional financial oversight. CFOs are now at the forefront of data management within their organizations. This shift is not just about managing financial data but encompasses the strategic handling of all data to enhance decision-making, improve efficiency, and drive business growth. Let’s explore how CFOs are increasingly becoming pivotal players in data management.

1.  Be a meticulous steward of financial data.

   At its core, the CFO’s responsibility for financial data remains paramount. High-quality data management is crucial for accurate financial reporting, regulation compliance, and robust financial planning and analysis. CFOs must ensure that financial data is correct, secure, and accessible. Stewardship involves implementing stringent data governance policies, leveraging advanced financial systems, and ensuring adherence to regulatory standards.

   In SaaS businesses, companies commonly lose control of accurate reporting due to the disconnect between data sets. In Enterprise SaaS companies, CRM captures Booking information, but the data often does not match the invoice data in the accounting systems. This disconnect leads to different SaaS KPI numbers. In Business-to-Consumer (B2C) companies, the billing system often does not match the revenue in the accounting system. This variance leads to confusion when calculating monthly cohort KPIs. All companies have R&D teams, but not all correctly capture the data needed for software capitalization. Even when the Jira system is set up to capture new features versus maintenance work, the engineers still must follow the process. Lack of data integrity for capitalized software will confuse the audit and tax auditors.

   An example of when a lack of data integrity impacts the business is when the CFO and Chief Revenue Officer (CRO) presented different numbers in the same board meeting. The CFO’s data was less credible, and that person was fired shortly after. Strong data stewardship can help the CFO avoid such embarrassment (and potential job loss).

   For more on SaaS metrics, read the FLG Partners SaaS Glossary: Metrics, Benchmarks, and Ratios Used in SaaS Business Performance Review.

2. Maintain a single source of truth.

   The accounting system is the single source of truth. The CFO must ensure that all other data sources match those in the accounting system. Thus, the CFO sits at the crossroads of all the company’s data and puts the CFO in the best position to analyze the data and provide strategic guidance to the executive team and the board of directors.

   The CFO can only identify and provide the financial and key performance indicators by standardizing the data sources. 

3. Integrate financial and operational data.

   CFOs are increasingly responsible for integrating financial data with operational data. This holistic approach comprehensively views the organization’s performance and health. By breaking down data silos and fostering collaboration between different departments, CFOs consider all relevant data in strategic planning and execution.

   Data consistency is so essential that I recommend that the IT and data science teams report to the CFO. The CFO must be mandated to synchronize the various data sources and mine the data for operational insights.

   [For an in-depth review of the challenges associated with disconnected data sources, read my article, Managing Apps in the Age of Saas: Avoiding the Risks of “SaaS Sprawl.”]

4. Implement and leverage advanced technologies.

   The rise of advanced technologies such as artificial intelligence (AI), machine learning (ML), and blockchain has revolutionized data management. CFOs are responsible for adopting these technologies to enhance data accuracy, streamline financial processes, and improve predictive analytics. AI can automate routine tasks, while blockchain can provide a secure and transparent way to manage financial transactions.

   CFOs are already implementing AI solutions that have proven to increase productivity. AI use cases utilized today include apps that:

   • Review Salesforce opportunities for the current quarter to identify non-standard deals and alert the deal desk team via Slack
   • Scan corporate bank accounts and create a summarized view of daily cash
   • Scan invoices and create journal entries with the proper GL code and cost center allocation
   • Read email threads and summarize the main points; this function is beneficial for deal desk reviews when trying to understand the critical blockers to closing an opportunity

   When CFOs lead innovation in new technologies, the company gains because it inspires other departments and employees to think about how they can adapt new technologies. Of course, other C-Suite members can do this, but only the CFO can calculate the ROI.

   [For more on how CFOs should think about adopting AI, see my colleague Kenton Chow’s article, AI and the CFO: Balancing Risks and Benefits.]

   [Read my article on AI prompt engineering, Understanding AI: How to Perfect Your Prompt Techniques to Improve AI Results, to learn how CFOs use prompts in their businesses.]

5. Take immediate action on data security and privacy.

   With the increasing volume of data, ensuring its security and privacy has become a critical concern. CFOs must work closely with IT and cybersecurity teams to implement robust data protection measures. Close collaboration includes ensuring compliance with data privacy regulations such as the EU’s General Data Protection Regulation (GDPR) and, closer to home for FLG Partners in California, the California Consumer Privacy Act (CCPA) and protecting sensitive financial information from cyber threats.

   We saw a recent example of data security risks when Palo Alto Networks recently announced that suspected state-sponsored hackers began exploiting a zero-day vulnerability in the company’s PAN-OS firewall software. Hackers used companies’ compromised devices to breach internal networks and steal data and credentials.

   In this case, the CFO must take immediate action, directing the IT organization to assess the extent of the damage, develop risk mitigation plans, and promptly report to the audit committee. 

6. Drive business transformation where it matters most.

   CFOs are instrumental in driving digital transformation initiatives within their organizations. By leveraging data analytics, CFOs can identify areas for improvement, streamline operations, and enhance customer experiences. Taking a proactive approach to key financial elements that greatly impact the business sets an important example for the other departments, helping drive organizational collaboration on digital initiatives.

   CFOs should be familiar with industry benchmarks and how they evaluate company performance. This knowledge gives CFOs credibility when working on business transformations.

   [For more on benchmarking, read my article SaaS Company Benchmarking: Leveraging Metrics for Performance Insights.]

   The role of the CFO in data management is multifaceted and ever-evolving. As stewards of financial data and strategic leaders, CFOs must embrace the opportunities and challenges of the digital age. By adopting a proactive approach to data management, leveraging advanced technologies, and fostering a culture of data-driven decision-making, CFOs can drive significant value for their organizations. A successful CFO is not just a financial expert but also a data-savvy leader capable of navigating the complexities of the modern business landscape.