Why data is driving the evolution of the financial director

30th January 2019

Corporate structures have changed dramatically over the last 150 years – and so too have executive roles. Over the last few decades, we’ve seen various new roles and titles such as Chief Information Officer, Chief Content Officer and Chief Analytics Officer have more presence in the board room.

Many of these new roles, and others focused on privacy and regulation are all linked to data and the increasing role information plays in the successful growth of a business. The role of Financial Director is no exception – and finance leaders are undergoing an evolution, driven by data. Information about the business, and critically the customers, suppliers and partners it does business with, has always been critical to the role. But developments in technology means that data is more critical to the position of financial director than ever before, and key to driving the business forward to long term success.

The origins of the financial director

For most of the twentieth century the position of financial director didn’t actually exist; instead, financial managers oversaw bookkeeping and duly created annual budgets. The position was introduced in the 1960s and has become a mainstay on the board of most companies.

As financial directors grew in popularity, a range of theories emerged on the best approach for them to take within the business. The role has transformed from the “financial engineers” or “number-men” in the 1990s, to “super controller” in the wake of the Sarbanes-Oxley regulation.

Today financial teams are becoming a central strategic lynchpin for their organisations. With the current economic uncertainty, rising number of bankruptcies and fraudulent activity, it’s up to modern finance leaders to protect the business and look for every opportunity for profitable growth.

That means understanding and mitigating risk, and balancing risk with the imperative of driving growth, identifying opportunities and improving efficiencies. However, for the financial director to be successful, making the best use of data and insights is critical.

Data in the DNA

The days when financial leaders sourced their information from simple balance sheets or Company’s House reports are long gone. Today, data is at the core of what the financial director does and is taken from a variety of sources, traditional and non-traditional. Our recent research found that  more than a quarter of financial decision makers believe that data analysis has become an increasingly vital part of their responsibilities, with many suggesting that it is now one of their day-to-day tasks.

Data is a critical tool in enabling financial leaders to manage risk intelligently, including minimising fraud and monitoring business failure risk. Financial directors can use analytics to assess the creditworthiness of business partners and monitor the risks associated with customers and suppliers on an ongoing basis. Teams can also use data to optimise the business’ cashflow by managing credit limits, creating a bad debt reserve and prioritising collections.

Importantly, data can also enable financial leaders to spot opportunities, by understanding the profile of the business’ best customers and identifying opportunities to cross-sell. The financial team can then act as a central point of integration for the business, feeding these insights to the sales and marketing team, and pushing forward business growth. In an increasingly globalised and risky business climate, data insights can be the driver for organisational success, and the financial team has a key role to identify and share these valuable insights with decision makers.

Getting the right data – and getting data right

Using data in the right way remains a significant challenge. There has been a proliferation of data over the past forty years, driven in part by the rapid expansion of the internet, digital technology and the emergence of social media. Today, the challenge is not simply about accessing business information, but dealing with a massive influx of data from a variety of sources and analysing it to unlock value and deliver business-critical insights. Importantly, the majority of financial directors say 56% say that their employees don’t have access to the tools and technologies that could help them succeed at present, according to a recent study.

To gain the best information, financial directors must be able to look beyond ‘traditional’ data sources and internal databases. Real-time information is often published online before reaching official sources. For example, 24-hour news sites like the BBC or Reuters might be the first ones to share exclusive developments on businesses, which might impact their risk assessment or the wider supply chain. Likewise, searching on Twitter might uncover an employee issue within an organisation, that otherwise might have been missed.

Non-traditional data can provide financial leaders with automated, contextual insight from a variety of sources, which is an exciting opportunity. The emergence of these sources has also made immediacy much more important. By using platforms that fuse non-traditional and traditional data, financial leaders can glean critical insights quickly, and act on opportunities and risks with speed.

The next evolutionary stage

The world has changed significantly over the last fifty years, and so too has the role of the financial director. Businesses today face a risky global environment, with economic fluctuations and complex supply chains. Financial directors must chart a course to growth and having the right data and analytics at hand is fundamental to success. Using the right tools, financial teams can gain insights from a whole host of sources and ensure that the business is taking the best course of action as a result. Get it right, and data will ensure the financial director continues to hold a critical strategic position at the heart of the business.

Tim Vine, Head of European Trade Credit, ‎Dun & Bradstreet