Surveys show CFOs generally see the need to incorporate technology to help them improve their finance and accounting functions. But knowing which technology is right for their operations and which isn’t — and also when the time is right — is the "opportunity and the curse," says Bryan Lapidus, FP&A, director of the FP&A practice at the Association for Financial Professionals. 

Lapidus says CFOs are bound to make mistakes when applying new technology because successful implementation depends on what makes sense for their operation and also whether the finance team is culturally ready to make the maximum use of it. Not all teams are.

It also matters whether you’re looking to technology to help you do continuous planning or improve your forecasting — two very different goals.  

"It’s first important to draw a distinction between planning and forecasting," Lapidus told CFO Dive Thursday. "Planning is aligned with strategy goals and what you hope will happen. Generally that’s a challenging process, because you have to align all the different elements of the company, like the people, the strategy, the goals for the year, and the different ways you can deploy them. Because it’s so time-consuming, [planning] generally happens once a year."

Forecasting, on the other hand, is "the honest projection of where you think your business is actually going, given current trends," Lapidus explains. "When a company talks about event-driven planning, or continuous planning, it means speeding up the planning process to plan and re-plan, and make changes, which is code for redeploying capital."

Until you look at your needs and take an honest look at where your team is culturally, he suggested, the CFO might be better served resisting the addition of new tech for its own sake.

Sticking to the status quo

For all the attention paid to the newest technology, companies have been adopting financial reporting technology generally quite slowly, which Lapidus attributes to finance organizations’ difficulty getting their business cases approved. 

"Work is getting done, somehow, someway," Lapidus explained. "Finance organizations are making do with whatever current technology they have, and when they ask for the money to improve what they’re doing, the ROI is hard to compete with other investments with direct revenue attached to them."

Lapidus says these organizations are often dismissed. "They’re being told, 'Well, you’re doing it now; what’s the benefit of being a little bit faster?' Making that case is a challenge for them."

"It’s funny because [the finance team] often feels like they need to be the model for fiscal responsibility within the company," Lapidus said. "And that just compounds the previous statement."

The importance of a "quantitative mind"

But why is it so essential for the CFO to have visibility across things that were previously siloed, such as product development and rollout?

Lapidus called the CFO "the steward of company capital," and says that person has a view that’s nonpartisan to a given business or product line. "And that objectivity helps the CFO to deploy capital in its most efficient way," he said. "And sometimes that’s unpopular, but to do that, you need to know which programs, processes, and ad campaigns are working. And which aren’t."

Accessing that knowledge requires reliable data, but at its core, it requires what Lapidus calls "a quantitative mind," that can see the strategy, but also see the numbers, and won’t be swayed on whether or not something is working.  

"It sounds incredibly easy in practice," Lapidus said. "but we actually just surveyed over 600 people on project management. Companies that call themselves agile aren’t taking one of the defining steps of agile, pivoting away from underperforming projects at a higher rate than any other company."

"The tech will basically look at historical data and find ways to project it forward very quickly and very efficiently," he said. "Sometimes it’ll be right, sometimes it won’t. If you’re in a steady state, and the future resembles the past, it can be great."

However, Lapidus predicts there are some lines in your forecast that will move based on key drivers, or based on inflation or contractual rates, and some that are really judgment-dependent. "You can’t apply the same predicted algorithms to all categories," he said. "Take your forecast line, determine the right methodology for each line, and act accordingly."

That’s the big risk, Lapidus concludes. Despite the appeal, not everything should be automated.  Predictive models and analytics excel at finding the best fit trendline for the historical pattern, but if the pattern changes, "you’ll be left predicting the wrong reality."

The CFO at a crossroads

Financial tech, and deciding whether to adopt it, isn’t the only big dilemma for the finance chief these days. Lapidus believes the CFO is at a crossroads, as to whether it will become a reporting and compliance function, or a business strategy function. He believes it could be too difficult to have both of those under one function. 

"But every department in the company does some sort of planning," Lapidus said. "Planning skills are already widely disseminated, and the tools are becoming more ubiquitous throughout the corporation. If the CFO doesn’t perform the business advisor role correctly, those skills will leave finance, and all that will remain are the controlling functions: accounting, audit, and reporting."