The importance of the CFO and non-financial data

This informal CPD article, ‘The importance of the CFO and non-financial data’, was provided by Advanced, who are providers of software and IT services to the public, private and not for profit sectors.

The role of the chief financial officer (CFO) has evolved significantly over the years. Traditionally, the CFO was mainly responsible for managing the financial aspects of the organisation, such as accounting, budgeting, reporting, and compliance. However, in today's dynamic and complex business environment, the CFO of a local council is expected to play a more strategic and influential role in driving the council’s overall performance.

One of the key challenges that the CFO faces is how to leverage non-financial data to gain insights into the drivers of value creation and competitive advantage. Non-financial data refers to any information that is not directly related to the financial performance of the organisation, such as customer satisfaction, employee engagement, innovation, social impact, and environmental sustainability. This data can provide a more holistic and forward-looking view of the organisation's performance and potential, as well as help identify risks and opportunities.

Some examples of non-financial data are:

• Customer satisfaction: This measures how happy and loyal the customers are with the products or services offered by the organisation. It can be measured by surveys, ratings, reviews, feedback, referrals, retention, and churn rates.
• Employee engagement: This measures how committed and motivated the employees are to work for the organisation. It can be measured by surveys, turnover, absenteeism, productivity, performance, and retention rates.
• Environmental impact: This measures how the organisation affects the natural environment and its resources. It can be measured by carbon footprint, energy consumption, waste generation, recycling, emissions, and compliance with environmental regulations.
• Social responsibility: This measures how the organisation contributes to the social and economic wellbeing of its stakeholders and communities. It can be measured by philanthropy, volunteering, diversity, inclusion, human rights, labour standards, and ethical conduct.
• Innovation: This measures how the organisation creates and implements new ideas and solutions to meet customer needs and expectations. It can be measured by research and development spending, social impact, environmental impact, efficiency and effectiveness, along with insights for continuous improvement and learning.
• Quality: This measures how well the organisation delivers its products or services according to customer requirements and expectations. It can be measured by defect rates, customer complaints, returns, audits, certifications, and customer satisfaction.
• Risk: This measures how exposed the organisation is to potential threats and uncertainties that could affect its performance and objectives. It can be measured by risk assessments, risk appetite, risk mitigation strategies, contingency plans, insurance coverage, and incidents.

Non-financial data can help the CFO to:

• Align the organisation's strategy with its vision, mission, and values
• Communicate the organisation's story to internal and external stakeholders
• Monitor and improve the execution of the strategy
• Identify and manage risks and opportunities
• Enhance the efficiency and effectiveness of processes
• Foster a culture of innovation and learning
• Attract and retain talent

However, non-financial data also poses some challenges for the CFO, such as:

• Defining and measuring relevant and reliable indicators
• Integrating and analysing data from multiple sources and systems
• Ensuring data quality and security
• Reporting and disclosing non-financial data in a consistent and transparent manner
• Balancing the costs and benefits of collecting and using non-financial data

To overcome these challenges, the CFO needs to:

• Establish a clear framework for non-financial data governance
• Collaborate with other functions and stakeholders to define and collect non-financial data
• Develop and implement tools and methods for data analysis and visualisation
• Educate and train the organisation on the value and use of non-financial data
• Embed non-financial data into decision making, planning, and performance management processes

Collecting, analysing, and reporting non-financial data is not an easy task. It requires a high level of data quality, consistency, and reliability, as well as a clear framework for defining and measuring relevant metrics and indicators. Moreover, it requires a strong collaboration and alignment among different functions and stakeholders within and outside the organisation, such as operations, marketing, human resources, investors, regulators, customers, suppliers, and society at large.

This is where technology can play a vital role in supporting the CFO in harnessing the power of non-financial data. Technology can enable the CFO to access and integrate data from various sources and systems, both internal and external, in real time and in a standardised format. Technology can also enable the CFO to apply advanced analytics and artificial intelligence techniques to generate insights and recommendations from non-financial data, such as identifying patterns, trends, correlations, causations, anomalies, and scenarios. Technology can also enable the CFO to communicate and visualise non-financial data in a clear and compelling way, using dashboards, reports, stories, and narratives.

By leveraging technology to enhance the use of non-financial data, the CFO can become a more effective leader and partner in driving the strategic agenda of the organisation. The CFO can provide valuable inputs and guidance to boards and other senior executives on how to optimise the allocation of resources, how to improve operational efficiency and effectiveness, how to innovate and differentiate products and services, how to enhance customer loyalty and retention, how to attract and retain talent, how to manage risks and compliance, how to create positive social and environmental impact, and ultimately, how to create long-term value for all stakeholders.

Choosing the right software provider for your organisation is crucial for its success. You need a provider that has a proven track record, offers solutions that can integrate with your existing systems, and provides you with valuable information and insights to help you make better decisions. A good software provider can help you streamline your processes, improve your efficiency, and increase your profitability. A bad software provider can cause you headaches, waste your time and money, and put your data at risk.

Non-financial data is a valuable asset for the CFO and the organisation. By leveraging non-financial data, the CFO can enhance their role as a strategic partner, a leader, and a catalyst for change.

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