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Do you have an equal passion for both justice and crunching numbers? You undoubtedly know what economics is and you’ve likely heard of forensics, but do you have any idea what forensic economics is? Who knows, maybe this is the career path you were meant to take. Let’s find out.

What You Need to Know About Forensic Economics

According to the National Association of Forensic Economics (NAFE), forensic economics is classified as the application of economic theories and methods to legal matters. It’s a scientific discipline and those who work in the field are almost always master’s degree or PhD holders.

Someone who works in forensic economics is called a forensic economist. Economics and accounting are completely different as are forensic economists and forensic accountants. Though the roles are similar in nature, there are a number of factors that differentiate one from the other. Two of the biggest differences are the scope of work and the salaries associated with each.

What do Forensic Economists Do?

While of course it can differ from industry to industry, a forensic economist is generally tasked with conducting research, preparing reports and formulating plans that are aimed at specifically addressing economic problems relating to monetary or fiscal policies.

Forensic economists are well versed in services such as economic damage calculation and litigation consultation. They are often called upon to act as expert witnesses in a court of law. Their common areas of practice include:

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How Much do Forensic Economists Earn?

Now, onto the good stuff. How much do forensic economists earn? Considering the scope of their work and the academic credentials behind their names, it should come as no surprise that forensic economists earn a pretty penny. The average salary of a forensic economist in the US is around $124,430, which is approximately $60 per hour, with an average bonus of $4,405 per year.

The entry-level salary for those with one to three years of experience is $86,457 while those with eight years of experience or more behind their name can earn up to $154, 814. Again, much like the scope of work, the salary of a forensic economist largely depends on the industry in which they work and the company or organisation that employs them.

A forensic economist can work anywhere from smaller organisations or cottage businesses to one of the Big Four firms. This is also one job that accommodates remote working—unless your presence is required in court of course—so it’s a career path that caters to working mothers and those that prefer working solo.

Final Thoughts

Forensic economists are remarkable people who can take numbers on a piece of paper and paint a picture of a hard-done-by single parent who struggles to make ends meet. They’re people who can review pre-incident records and come up with accurate figures that represent a business’s loss of earnings. They fight for the little guy and big guys alike, so whoever hires them benefits from their expertise and they leave a positive legacy.

Iskander Lutsko, Chief Investment Strategist and Head of Research for ITI Capital, offers Finance Monthly his perspective on how US markets are likely to trend in the latter half of the year.

Throughout the first six months of 2020, world markets have been volatile to say the least. Global stock index values have so far been characterised by record beating losses and resurgent gains; The Dow Jones and FTSE 100, for example, dropped more than 20% in March, but have already regained much of those losses in the time since. Additionally, the Nasdaq recently hit a record high, and the S&P 500 reached a local high at the start of June below an all-time high on 19 February 2020, and a severe dip in March.

The primary reason for this market volatility is not the US and China trade-related disputes or any other geopolitical market-sensitive tensions which have become an essential part of the global volatility environment since 2018. Quite clearly, markets have been impacted most prominently by COVID-19, and none more so than in the US, which is the world’s largest economy, reserving currency account for 65% of all global transactions – and now also the epicentre of COVID-19, accounting for 26% of total recorded infections worldwide.

All eyes have been on the US in recent weeks. Controversial decisions to reopen certain aspects of society and reduce lockdown measures have seen the number of infection rates rise across the country after a slight decrease. As a result, US equity markets have mostly been driven by HF flows being reallocated into IT stocks, primarily in those that benefited from quarantine. Hence, cyclical companies are trading, on average, 30% below its pre-COVID levels, as opposed to IT companies and biotechnology companies which recorded historical highs.

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However, this is not a second wave; it is a mid-cycle of the first. As in the sea, waves are usually preceded by a trough, and we don’t expect the official trough of the first wave to arrive until at least the end of August. From there, we might expect a second wave of the pandemic to hit in November or December 2020. Of course, this is all speculation, and entirely dependent on weather, vaccinations and lockdown measures – however, as analysts, it’s our job to predict the most likely scenario based on the data that we have, analyse fluctuations and predict market movements accordingly.

Thus, we have crunched the numbers and come to the conclusion that the peak of the current market run will last two months, from the end of July until the end of September, coinciding with a hopefully declining number of cases. Before that, correction and consolidation are likely to dominate, implying that there will be high demand for gold and US corporate bonds, bolstered by a strong US dollar positioning against currencies in Europe and emerging markets.

As soon as investors gain confidence, either through success stories over vaccine trials or new evidence of the infection rate declining in the US and other countries, abundant cash and excess global liquidity from central banks should push the S&P 500 to record highs. However, for that to happen, countries will need to bring back temporary quarantine and policy measures to reduce further risks of the virus spreading.

According to our base scenario, we could see the S&P 500 heading to 3500 points by end of September, pulled by oversold companies from the production and service sectors of the U.S. economy.

As soon as investors gain confidence, either through success stories over vaccine trials or new evidence of the infection rate declining in the US and other countries, abundant cash and excess global liquidity from central banks should push the S&P 500 to record highs.

But risk will not fade away entirely - it’s worth also remembering that the US presidential election is imminent. Even in a ‘normal’ year this election would be considered unique, as former Vice President Joe Biden faces off against Donald Trump, whilst celebrities such as Kanye West have put their two pence in (and quickly withdrawn it), it’s fair to say that US politics has, and will continue to play a role in market volatility in 2020.

If Biden wins, the market will probably see strong sell-off, as his first policy actions will be aimed at restoring corporate taxes to levels seen before Trump's cuts, though it’s worth mentioning that this will be gradual, as it would be unwise to raise taxes at times when 18 million are still unemployed in the USA compared to pre-COVID numbers. Biden also plans to significantly reduce budget spending, which could top contribute to an unprecedented 20% of GDP this year, up from 4.7% in 2019.

Furthermore, if no vaccine will be in place it’s likely that the second wave of the pandemic could come in November or December, coinciding exactly with the presidential election. Hence, markets will be extremely shaky during this period, the extent of which can not be accurately predicted until it’s closer to the time, but certainly worth remembering for keen eyed investors and traders.

Therefore, for short term returns, there are good chances of buying cyclical stocks at the dip now, presenting lucrative opportunity for opportunistic investors. However, in these unprecedented times, almost anything can happen, and it is strongly advised that asset managers and traders looking to expand their portfolio seek professional advice aided by cutting edge technology to ensure that they are making the most informed decision available to them.

New figures released by the Office for National Statistics (ONS) found that the UK economy shrank by an unprecedented 20.4%, its largest monthly downturn in history.

The contraction was more than three times greater than March 2020’s shrinkage of 5.8%, the previous record-holder. Analysts had expected April’s figures to be the bleakest of the crisis, as UK-wide lockdown measures were imposed in late March and began to be eased in May.

Jonathan Athow, Deputy National Statistician at the ONS, outlined the scope of the contraction. “In April the economy was around 25% smaller than in February,” he said. “Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.

Some of the most significant falls were observed in the manufacturing and construction sectors, which declined by 24.3% and 40.1% respectively. The UK’s services sector, which makes up around 80% of the country’s economic output, plunged by 19% in April, while industrial output fell by 20.3%.

Morten Lund, an economist at Nordea Markets, remarked: “We've gotten used to really bad numbers, but this is breathtaking.” He also noted that the UK was “looking worse” when compared to its peers in the G7.

The new release follows predictions by OECD that the UK will be among the nations hardest hit by the economic impacts of COVID-19, with an estimated decline of 11.5% in GDP provided that a “second wave” of contagion does not occur.

Well, all too often these processes utilise simplistic methods, such as spreadsheets. This ignores the multiple benefits that more technologically advanced processes can bring, most notably far greater accuracy. More accurate forecasts will help businesses in many ways, from securing funding from banks or investors to identifying future shortfalls. While rethinking how to approach cash flow forecasting will always be relevant and beneficial for businesses, in today’s uncertain climate of business instability due to COVID-19, it is especially important. 

In fact, cash flow forecasts are almost useless if they are inaccurate and it is only the businesses with accurate forecasts that will flourish. Accurate forecasts allow businesses to run predictably, generate funding and make informed decisions on capital investment. In contrast, inaccurate forecasts can lead to potentially devastating outcomes. At the lighter end of the scale, an inaccurate cash flow forecast can result in missed opportunities while the business had surplus cash in the bank. Whereas, at the heavier end, an inaccurate forecast could lead to overtrading and the end of the business. It is clear that this must be avoided and remedied, but how? Andy Campbell, Global Solution Evangelist at FinancialForce, shares an alternative method with Finance Monthly.

The Difficulties

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting. The first of these is that future income and future expenses are typically completed in monthly increments. This is an issue because it means that the future is generated using data from the past so by the time the forecast has been generated, the data is out of date and, therefore, no longer accurate. Another issue is that it takes a lot of time to assimilate data from the many different sources required for this process which causes further delays. A solution to this problem is that all data from each department be made visible to the finance teams so that they can create an accurate and real-time data set.

A well-built data set will become the foundation for accurate forecasting, so it must be able to process the variety of data produced by each department. This is because companies generally process a combination of both product and service-based revenues. Therefore, the data set must be able to manage both of these sources and their different payment structures.

Although popular, the spreadsheet presents many issues as a tool for cash flow forecasting.

Volatility presents another difficulty to be reckoned with. As the current pandemic has shown, volatility can come in unexpected forms and not all can be protected against. However, preparation is key, and some volatility is more predictable. For example, businesses themselves are volatile by their very nature with the changing of business models in line with the latest developments. Therefore, it is to be expected that business revenues would also be prone to volatility. This can be mitigated against by ensuring that all data has human oversight and is regularly reviewed. Doing so will ensure that any projection is in line with the company’s strategy and should prevent unexpected outcomes.

Cash flow forecasting comes hand in hand with revenue forecasting, which is the greatest of all these challenges. Revenue generation crosses all departments: starting in marketing, it is then delivered by sales, realised by operations and, finally, measured by finance. As already stated, the collating of data from multiple departments is tricky, revenue generation crosses all departments so presents a tangible difficulty here. Currently, the typical finance department addresses this using a complicated interlinking system of spreadsheets which often presents further problems. Another issue is that there can be disconnect between departments where a lack of trust means that data is not readily shared. To solve this, businesses must remove the culture where each department treats its goals separately rather than looking at one overarching goal and working together.

How to Overcome These Difficulties

The problems can be broken down into two main categories – technology and people. In terms of people, this comes down to the business culture and only a business that can successfully change its culture will be able to successfully implement new technologies. It is very important that employees are properly briefed and trained in the new processes or technologies that businesses want to implement so that they feel part of the processes and are adequately prepared. Simply enforcing a new process and expecting it to be a success will not work and there will be no visible improvements to the business.  Successful change to a business culture, at all levels of seniority and across all departments, will result in more tangible improvements.

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In regards to technology, the days of spreadsheets are over, it is time to retire them and let new technology take over. Finance needs to have clear and direct visibility into active opportunities to be able to generate accurate cash flow forecasts. A simple way to do this is to integrate the CRM with finance which will give a window directly into the required processes. The data set can be further strengthened using data from the past, for example past win rates and payments can indicate what the future may hold. AI can analyse historic data sets to identify customers who were slow to pay in the past and, therefore, are likely to be slow to pay in the future.

Ultimately, the more integrated a business is, both in terms of people and technology, the more smoothly it will run and the better its outcomes will be. Having a finance team that can produce accurate cash flow forecasting and a business reaping the rewards is not as difficult as it may seem. There are tools and technologies to help along the way. It is time to say goodbye to spreadsheets and to embrace the new way to approach cash flow forecasting.

Forecasting your balance sheet can become a troublesome task accordingly, but here to help Finance Monthly readers is Ed Gromann, CPO at Centage Corporation, with some top tips.

Within all this uncertainty, businesses that want a steady path to growth are forced to ebb and flow with the changing nature of the world. This can feel like an insurmountable task, especially for a CFO that relies on consistency to meet the board’s expectations. As CFO, you can hardly throw up your hands and exclaim, “what is to be done?” All eyes are on you to even out the peaks and valleys as much as possible so that the organization may continue to operate without too much distress.

One way to detect the kid of crises that can upend the best-laid business plan is by forecasting the balance sheet on a regular basis. I realize that many CFOs don’t undertake this exercise because (let’s be honest) it’s not an easy task. This is a mistake. Forecasting the balance sheet can reveal critical details you’d easily miss in your P&L forecasts. Case in point: let’s say your VP of sales decides to offer a “buy now pay later” deal to stimulate sales -- a great way to build the sales pipeline. The company will certainly face all the upfront costs of registering and servicing new customers upfront, but without immediate revenue to defray those expenses. This sales tactic could lead to a cash flow issue later on in the quarter if not properly planned for.

Tips for Accurately Forecasting your Balance Sheet

As I mentioned, forecasting the balance sheet can be a bit of a bear, but these five tasks can make the task more approachable:

  1. Continuously monitor your deferred revenue

Look at your deferred revenue on a monthly basis to ensure it’s not getting too high, which can lead to cash flow issues later on. If you see that it’s getting high, take steps to correct it. For instance, you may need to restrict deferred payment terms offered by your sales team, or rollout a pre-paid product or service that will generate cash upfront. The sooner you spot a potential issue, the better you can plan for it.

  1. Monitor your accounts receivables

Monitor your accounts receivable to assess whether or not you have some wiggle room. For example, you may incur some expenses in January that may not come due until later in the year. Monitoring them monthly will help you assess how much cash you actually have to get you through lean times. If you see an issue early enough, you may be able to renegotiate terms with vendors.

  1. Create multiple scenarios for your income statement forecast

CEOs often ask, “what happens if?” and as CFO, you want to have answers. The best way to do that is to create multiple scenarios for your income statement forecast, specifically sales projections that meet, fail short of, or exceed the sales projections for 2019. Not only will this increase the accuracy of your balance sheet, but it will help the organization create and implement timely contingency plans.

  1. Don’t forecast too far ahead

Although I’m a firm believer in projecting what might occur, it’s important that you don’t forecast too far ahead. Although economic indicators are still strong, the stock market has dipped and we continue to live with the potential of trade wars, and so on. It’s wise to limit your balance sheet forecast for the next month or two ahead, as each new month will bring new changes that can affect the accuracy of your forecasts.

  1. Do sensitivity analysis on your actuals

Sensitivity analysis is the quickest and easiest way to predict how change will affect your financial statements (I say quick and easy because it tests just one variable at a time, meaning you don’t need to change your underlying model). For instance, experiment with sales and expenses within your P&L to see how they flow through to the balance sheet. This exercise will help the management team make better and more accurate decisions.

No doubt as a CFO you’re pulled into many directions, and the last thing you want to take on is additional tasks. That said, forecasting your balance sheet is one of those tasks that will save you a lot trouble.

Budging and correcting your forecast should come as a benchmark practice. Below Finance Monthly hears from Chris Howard, Vice President of Customer Experience at Centage Corporation, on the growing importance of forecasting.

On January 1, a new set of tax cuts went into effect designed to stimulate growth in the small to mid-size business sector. I speak to a lot of CEOs who oversee companies with revenues in the $50 to $150 million range, and they’re approaching the start of the New Year with cautious optimism.

In addition to the tax breaks, there’s a lot to be optimistic about: low unemployment and inflation, coupled with steady growth in the GDP and stock markets. But there’s also plenty of reasons to be cautious as well. What happens if the tax cuts hit middle income families in states with high local and state taxes? Will they be able to afford their mortgages? If not, what’s the impact on the economy if many default on their mortgages?

Many CEOs tell me they’d feel more confident if they could keep better tabs on their financials. They’ve put their plans into place based on economic and market assumptions made a few months back, but will they hold up?

My message to them is always the same: forecast Quarterly, or even monthly. As one CEO of a manufacturing company who updates all of his forecasts weekly told me: “I try to analyze actual results against my forecasts on a weekly basis, because it gives my organization 52 chances a year to make corrections.”

Forecasting is a critical endeavor in times of cautious optimism. By treating your budget as a valuable asset that you consult regularly, you give your management team the opportunity to course correct as conditions change or new trends emerge.

To a certain extent, forecasts represent a best guess of what lies ahead. Predicting unforeseen trends and opportunities 12 or 18 months in advance is difficult in the best cases, and nearly impossible when the economy or specific industry experiences uncertainty or volatility. For this reason, it’s worth considering a shift to a rolling forecast (aka rolling planning system).

A rolling financial forecast allows financial teams to project out as the year progresses in order to accommodate trends that affect key business drivers. Typically, with a quarterly rolling forecast, businesses project out approximately four to six quarters ahead, irrespective of the calendar date or year. Of course, successful rolling forecasts depend on knowing a company’s key business drivers, so that the team can watch them for unplanned surprises.

I’ve also become an advocate for balance sheet forecasts. Few CFOs take the time to forecast their balance sheets, preferring to rely on their P&Ls to monitor their cash levels. Granted, forecasting a balance sheet is a difficult task, and nearly impossible to do in Excel. But I’ve seen how valuable the process is, given the critical details often missed when relying on the P&L.

For instance, let’s assume a company has earned $1 million in revenue in March, and incurred $800K in expenses. The P&L would indicate that the company has $200K in cash on hand when in fact, that may not be the case at all if the sales team offered unusually long payment terms for a client. That means the company won’t realize a chunk of revenue until some point in the future. And although it has incurred $800K in expenses, its own payment terms may mean it doesn’t need to pay an invoice immediately or all at once. Deferred revenue and liabilities are the kinds of details that the balance sheet alone can capture, which is why forecasting it monthly is the only way a CFO will know how much cash the company will have in the months and quarters ahead.

Any company seeking growth in 2018 would be wise to include sensitivity analysis as part of the balance sheet forecast. There are many ways to book actuals and financial teams may want to spend some time determining the optimal process for their company. For instance, experiment with sales and expenses within the P&L to see how they flow through to the balance sheet. This exercise will help the management team make better and more accurate decisions.

The largest part of a budget for many companies is workforce expenses. Salaries, hourly, overtime, taxes (employee and employer), 401(k) contributions, insurance, employee stock purchases, garnishments, pre-tax items, post-tax items, holiday pay, sick day pay and vacation pay, are just a few of the items that make it complex. And that complexity will only increase as a company grows and adds headcount. The more detail entered into the workforce expense forecast, the more accurate it will be.

Getting There

Earlier I noted that many CFOs want to forecast regularly, but don’t do so. Coordinating data to analyze, report, and predict performance simply requires too much time and effort, but that’s changing for two reasons. First, new budgeting platforms streamline the process, applying intelligence to ensure inputs are applied accurately and automatically.

Second, critical business systems, such as CRM and HR platforms, generate robust data that can be entered into the budget modeling software, enabling CFOs to create highly detailed forecasts. When combined, these two trends allow financial teams to quickly identify where, when and why actuals differ from plan, and inform the management team so it can take appropriate action.

Every employee of a company has a part to play in meeting the business plan set forth in the year ahead. One of the best things a CFO can do is to jettison Excel, and replace it with an automated platform.

Here James Kipling, Product Manager at Quantrix, outlines for Finance Monthly the importance of good forecasting and gives an insight into its impact on businesses.

The rise of ‘Big Data’ has seen technology companies, of all shapes and sizes, vying to increase the speed and effectiveness at which they analyse trends in customer data, production data and macro-economic financial data. In order to identify trends and areas where they can gain efficiencies, these companies are likely to analyse all of the data sources available. So, what’s the problem?

Put simply, analysing data and trends with business intelligence tools alone does little to highlight the opportunities available for a business to capitalise on – meaning time, money and resources are frequently wasted. In a competitive environment, it’s easy to be left behind. But, there is a way forward – through superior business forecasting.

There are many types of business forecasting – demand planning, sales forecasting, inventory planning, capacity planning, and financial forecasting, to name just a few. For many companies, forecasts guide and drive business activity, so it is vitally important forecast models are based on reliable data, cover the full spectrum of likely scenarios and are integrated with the rest of the business to show the full ‘cause and effect’ of scenario changes as they ripple through an organisation.

It’s not about having all the data, but having the relevant data.

The most successful companies facilitate the bi-directional flow of information between business intelligence (looking at historic data) and forecasting (modelling the future) functions within their organisation. Beginning with robust basic forecasts to test assumptions, an opportunity is identified, forecasts are refined with the aid of historical data and trends, action is made to capitalise on the opportunity, and critically, the results of the action are fed back into the future forecasts to further refine their accuracy and effectiveness.

Too often, companies do not begin with accurate forecasting and the effects can have dramatic and far reaching consequences.

“There are so many challenges, really, and people tend to make emotional rather than objective decisions,” says George Pappas, a venture capital-affiliated software executive. “They also tend to make their models match their expectations. But really, the levers that drive results are too complicated in most cases to model in a program like Excel.”

Take the real-world scenario below of a company developing assumptions for new customer growth, including the sales cycle, close rate, deployment time, and economics:

Through a flattened Excel view of the sales booking of these new customers, the assumptions seem reasonable:

But then you look at result of these assumptions. A multi-dimensional model shows the reality: if you sell this way and your deployment time is as predicted, you must be prepared to handle rolling out to 70 locations in one month at peak load and staffing.

This one example clearly shows the benefits of good forecasting. Without this insight, the company profiled – and still in its early days of development – would have been seriously hindered.

Given the complexity of today’s businesses, companies should be wary of the tools they select for forecasting. Indeed, many are using solutions that simply aren’t sophisticated enough to handle the task at hand.

The go-to tool for forecasting in almost all industries is the traditional spreadsheet, meaning businesses open themselves to well-documented risks such as calculation performance, a lack of transparency and perhaps the most pressing issue of all – errors.  And then, once a company has invested time to build a spreadsheet model robust enough to capture the key drivers of the business, often the nature of the forecast has changed.

Forecasting is time consuming, and can involve consolidating, summarizing, communicating, explaining and reviewing. Unfortunately for businesses, the hours and weeks spent creating forecasts means they can potentially become redundant after completion – with forecast-horizons passing or the initial conditions changing. Because of these challenges, the frequency of accurate forecasting within a company suffers.

Some successful companies incorporate a minimum of an 18-month rolling forecast. This allows them to ‘peek’ around the corner early on, leading to an increased speed of planning and budgeting – generally these companies are well-oiled ships and start by forecasting the future as a basis for all decisions. But such companies are rare.

Only 19% of survey respondents to the PwC budgeting and forecasting survey used a “best-in-breed” planning and forecasting application to aid in the rapid creation of accurate forecasts. In the same survey, ATK’s director of finance, Michael Varecka, draws interesting insights into the mindset of analysts, suggesting one way to ease the transition away from spreadsheets is to introduce best-in-breed systems which can accommodate a degree of personalisation whilst staying close to the financial truth. The goal is to reduce spreadsheet reliance, not to fully eliminate it.

The message to businesses needs to be loud and clear. If organisations lack confidence or accuracy in their forecasts, their conservative approach will lead to missed opportunities – or on the flip side – an overly optimistic forecast will mean they rely on opportunities that simply don’t exist. But get forecasting right and you’re in for a much easier ride.

Macroeconomic turbulence is the process that sets in motion change from the largest financial institutions, down to the smallest of back pocket wallets. Here to provide practiced and proven guidance on how to navigate the macroeconomics maze around us, while keeping one step ahead, is Rob Douglas, Vice President of UK & Ireland for Adaptive Insights.

As organisations enter 2017, they find themselves in a chaotic macroeconomic environment. With a great deal of change in 2016, and much more in store for 2017 as the effects of Brexit, the new American government, and countless other factors take hold, it has the potential to be a volatile year. Indeed, in a recent CFO Indicator survey, eight out of 10 CFOs considered it likely or very likely that market volatility will continue.

To cope with these market conditions, finance teams are needing to become more strategic and visibility into business data—including both financial and non-financial KPIs—is key. In another CFO Indicator survey, we found that 45 percent of CFOs report that they are currently fulfilling the role of chief data officer, compared to only 16 percent who said that the CIO has this responsibility. It is clear that CFOs and their teams are well placed to become the strategic business advisor as data ownership is shifting to the office of the CFO.

Active planning

In a constantly changing environment, finance departments can become more agile by taking an active vs. static approach to planning. Specifically, finance teams must embrace a process that is collaborative, comprehensive, and continuous to adopt an active planning process. This active planning approach allows finance to shift into a leadership and guiding role, instead of being mired in the drudgery of back-office transactional tasks.

And, as teams embrace active planning, three clear benefits start to emerge:

A holistic view of the business

CFOs are being tasked with not only understanding and communicating financial results but with helping the organisation to understand the operational drivers behind them–a key factor for business agility in a volatile market. This requires much more detailed analysis of business KPIs, many of which are non-financial, and therefore involves greater collaboration and integration across the business. As such, to be agile in 2017’s changing market conditions, the finance department must have a holistic view of the business.

Fundamentally, there needs to be a single source of trusted data that is always fresh and always live, meaning that you never have to manually recalculate to be sure the numbers are up-to-date or consistent across models and reports. To be truly effective, teams will need to integrate systems into a single source, including data integration from ERP, CRM and HR systems, to name a few.

According to the CFO Indicator, CFOs expect non-financial KPIs to comprise up to 30 percent of the total KPIs tracked in two years’ time, including data as varied as customer satisfaction, employee retention, supply chain contract renewals, and more.  Once operational and financial data are assimilated into a single source of truth, it can be incorporated into reporting, planning, and forecasting. By bringing these together, the office of finance can help business leaders across the organisation to spot trends early, which will help mitigate risk and open up opportunities.

That said, identifying non-financial KPIs can be a difficult process. It requires the finance team to dig deeply into the business and to spend time engaging in analysis that leads to greater business insights. This can be done by a member of the finance team spending time in another part of the business or through training programmes that aim to generate broader business knowledge. It is important that both finance and business users are involved in everyday planning and forecasting. This inherently leads to collaboration and consequently better overall plans, budgets and forecasts, as well as organisation-wide visibility into KPIs and business performance. After all, the impact of missed forecasts can be felt far and wide, from resource allocations and supply chain management to shareholder confidence.

“What-if” analysis and multiple scenario models

The macroeconomic environment is a vitally important consideration for any business, not least because it is a factor which no business can control. A business can, however, plan and model for different scenarios to ensure that it can withstand a variety of potential consequences. In 2017, this could be a change in exchange rates due to the shifting value of the Pound or taking into account a different level of taxation due to amended trade agreements between the United Kingdom and United States.

Ultimately, ensuring a business can remain agile and withstand the tremors of a volatile market is no easy task. With data that stretches across the breadth of the business—incorporating both financial and non-financial elements—it is possible for CFOs to get a real-time, accurate picture of what the business looks like in the current environment. If done effectively, the true expertise of the finance team can then be put into play, as it has the data to analyse, model, and forecast for the future. Creating “what-if” scenarios, based on highly accurate and reliable data, will be invaluable to businesses in 2017 as they traverse an unpredictable landscape.

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