Shane Schick, Author at Retained Learnings Magazine

Better together: What research tells us about the future of CFO-CMO relationships

Posted on 13 December 202213 December 2022 by Shane Schick

Let’s start by getting all the stereotypes out of the way: in one corner sits the bean counter, the penny pincher, focused solely on the numbers and how much money is going out the door.

In the other corner sits the executive who oversees what is largely perceived as a cost centre – the place where valuable resources are put towards developing creative assets that may or may not help the bottom line.

Like most stereotypes there may have been a grain of truth to this in the past, but hopefully most CFOs and CMOs don’t see each other this way today. They need to have a healthy relationship based upon mutual respect and a shared understanding of their common objectives. Otherwise, a lack of alignment between these two functions can make it difficult for organizations to weather the challenges in front of them.

As they look ahead to 2023, for instance, Canadian businesses are grappling with high inflation, prolonged supply chain disruption and ongoing questions about where employees should work. CMOs need to continue building strong brands despite these issues if they are going to appeal to cost-conscious customers. CFOs, meanwhile, have to ensure marketers’ efforts deliver the intended return.

The data behind the stereotype

Toronto-based media consulting group Empathy Inc. has been conducting a research study that surveys about 50 representatives from both leadership functions for the past two years. The most recent iteration shows conversations between CFOs and CMOs are improving, but there are important discussions they still need to have.

Despite ongoing economic uncertainty, for instance, 83 per cent of CFOs believe they will increase marketing budgets in the next fiscal year. This was substantially higher than those in the CMO camp, where 73 per cent predicted they would have more resources in 2023.

According to Empathy’s president Mo Dezyanian, greater finance and marketing alignment may be a byproduct of the COVID-19 pandemic, which forced many in the C-suite to work more closely together than ever before.

“For the past few years, all of a sudden marketers have had to be concerned with things like cash flow, which traditionally wasn’t their problem, or their jurisdiction,” Dezyanian told Retained Learnings. “The gaps in terms of their outlooks and their priorities aren’t as wide any more.”

When it comes to setting goals, however, six out of 10 CFOs feel they don’t have enough information to set marketing goals, compared with 73 per cent of marketers who have greater confidence in identifying the right targets. Amrita Gurney, Float’s head of marketing, said this is part of an education process that has been ongoing between CMOs and their peers in finance.

The gaps in terms of their outlooks and their priorities aren’t as wide any more.

Mo Dezyanian, President of Empathy Inc

“Marketing is understandably a black box to people who don’t work in this department,” she said. “It’s a broad discipline and there isn’t a perfect science to measure direct returns from every investment.”

Building a better budgeting process

One way to get a better handle on ROI could be fine-tuning how budgets are developed. For example, the research found that more than half of CMOs begin the budgeting process two to three months before the new fiscal year, but only 10 per cent of finance leaders get involved that early.

During turbulent periods like the pandemic – and even now with a potential recession looming – Dezyanian said it’s more natural for businesses to condense planning cycles compared with times of relative prosperity. The real question is whether budgeting can become a more collaborative exercise between CMOs and CFOs.

At the Toronto-based CFO Centre, COO Paul Nagpal and his team help pair organizations with CFOs who can work with them on a fractional basis. He said marketing leaders have traditionally spent a lot of time preparing a budget for CFOs to approve, rather than getting their input and buy-in leading up to the discussion.

“When finance is engaged more often, CFOs are much more inclined to be onside with the budget for the next year, because they already know how things are going and they’re seeing that success,” he explained. “They’re also better able to understand the justification for either additional capital, or reallocated capital.”

Gurney agreed that taking the time upfront to share your strategy and decision-making process is the best way to create common ground with finance.

“CFOs are responsible for stewarding the company financially – they are not our enemy,” she said. “In fact, they are our partners. Working closely with finance has made me a better marketer by better connecting marketing investments to outcomes and balancing short term and long term bets.”

Nagpal said the results of Empathy’s research indicate the next 12 months could be a critical litmus test for CFO-CMO relationships. The fact that finance leaders are projecting a larger marketing budget suggests they’re ready to let marketers demonstrate the kind of contribution they can make during difficult moments in business. Marketing, in other words, will be seen as more than a series of costly ad campaigns but as a strategic lever for revenue growth.

“If the market becomes more challenging next year, investing in marketing is a way to double down and continue to reinforce and build your relationships with your customers,” he said. “If CMOs can continue to build that trust, CFOs are going to see that putting a little bit more money towards it will then reap longer-term dividends.”

Regaining confidence in revenue projection

Reaching that point will likely require an advanced approach to managing and harnessing the power of data. Empathy’s report found more than a third of marketers rely on past performance to set new budgets versus 18 per cent two years ago. On the finance side, however, only 19 per cent of CFOs use forecasting based on historicals compared with 29 per cent in 2020. Instead, 33 per cent said they see market intelligence as key to informing budget decisions.

“It’s almost like they’ve sort of lost that confidence in this revenue projection exercise that they were so good at,” Dezyanian said. “Before the pandemic they lived through a long period of stability. Now they’re looking outside of the company for answers. That’s a great opportunity and a great message for the marketing side of the business, because that’s what marketing is always supposed to help with.”

For example, CMOs and their teams can empower finance leaders with research, consumer sentiment from focus groups and other forms of insight to complement or build upon the internal data CFOs have traditionally relied upon. Nagpal pointed out that marketing itself has become far more data-driven than the days where much of the impact from advertising seemed intangible or difficult to quantify.

It’s not just up to marketers to continue moving the relationship forward, of course. Gurney recalled her previous role with CrowdRiff, where she said the VP of Finance Jody Davis treated her as a peer, rather than taking a top-down approach.

“He worked alongside me to share how he was modeling our budgets, and genuinely listened to my recommendations on how to make calls on investments in marketing,” said Gurney, adding that the situation is similar with Float’s finance leader, Jennifer McNamee. “Jen spends time with me to learn how I make decisions, how I measure returns, and we have a healthy back and forth on how to arrive at the right decisions.

“What I appreciate about both of them is that they know I am ultimately responsible for my department’s targets,” Gurney added. “They provide good perspective and top line guidelines that have helped me make better decisions while still having a lot of control over what my team does.”

Nagpal agreed that the road to alignment between finance and marketing is inevitably a two-way street, where a commitment to communicate well and often will make the difference. This is something many CFOs have already been focusing on as they reimagine their role.

“When the CFO comes in, they’re not just arriving to work with the CEO and the finance team,” he said. “They need to work across all departments, all divisions, to understand what’s happening in the business. That means marketing. It means sales. When you have that kind of visibility into the organization it just transforms the ability of the CFO to add more value. It makes the organization better, and it makes for a better CFO.”

The art of managing corporate costs amidst macro challenges

Posted on 7 November 202228 November 2022 by Shane Schick

The ‘C’ in his title may not stand for “creative,” but Brian Goffenberg is a good example of a finance leader who approaches expense management almost like an artist.

As the CFO of VitalHub, a Toronto-based provider of health-care applications, Goffenberg has learned that smart budgeting requires vision – or in other words, being able to effectively imagine what a company might need in the future. Then, as business conditions change, he works with his team to paint a picture of what success could look like, even if it means spending less money.

The result is that Goffenberg feels VitalHub is in a strong position to weather the current period of economic uncertainty, even as forces such as rising inflation put increased pressure on everything from wages to pricing.

“It’s always been our culture that we’ve been pretty tight and watch what we spend,” Goffenberg told Retained Learnings in a recent interview. “We set our budgets and we’ve managed them to the right levels. For us it’s pretty much business as usual.”

Expense management becomes a top business priority

Goffenberg’s perspective is a shining light against the backdrop of the predominant economic narrative

According to the most recent business outlook survey from the Bank of Canada, for example, overall positive sentiment has dropped from approximately 49%in August 2022 to about 25% as of October. More firms have also said their future sales indicators look worse than a year ago.

Meanwhile, Scotiabank’s third annual Path to Impact report found that nearly a third of Canadian small businesses say their number one priority over the next three months will be finding places to cut costs.

“People have to understand that money is going to be hard to come by in the next little while,” Goffenberg said. “Interest rates are going to be higher. If you go to the market to raise funds, it’s going to be harder. So you absolutely have to hunker down and make sure that whatever you’ve got goes as far as it can.”

This reality doesn’t have to be as doom-and-gloom as it may sound. There’s a path to optimism, according to Goffenberg. Getting a handle on expense management could help future-proof startups and mid-sized companies to be more agile, resilient and ultimately more successful.

“When you become less optimistic about the numbers in terms of what you can sell, it puts a greater scrutiny on your product,” he said. “You become much more aware of risk and how to run your business. It can actually be healthier than operating a business in the more frothy times because it’s a better test of your market.”

That said, Goffenberg acknowledged that there is a whole generation of finance professionals who haven’t faced this kind of economic turbulence before. He offered some of his core expense management principles to help guide his peers towards making the tough decisions that may come up:

1. Draw a realistic map of your financial runway

Take stock of your existing cash flow and how long you could manage if it were to be impacted by business disruption.

Do it sooner rather than later. According to Goffenberg, a mistake that companies often make is waiting until it’s too late to steer through economic turbulence. It’s impossible to maintain clarity with respect to expenses unless you’ve done your diligence upfront.

“Most entrepreneurs, and people in general, are pretty optimistic by nature,” he said. “If you’ve got a business that’s generating cash, then make sure that it’s generating the right amount of cash. And if it’s not generating cash, then you’ve got to be pretty sure how long your runway is because you’re going to have to go to market somewhere to get financing. And the sooner you start doing it, the better.”

2. Gain visibility into current expenses and spending trends

Sometimes when economic turbulence nears, leadership teams gather to review where their money has been going. If the result is a lot of surprised or even horrified expressions on people’s faces, Goffenberg said it can reflect a corporate culture where tracking and clear accountability have not been adequately developed.

“You have to start that (culture-building process) way earlier,” he said. “If you’re not yet making a profit, you’re sending shareholder’s money, or the bank’s money. You can’t run a business that way.”

While expense management might have been more difficult to do in the days when the work involved a lot of paper and manual effort, Gottenberg said technology is offering a better approach for businesses of every size.

“I mean, the fact that you can see spending happening in real time means there is less that slips through the cracks – fewer issues that you would otherwise only find out about a month later,” he said. “That has definitely helped.”

3. Prioritize the expenses that contribute directly to customer experiences

You might need to pull back on how much goes towards office supplies, but there will be other areas where the decision to spend is less cut and dried. That is why Goffenberg likened the role of finance leaders to being a sort of chameleon.

Much like the way chameleons change colours depending on their environment, for example, working in finance means occasionally looking beyond the bottom line and putting themselves in the shoes of those they’re serving. Some expenses are important investments, especially with respect to converting prospects into buyers or building customer loyalty.

“I think you want to safeguard the customer experience as much as possible,” he said. “You definitely don’t want to erode that, because this is what’s keeping the lights on, for the most part.”

Not a customer experience expert? That’s okay, because organizations like the Customer Strategy Alliance have done research that ranks areas of investment and common priorities.

4. Empower and advise (but respect) the CEO

CFOs don’t oversee expense management entirely on their own, of course. Beyond their finance team, they also have to collaborate with many other stakeholders, including the most influential leader of all — the CEO.

Recent data from market research firm Gartner found CEOs and CFOs are aligned on many areas of cost-cutting, such as M&As, but they’re not always going to agree. That’s actually a sign of a healthy relationship, according to Goffenberg.

“The CEO and CFO have to challenge one another,” he said. “At the end of the day, though, I think the CFO needs to understand that they’re the No. 2 person, not No. 1. If a CEO decides to go into a direction they disagree with, they’ve ultimately got to support that decision, even if it’s not their decision.”

5. Combine numbers with business acumen to separate needs from nice-to-haves

When employees sense that CFOs are tightening up the ship, there can be a natural impulse to become defensive about the spending within one’s own business function. Finance leaders need to navigate that by reminding everyone of the organization’s core mission and breaking down which expenses most directly advance that mission, Goffenberg said.

This is an art because some areas offer potential, but not guaranteed, results. He used a trade show as an example. A marketing department might argue exhibiting at a trade show will bring in more leads for the sales team. CFOs might want to ask to look at any data that shows the revenue that can be attributed to those activities in the past.

In the end, it’s a judgment call, and Goffenberg offers a handy “50%” rule of thumb to help make it. “You have to ask yourself the question, am I going to get the return? And if the answer is no – or if you’re less than 50 per cent positive it will – then you probably shouldn’t be spending there,” he said.

Final thoughts: The one expense everyone cares about

It’s one thing to say no to certain business trips or a team lunch. It’s quite another to have to start looking at headcount, Goffenberg said. Finance leaders who have never had to worry about making payroll will quickly learn that it’s far better to make strategic cutbacks in other areas before pruning the talent among your team.

This is a final way in which expense management could be thought of as an art form: no matter what you do, you’re going to have your fans and your critics. Goffenberg said focusing on the people you’re able to work with and mentor helps provide the kind of fulfillment that makes the more challenging times easier to ride out.

“Business is business. Sometimes it’s fun, sometimes it’s more stressful, but I’m fortunate that I’m in a business that’s growing and that operates in a nice field,” he said. “As long as I’m learning and I’m being challenged, I’m happy.”

Playbook: Take the pain out of your next NetSuite migration

Posted on 1 October 20224 October 2022 by Shane Schick

Jennifer McNamee and her team weren’t worried. They hadn’t heard the horror stories. There was a general “We’ve got this” vibe. It didn’t last long, though.

“We told ourselves, ‘We’ve implemented software platforms before, and we’ll do it again,’” McNamee, Float’s Senior Finance and Accounting Manager, recalled, harkening back to a project with a previous employer. “But then, halfway through, it was like, ‘Okay, actually, this is a huge beast.’

The beast, of course, was NetSuite, an integrated suite of applications that spans enterprise resource planning (ERP), customer relationship management (CRM) and e-commerce.

Founded in 1998 and owned by Oracle, the company has attracted customers in more than 28,000 organizations around the world, including Canadian firms like TD Bank. It has achieved the “Leader” position in Gartner’s most recent Market Quadrant in its category. It has strong reviews on sites like G2. Adopting it as a growing business, however, can have its challenges.

This is not necessarily a criticism of the product itself. It’s just that any time a company moves from technology with basic functionality to something more advanced, there is going to be a learning curve. Too often, people have to pursue that learning on their own.

With that in mind, Retained Learnings drew upon McNamee’s experience, prior to joining Float, to create a high level NetSuite upgrade playbook and help streamline this journey for fellow finance professionals.

Step 1: Review your business case for a NetSuite upgrade

It’s easy to understand why growing companies don’t start off with a platform like NetSuite. It would be like a single person buying a mansion as a first home: their life probably hasn’t got enough going on to fill all those rooms.

In a similar way, many companies typically set up their finance and accounting teams with tools that allow them to handle everyday transactions and keep costs down at the same time. QuickBooks is a great example of a product that’s suited for small businesses and early-stage startups. In the case of the company where McNamee worked previously, the finance team had been working with Xero.

Everything was going fine until the organization grew to the point where it had a U.S. subsidiary and consolidation was becoming more onerous.

“If you have multiple entities, you have to download both sets of financials, put them into a Google sheet and then do that consolidation manually,” she explained. “It just takes a lot and it’s pretty error prone.”

As a company takes on more subsidiaries, manual consolidation simply isn’t scalable. There are also multiple currencies to consider: McNamee’s company, for instance, was suddenly dealing not only with U.S. dollars but Euros.

If you’re still not sure if you’re ready to upgrade to NetSuite, think long-term. Jen recalls being in meetings about a possible exit strategy for her former employer and, whether you go public or private, NetSuite is a common thread among companies that move to the next level.

“It’s just a much more robust and trustworthy accounting tool. That’s something that investors in the market really like to see,” she said. “We had to step it up.”

Step 2: Budget for the time it takes to get NetSuite running

In addition to your company’s IT department, upgrading to NetSuite will need to draw upon the insights and experience of multiple stakeholders in your organization. This can create tension within some teams, where the time spent advising on a software deployment and participating in user testing means less time for the regular day-to-day tasks associated with managing finance.

As McNamee suggested earlier, however, sticking with manual consolidation can be an even bigger time suck. Depending on how often you’re closing the books – and many firms are moving to a continuous close – you might need finance and accounting team members working late, or even losing their weekends to get the job done.

Though the exact timeline for a NetSuite migration will vary from one organization to another, it’s probably better to err on the side of having the right stakeholders available for more hours than you initially expect.

“If I could redo it, I would not try and chip away at this project,” Jen said. “I would just say, ‘Okay, no – we’re working on this project full time for the next four or five months and then we’re done.’ Don’t try and just do it on the side of your desk. It will drive you crazy.”

Step 3: Bring on third-party experts who know how to customize

Consultants get a bad rap sometimes because they can be expensive. The reason those costs skyrocket in many cases, though, is because the consultants don’t fully understand the needs of their clients and aren’t prepared to ensure the technology is probably aligned with the nuances of a particular business.

McNamee has seen this challenge first-hand. When her former company moved to NetSuite, a team of consultants were initially brought on to guide the implementation. It became clear, however, that their approach was out-of-the-box and failed to meet the project’s goals.

On a daily basis, for example, the company would bring in all the batch transactions, including a deferred revenue component. That meant NetSuite had to be configured so that it could parse a daily batch of more than 1,000 transactions and automate the revenue recognition process.

Unfortunately, the initial migration led to ongoing errors in the reconciliations, which meant a lot of time going back and forth to the consulting team. Eventually she and her team found an independent contractor through word of mouth who was able to approach the NetSuite migration with the specific use cases in mind.

“We wasted all this money and time with those people, and we didn’t finish what we wanted to finish,” McNamee recalled. “(The independent contractor) cost lots of money, but she was really good. She developed a whole customized plan for us. And then we ended up finishing the project because of her.”

Step 4: Minimize business disruption – and remember the people

After four months with the initial consulting team, McNamee estimates working with the independent contractor took approximately another six months. There’s obviously no way to simply put consolidation and other finance/accounting tasks on hold, but switching over everything at once risked causing even greater disruption if anything went wrong.

That’s why, as with so many other projects, Jen’s firm decided to have Xero and NetSuite running in parallel. That way, as the ability to produce new reports using NetSuite went live, the team was able to evaluate whether they were getting the results they wanted and then continuing until NetSuite was fully operational.

“Don’t take on too much,” McNamee advised. “Take baby steps. Get a basic version going that you can live with.”

A project like this is never purely about technology, of course. It also represents change for all those who have been doing manual work or using tools with less functionality. Though they may appreciate moving to NeSuite, make sure you work with team members to understand their needs in transitioning to a new platform, including any ongoing support following initial training.

McNamee had been leading a team of two. One of those people had never used NetSuite, but she caught on fast. And the other one? “We actually specifically hired him because he had that NetSuite experience so we knew he would have no problems day to day,” she said.

If you’re a controller who’s considering or in the midst of moving to NetSuite, this may be a time to consider the skill sets you look for as you bring on more talent.

Step 5: Think beyond the go-live

As one of the early entrants in cloud-based finance software, NetSuite is constantly getting updated with new features and capabilities. At the time this playbook was being produced, Oracle had just introduced tools to manage rebates and trade promotions, as well as improvements to the way users can track estimated or proforma claims and disbursements.

Within your company, meanwhile, there may be an equal or even greater number of changes going on. Before she joined Float, McNamee said her former company had moved into a new business vertical. That led to taking another look at NetSuite to ensure the team knew how to track all the new data associated with the change. “As the business evolves, our use of NetSuite just became more and more sophisticated,” she said.

In some cases, you should even be prepared to walk through the entire planning, deploying, testing and go-live process to avoid any performance issues.

It’s about the destination, so embrace the journey

The good news is that McNamee has only good things to say about life after a NetSuite migration. She found, for example, that the technology not only brought time savings and improved accuracy, but greater comfort over the numbers when the time came for audits to be conducted.

Best of all, McNamee said she would even consider doing it all over again. Beyond the business benefits, she said she learned a lot and has come to recognize the game-changing opportunities that modern technology can bring to finance and accounting.

“It’s almost like it’s like a strategy game, because you have all these different objects,” she said. “And it’s all about how you assemble them in the most efficient way to get to the end goal. I like that about NetSuite.”

Spoken like someone who not only played that strategy game, but came out a winner.

RETAINED LEARNINGS

Author: Shane Schick