CFOs step up to face their new enemy: Poor data

Finance leaders say that data quality is now one of the biggest threats to their reputation. As companies rely increasingly on data to drive performance, the risks of misreporting due to poor data have become critical.

Increasing data quality brings many positives. In the IBM 2021 Global C-Suite Study, 70% of leading CFOs say implementing enterprise-wide data standards is a top priority to help their organisations consolidate systems, cut costs, and scale rapidly. Many CEOs are asking finance leaders to take this responsibility — for example, in overseeing standardisation, clean-ups, and integrations — as they believe they are best placed to do it.

Boards want more insights from sophisticated and real-time reporting and analytics. These insights are risky or have limited use if not based on consistent, reliable data. But it is a tough challenge as, all too often, raw data is messy and CFOs struggle to keep it clean and consistent.


UK-based Simon Bittlestone, FCMA, CGMA, is CEO at Metapraxis, the financial analytics technology business, founder of the Tomorrow’s CFO initiative, and a CIMA global council member. “As organisations become more data-driven, the effects of poor data on decisions and resulting performance will become much more serious,” Bittlestone said.

Many CFOs could see cleaning up and organising internal and external data as a burden in addition to their other responsibilities. But they may also see it as the lesser of two evils.

“The CFO needs to stand by the insights they offer to support critical business decisions, so they might as well own it,” said Diarmuid Cotter, ACMA, CGMA, who has 20 years of senior finance experience, most recently as divisional CFO of IBM Digital Sales Europe. “But more importantly, it offers significant opportunity to transform the CFO role and finance function. With a sound foundation of quality, cloud-based data, they can transform finance by automating areas such as accounts receivable, accounts payable, reconciliations, and reports, freeing them for more value-adding activity.”


Data quality stresses

Ireland-based Kunwar Chadha, FCMA, CGMA, head of EMEA FP&A at Google affiliate Fitbit, said outdated data is a typical quality issue. “For example, in a previous role, when we were raising funds, investors requested revenue forecasts,” he said. “When we looked at our sales pipeline data closely, we came across a number of old leads, so some data cleansing was required. As revenue forecasts were visible to key internal and external stakeholders, there was a natural overlap where finance collaborated with sales to ensure accuracy of our pipeline data. In Europe, the General Data Protection Regulation (GDPR) — which carry financial risks — is another reason for the CFO to collaborate cross functionally on data hygiene.”

Nearly 70% of organisations have made a significant business decision with inaccurate financial data, according to a global survey by software company BlackLine. Also, 55% of finance leaders are not confident they can identify financial errors before reporting results. It is no wonder there have been so many high-profile stories about the harmful effects of misreporting.

But data from outside the finance department and outside the organisation can be even less reliable.

Sydney-based Rachel Grimes, CPA (Australia), former president of the International Federation of Accountants, said alongside cybersecurity, poor data is now the biggest issue that could “wipe out” boards and management.

This pressure has increased further during the COVID-19 pandemic. “One pressure on CFOs has been the thirsty demand for data by management, market, and regulators,” she said. “In some instances, regulators have taken data to interpret themselves, which can lead to different conclusions. Some regulators are also looking to publish data before the standard reporting season, creating potential market disclosure issues. In this environment, accuracy has become paramount.”


Slaying the bad data beast

Unless you are the CFO of a startup with unlimited investment, the idea of perfect data is a fairy tale. Organisations of all sizes are grappling with myriad systems that do not talk clearly to one another, which makes managing data a serious challenge.

Ensuring quality requires a huge effort to manipulate, validate, reconcile data, and correct errors — even before you start combining it with external information.

“In a previous role, we had a cloud hybrid offering that enabled easier data collection, organisation, and analysis. Combining this with analytical tools simplified data consolidation and cleaning, instead of trying to do it the old-fashioned way in spreadsheets. Off-the-shelf business intelligence systems can do much the same.”, Cotter said.

To handle these tools, the CFO may not need new skills themselves, but they must understand the new mix of skills they need to train or bring into the finance team.

“The ideal is a data scientist or analyst who also has strong business knowledge,” Cotter said. “The need to identify people with such skills is urgent and a major roadblock, due to the lack of such talent available.”

CFOs are looking to build the optimal mix of expertise and tools to form data governance and management teams with a framework for quality monitoring and support. This requires an understanding of governance structures, such as how to establish a network of data stewards, said John Pearson, ACMA, CGMA, that has worked in IT risk, assurance, and data management for 16 years.

This is supported by a central data management team; plus framework fundamentals such as the data management lifecycle, key control points, and how the various tools support each phase, he said. Understanding these structures will enable the CFO to build teams and budget appropriately to deliver control improvements and efficiency returns, without needing more in-depth technical knowledge.


One benefit and challenge of taking on the data quality role is that teams have an opportunity to expand their technological, analytical, and presentation skills. If they can get all these aspects right, it allows CFOs to lead their businesses confidently into exciting new territory.


Adapted from “CFOs step up to face their new enemy: Poor data”, By Tim Cooper, 14 April 2021 in Finance Management

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