Uniting tech & financial foresight: how CFOs can ‘see’ into the future
By Todd McElhatton, CFO, Zuora
In today’s time of uncertainty, the role of a CFO is growing increasingly challenging. The supply chain of essential goods and services that underlie your revenue often sits outside of direct oversight and can be disrupted in unforeseeable ways. Demand patterns can shift in unpredictable ways, especially as they interact with cultural trends and brand reputation. And, perhaps above all, macroeconomic pressures can create both friction and fluidity in any given financial variable.
Yet these issues need to be tackled strategically, and CFOs need to strike a balance between staying agile in the short-term while setting a long-term strategy and sticking to it. They can’t get tied down with only addressing what is immediately in front of them. If they do, they risk fighting for a future that is unstable from the offset. As such, CFOs want to know what to expect from the future so that they can prepare without having to constantly pivot; they’re seeking greater visibility to navigate these new trends and challenges nimbly, and ultimately rise above uncertainty.
Thinking further ahead
There are now a powerful range of approaches available to help CFOs meet the demands being placed on them. The fundamental agility offered by cloud platforms – enabling more flexible working styles, scalable capacity, and closely right-sized expenses – has of course been a major story over the last decade as digital transformation has ramped up across different sectors. Likewise, and even just as important, technology has empowered a more proactive approach to future revenue.
Traditionally, driving internal efficiency may have been the major way that a CFO could intervene in business challenges. However, even as market conditions have become more unpredictable and disruptive, technology has also increasingly enabled businesses to adapt their behaviour, and therefore their spend, in light of changing conditions. Business leaders can use technology to spot trends and pivot where necessary, taking the guesswork out of building a resilient strategy. This grants them a more forward-thinking, granular, and impactful way of managing spend in response to market changes.
When considering the range of stakeholders CFOs now need to support with smart planning and intervention, such visibility is incredibly valuable. For example, with the right technologies they can assure shareholders that they have a realistic runway to see projects through and invest in the future, in turn supporting job security and career ambitions. For boards of directors, these tools can help ensure that products or services adopted today will still be fully supported tomorrow, even amidst market changes.
Tools to secure steady revenue streams
While there is no crystal ball for the future, the reality of rising interest rates and budgets being constantly squeezed means that improving profitability and efficiencies will continue to be critical. This makes tools that automate tasks increasingly valuable in helping to streamline processes, as well as delivering a reliable and stable picture of future revenue. Survey data supports a strong desire for these tools too, with 79% of revenue accounting leaders stating that there’s a need for higher levels of automation. Despite this, many executives aren’t recognising the impact that revenue automation can have on the business, as 67% of respondents in the same survey said it’s a struggle to get buy-in from finance and accounting leadership.
While recurring revenue models are by no means new, there’s huge scope for them to offer greater long-term value while being able to respond to changes in real-time when approached strategically. As a foundation, implementing predictable business models makes it possible to confidently forecast a baseline revenue stream for the next six to twelve months, supporting much more efficient financial planning. Subscription models, for instance, offer customers goods and services for a recurring charge rather than a one-off investment. Similarly, consumption-based pricing strategies are following standard subscription models in spreading to other areas of business as a way of delivering value to the customer. There’s even an opportunity to combine subscription and consumption to balance predictability and flexibility.
What these tactics have in common is that they can deliver much greater certainty in future revenue than traditional one-off customer interactions. Businesses with subscription models can confidently predict a likely revenue range further into the future on the basis of historical user retention and real-time trends. Consumption-based pricing, likewise, incentivises ongoing custom and so levels out the peaks and troughs of revenue.
Combining these models with the right technology, such as automated revenue recognition tools, means that CFOs can accurately forecast revenue targets in real-time. For example, with access to a live view of the revenue being recognised by the business model across different geographies, they can be empowered to set targets with certainty while responding to market changes as they happen. Whether it’s identifying causes of revenue changes or being able to proactively resolve variances in revenue recognition, they can shine a light on the landscape and plan accordingly. In turn, by responding to challenges and opportunities in real time, they can nurture stronger customer relationships, paving the way for brand equity that bolsters a more stable future forecast.
Again, it’s about finding that healthy balance: businesses can and should implement initiatives to react more quickly to changing conditions, and building the best internal workflows to turn investment into revenue is always an imperative. If they’re not also looking at how technology can clear a smoother revenue path ahead of the business’s progress, though, they are leaving a vital tool in the toolbox.
Global Banking & Finance Review
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