For many consumer goods (CG) manufacturers, the second largest line item on their P&L is trade spend. Finance keeps close tabs on all trade finances—including detailed revenues, trade spending and product information. They provide big picture reporting on account, brand, category, region and spend type to focus activities designed to maximize value for the company. By leveraging some of the newer tools available today, can the typical CG CFO deliver additional strategic input?
A recent article in CFO, “Vision Quest: Expectations for CFOs to Add Strategic Value Have Never Been Higher,” emphasized the need for every company to have a strategic CFO. This is not a new idea, but the changes in the CG business environment have strengthened the case for strategic input from finance.
Becoming more strategic from a financial perspective has always been difficult given that most financial analysis is done in the rear view mirror, reporting on what has happened rather than influencing what could happen. For instance, the CFO can analyze the details as to why trade spend is up from 10 to 30 percent in recent events, evaluate the outcomes, and then apply those learnings when planning the next event. Imagine the potential upside opportunity a CFO could deliver if they had the tools and data to predict how an event will perform—and adjust in real time it if it isn’t reaching its full potential.
Upside identification has typically been limited to the realm of sales, marketing, and brand. More recently through advancement in integrated business planning, all departments are pushed together at least once a year to balance between risk and upside when generating the next period plan. Therefore, one must ask, is there value in providing an environment where this cross department collaboration can happen on a more frequent basis? And using that model can departments like finance participate more strategically with other departments striving to find upside for the business?
Generating upside opportunities comes from combining all the data that pertains to the trade promotion event including shipment, wholesaler SPINS, syndicated category (POS point of Sale at Shelf) and trade spend data. Strategic CFOs can participate by analyzing this information to better understand the company’s financial upside, performance and risk. “Indeed, in KPMG’s CEO survey, three of the top five CFO initiatives thought to add the most strategic value to an organization involved financial data analysis or forecasting, with ‘achieving profitable growth through financial data analysis’ at number one,” cited Edward Teach in the Vision Quest article.
In many cases, systems are already deployed which can provide access to data, which if properly presented as part of a dashboard or workflow, will provide actionable insights designed to improve business performance. Typical data sources include ERP, CRM, retail management, trade management, sales agencies, distributors and more data which are non-integrated. A dashboard can consolidate the data sources into specific views of the business designed for the CFO.
Let’s take budget overspends as an example. They are difficult to track and impossible to correct in any measureable way. Using a dashboard, a CFO can:
- Track trade budget objectives at all levels of geography from account to national roll-ups
- Track trade budgets at all levels of product from SKU or size/flavor to all-product roll-up
- Manage budgets separately or summarize them across different activities (slotting, MDF, etc.)
- Expense trade promotion activity to the correct year and fund
- Identify over-spends before they happen by tracking projected liability versus other measures, including earned funds, actual, budgeted and planned spending
This information can help the CFO with information that can be shared with sales, marketing and brand to ensure they know the current situation and can address it. Additionally, the information can be used to set the CEO’s and shareholders’ expectations.
For more information, see our data analysis software, AFS™ G2.