Why CFOs are interested in Sales & Operations Planning ?

[Former Member]

From the days working for Pepsi’s CFO few years ago and over the years interacting with several CFOs – large/small companies, realized CFO/finance of manufacturing companies are much interested in Sales & Operations Planning. Why? I share here few reasons

CFOs role has evolved into true business finance advisor and forward looking

Gone are the days when CFOs are mere number crunchers and accountants, post mortem reporters. While the financial reporting and stewardship is still an important responsibility of CFOs, they have evolved into a more business finance advisor role. They also have heavy responsibility on the bottom line and are held accountable for the forward looking outlook. This has resulted in CFOs being on top of Sales & Operations process to stay abreast of what’s happening on a regular basis. The Executive S&OP meeting is something they look forward to.

CFOs/Finance are decentralized and spread across the company

In most companies, especially the large enterprises, finance function is much decentralized. Also there are business CFO roles that are effectively supporting sales leaders, or operation leaders and have dotted line to the Group CFOs. These finance leaders are staying close to Sales, Operations and other functions of the company – playing the role of converting everything into financial terms and helping the business to make right decisions –profitably aligned. These CFOs stay very close to Sales & Operations planning process, to help both in top line and bottom line progress.

Sales & Operations planning process drive huge financial KPIs and performance

Here I would like to draw your attention to the latest research findings by Supply Chain Insights who have done comprehensive research on how supply chain /Sales & Operations drive key financial KPIs and market capitalization. As you can see, across various dimensions such as growth, cycle, profitability and complexity, the sales & operations drivers drive financial performance. CFOs would like to stay on top of this and can rely on this as its coming from the fundamentals of business. Monthly Executive S&OP meeting becomes a key collaborative interface that helps them stay abreast with the business and ensure profitable alignment of demand and supply.

Dynamic forecasting for better forecast reliability

I had touched upon how companies are looking at more real time dynamic forecasting in an earlier blog. CFOs especially the ones who have to externally report earnings forecast, have to get a better hang of forecast reliability. While they do this in their quarterly forecast cycle, they are eager to learn what’s going on in Sales & Operations Planning process. So essentially they look at Sales & Operations plans becoming key input to financial forecast process (see my recent blog on how these process are different, and a research on how both should be connected), and also adjust for risks/economic outlook before it’s taken to external stakeholders. This ensures targets can be changed, resources allocated and decisions made in dynamic mode.

Analytics/Big Data, collaboration and simulation technologies

Microsoft Excel has for a long time dominated how Sales & Operations Planning process is managed, often being tough for CFOs/Finance to be involved in the process and getting visibility to the information. But with availability of new technologies such as SAP Sales & Operations Planning powered by HANA, deployed in cloud, it’s made possible for great alignment between Sales & Operations and Finance. This solution has built-in a model that aligns demand, supply and finance. Also it allows for simulation and what if scenarios to enable comparing multiple scenarios especially on how each affects financial KPIs (with prebuilt dashboards) that CFOs would be very interested. Built natively on in-memory technology, SAP HANA, it’s possible to calculate and report large volumes of data very fast, supporting big data. Lastly has great collaborative capabilities enabled by SAP JAM that ensures CFOs and other cross functional team can be involved in the Sales & Operations planning process.

Hope you got a good sense of why and how CFOs can stay close to Sales & Operations Planning

Your comments are welcome….