Written by Todd McElhatton, CFO Adequate
In today's time of uncertainty, the role of the CFO has become increasingly challenging. The supply chain of essential goods and services that form the basis of your revenue often falls outside your direct supervision and can be disrupted in unexpected ways. Demand patterns can change in unexpected ways, especially when they interact with cultural trends and brand reputation. Perhaps most importantly, macroeconomic pressures may create friction and liquidity in any financial variable.
However, these issues must be addressed strategically, and CFOs need to balance maintaining short-term flexibility while establishing and sticking to a long-term strategy. They cannot be restricted to eating only what is directly in front of them. If they do, they risk fighting for an unstable future. As such, CFOs want to know what to expect from the future so they can prepare without having to constantly pivot; They are searching for a greater vision to navigate these new trends and challenges with grace, and ultimately rise above uncertainty.
Think more about the future
There is now a robust range of methods available to help CFOs meet the demands placed on them. The fundamental flexibility offered by cloud platforms – enabling more flexible working methods, scalable capacity, and right-sized expenditures – has of course been a major story over the past decade as digital transformation has ramped up across various sectors. Likewise, and equally important, technology has enabled a more proactive approach to future revenues.
Traditionally, enhancing internal efficiency has probably been the main way a CFO can intervene in business challenges. However, even as market conditions have become more unpredictable and more turbulent, technology has also increasingly enabled companies to adapt their behavior, and thus their spending, in light of changing circumstances. Business leaders can use technology to identify trends and pivot when necessary, taking the guesswork out of building an agile strategy. This gives them a more advanced, accurate and impactful way to manage spend in response to market changes.
When considering the range of stakeholders that CFOs now need to support through intelligent planning and intervention, this insight is of great value. For example, by using the right technologies, they can reassure stakeholders that they have a realistic path to seeing projects and investing in the future, which in turn supports job security and career ambitions. For boards, these tools can help ensure that products or services approved today will still be fully supported tomorrow, even as the market changes.
Tools to secure steady revenue streams
Although there is no crystal ball for the future, the reality of rising interest rates and continued pressure on budgets means that improving profitability and efficiency will continue to be critical. This makes tools that automate tasks increasingly valuable in helping to streamline processes, as well as providing a reliable and stable picture of future revenues. Survey data also supports a strong desire to use these tools, with 79% of revenue accounting leaders stating that higher levels of automation are needed. Despite this, many executives don't realize the impact revenue automation can have on a business, with 67% of respondents in the same survey saying it's difficult to get buy-in from finance and accounting leadership.
Although recurring revenue models are by no means new, there is significant scope for them to deliver greater value over the long term with the ability to respond to real-time changes when approached strategically. As a basis, implementing predictable business models makes it possible to confidently forecast the underlying revenue stream for the next six to twelve months, supporting more efficient financial planning. Subscription models, for example, offer customers goods and services for a recurring fee rather than a one-time investment. Likewise, consumption-based pricing strategies follow standard subscription models in spreading to other areas of the business as a way to deliver value to customers. 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 provide much greater certainty about future revenue than traditional one-time customer interactions. Businesses with subscription models can confidently forecast potential future revenue range based on historical user retention and real-time trends. Likewise, consumption-based pricing stimulates continuous custom and thus limits peaks and troughs in revenue.
Combining these models with the right technology, such as automated revenue recognition tools, means CFOs can accurately forecast revenue targets in real time. For example, by having access to a direct view of the revenues recognized by the business model across different geographies, they can be enabled to set targets with certainty while responding to market changes as they occur. Whether it's identifying the causes of revenue changes or being able to proactively resolve revenue recognition discrepancies, they can highlight the landscape and plan accordingly. In turn, by responding to challenges and opportunities in real-time, they can foster stronger customer relationships, paving the way for brand equity that fosters a more stable future outlook.
Again, it's about finding that healthy balance: companies can and should implement initiatives to react more quickly to changing circumstances, and building the best internal workflows to turn investment into revenue is always essential. If they don't also look at how technology can pave a smoother revenue path before the business moves forward, they are leaving a vital tool in the toolbox.
