The Forecast for the CFO:

Improving the Outlook

for the Finance Function

This guide will explore the ever-changing

role of the CFO and establish how

software can help CFOs and finance

departments to address challenges.

2

Contents

3 Introduction 4 The Evolving Function of the CFO 5 The range of tasks undertaken by CFO

6 Top Priorities for the Future 6 Information: The “currency” of the finance department

7 Reducing Complexity 8 Comprehensive financial accounting information

9 Addressing Challenges Using Software 9 Supporting international growth 10 The importance of flexibility 11 Procurement and operating costs

12 Summary 12 The overall potential of software 13 Checklist: Choosing the right software for your needs

14 Introducing Sage ERP X3 14 The ERP solution that sets the foundations for international expansion and growth

3

Introduction

The Role of CFO

As Chief Financial Officer or CFO, Commercial

Manager, Head of Accounting or Head of Finance,

of a mid-sized to large business, you will be

responsible for the finance department, as well as a

key member of the senior management team. Your

daily operations will cover a broad range of tasks,

including both internal and external accounting.

Your workday is also characterised by many

challenges such as altered refinancing and

investment conditions, internationalisation,

technological developments and changing markets,

in addition to the substantial demands of your daily

operations. Your tasks are complex, your workload

and level of stress are correspondingly high.

You decisions and findings are based on in-depth

analysis into; market or competition, specific

business data such as sales, revenue and costs,

figures such as sales targets or key performance

indicators such as customer satisfaction. It is on this

basis that the company management make

decisions about the company's future, for example

decisions about investments, acquisitions, relocation

abroad or restructuring. You have to report in detail

on the strengths and weaknesses of your company,

critically review strategic projects with regards to

their (financial) feasibility, safeguard the profitability

and assets of your company, negotiate with

investors and creditors, build confidence and much

more.

To do this, excellent financial reporting is a

requirement, as well as a high level of specialist

expertise, an analytical way of thinking with

strategic open-mindedness and good communication

skills. The efficiency of your department as well as

the depth and quality of the information, all highly

depend upon the IT solution you use. And this is

often an area in which huge improvements are

necessary. Some IT solutions are highly functional,

but not designed for international use. Others are too

extensive for a mid-sized business or do not meet

current technological standards. Furthermore, some

cannot be adapted adequately to the requirements of

your company.

It can also be that the provider does not possess

sufficient expertise, its distribution channels are

complicated, or its processes are not flexible enough.

Due to the large range of software providers and

solutions on the market, it has become difficult and

time-consuming to find the right solution for your

needs. How are you, as a finance, but not an

IT expert, expected to negotiate your way around this

market? Initially, it is advisable to work with your IT

department to create an integrated technical concept

that describes as precisely as possible the

requirements of your company and your department

with regard to IT, and then to research the market on

this basis.

The following guidelines are intended to help you to

understand: how software can help you overcome

challenges you face, the considerations when

choosing the software that's right for your needs and

the questions you should ask suppliers and your IT

department.

4

The Evolving Function of the CFO

The workload and range of tasks of the CFO have

also, and increasingly in mid-sized businesses,

greatly changed in the last few years. You are now

more than ever required to be a strategist as much

as an executive and controller for your company.

You have to drive forward and advance the company

– but do so without any risks or side effects! In

economically turbulent times in particular, cost

management and risk evaluation move more sharply

into your focus.

You also have to look at specific market requirements,

for example partial invoices, imputed depreciation,

different evaluation methods, as well as implement legal

changes in Germany for external accounting, such as

the transmission of your balance sheet (electronic

balance sheet), or changes in taxation and bank

guidelines such as SEPA at a European level.

In mid-sized businesses especially, conflicts of

interest frequently arise between entrepreneurs that

are sometimes too visionary, or between those that

are too cautious, and the corporate interests that they

represent. In these cases, your role is often that of a

mediator.

Internationalisation is beneficial

– Particularly in mid-sized businesses

A large number of successful mid-sized businesses

are niche players with high value added density

and, at the same time, global market leaders in their

field. This means that you also have to facilitate

technological progress from a financial perspective,

secure long-term success and expand into new

markets.

Research has shown that international mid-sized

businesses are more successful than those that are

restricted to only one or few markets. Most CFOs see

expansion and internationalisation as the major

challenges of the future. Internationalisation and

sector know-how are therefore part of the core

expertise of CFOs in mid-sized businesses.

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The Evolving Function of the CFO

The range of tasks undertaken by the CFO

Strategic Operative Communicative

Annual financial statements

including auditor's certificate

Strategy implementation

Cash flow

Negotiations with investors

and creditors

Development of financial strategy

Risk evaluation

Involvement in overall strategy

Analysis

Supplying findings and analyses for

Reporting, quarterly, half-yearly and annual reports

Media Contact

management decisions

Financial planning including

feasibility and plausibility checks

Reporting

Controlling

Cost management

Development and

evaluation of scenarios

Building the financial organisation

Budgeting and planning

Compliance with legal provisions,

taxes

Internationalisation Reporting

Creation of forecasts

6

Top Priorities for the Future

Information: The "currency" of the finance department

To produce excellent financial reporting that satisfies the demands of both internal and external accounting, and

therefore of the company management and divisions as well as investors and creditors, you need the right

information at the right time and, above all, on a daily basis. You are responsible for managing the complexity of

the accounting system, for example cost accounting that extends to all variants (cost categories, cost units, cost

centres) and internal and flexible controlling and, on the other hand, book-keeping that takes account of legal or

taxation requirements as well as national and international accounting standards, for example. Your daily work is

often more difficult or more time-consuming than you would like.

There are many reasons for this:

• Distributed and heterogeneous IT systems that

do not communicate with each other properly

lead to complicated accounting procedures,

increased effort and higher costs.

• Process structures that have evolved over the

years, but are somewhat outdated and above all

not automated hinder the flow of information and

communication within the financial organisation.

• Inconsistent data and information management,

sometimes still in complex Excel tables, is a

source of potential error and lack of

transparency.

• Inconsistent figures and key performance

indicators make analysis difficult and prevent

clear statements.

• Limited contact with operational teams.

• The dependence of IT analysts on the

procurement of information, for example

obtaining specific data evaluations, delays

processes.

• An organisational structure that has expanded

nationally and internationally, but has never been

properly consolidated, hinders the consolidation

of corporate key figures with the consequence, for

example, that clear statements regarding the

profitability and cost-efficiency of individual areas

cannot be made.

• Markets that are growing in complexity and speed

as well as new legal provisions and guidelines

require adjustments and changes, i.e. change

management.

• Changes in refinancing and investment

conditions need yet more decision-making effort,

and therefore even better financial

communication.

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Top Priorities for the Future

Reducing complexity

When CFOs are asked about their core tasks,

controlling, financial management, as well as

strategy and planning are often top of the list.

Looking at the actual work distribution, there is

frequently a different picture: based on this

information, day-to-day activities take up so much

time that other important core tasks often fall by the

wayside. This is mainly because you have to work

within the constraints of the difficult conditions

described previously.

The main priority for a business software solution

must therefore be to remedy this situation with the

aim of minimising the discrepancy between the

defined tasks and actual activities in favour of

strategic work. That is, to take the strain off your

day-to-day activities and reduce complexity. If you

or another specialist department has to collate

information manually in an arduous way – which in

an international practice can even take several days

– you find that the information is already outdated

and unusable, and generally 20% presented in an

inconsistent manner. The task of the software

should be to provide you with the necessary

information clearly and at the level of detail you

require – and at the press of a button, in real time,

and from all necessary departments, locations or

subsidiaries. The software should also eliminate or

alleviate certain tasks. The best way to achieve this

is with integrated and international software. The

following section describes how this can be done.

Proportional time budget per task area Day-to-day activities

Responsibility for results (broad term)

Controlling

Controlling instruments

Agreement with board of directors/company management

Project management

Internal and/or external communication

Strategy and planning

Mergers & Acquisitions

Management tasks (broad term)

Financing

0% 5% 10% 15% 20% 25% 30% 35% 40%

Average time budget

Software should bring relief and reduce complexity

36%

28%

24%

24%

23%

22%

21%

20%

20%

19%

19%

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Top Priorities for the Future

Comprehensive financial accounting information

Comprehensive financial accounting

It goes without saying that good financial accounting

that covers all internal and external financial tasks

forms part of a good business software solution. This

may include accounts payable and receivable,

payment management, cost and budget accounting

with investment accounting, as well as controlling

functions for key figure analysis, key performance

indicators, plausibility checks or risk evaluations, for

example. Most of the solutions available on the

market cover these areas but differ in terms of the

depth of their functionalities and whether they can

integrate the individual requirements that are specific

to your company. It is therefore important that you

check carefully how flexible the solutions are in this

respect.

Comprehensive information leads to

the right decisions

Inter-site collaboration

Very few companies have an organisational

structure with only one company and only one

accounting system. The structures of most

mid-sized companies are more complex, for

example a holding or a group with several

independent subsidiaries. You are responsible for

providing a realistic picture of your entire company

as well as of the individual subsidiaries both

internally and externally, for example as a

representation of the results of operations, financial

position and net assets. Ideally, your software will be

set up in such a way that all companies and

subsidiaries are displayed within one solution and

evaluations can be carried out across all companies.

This facilitates comprehensive cost management

and the preparation of financial statements, for

example, and therefore satisfies both your Managing

Director and external investors because they both

expect you to produce clean, clear, consistent and

comprehensive information – each with a different

focus. Software intended for this type of use is

based on standardised master data across clients

and company codes. Thanks to multi-company or

multi-site functionality, it is able to reflect complex

relationships between corporate entities and also

make it easier for you to carry out comprehensive

controlling and global management.

9

Addressing Challenges Using Software

Supporting international growth

Legislation

If your company is already successful on an

international scale or you are planning to expand

internationally, it is important that local legal

conditions, tax provisions and the respective local

legislation are observed. Business software

solutions that integrate different legislations (multi-

legislation) are specifically designed for this

scenario. You can use these solutions to manage

the full accounting process for many countries,

including the reporting required at a local level such

as tax returns, a profit and loss account, the balance

sheet, as well as the electronic payment run and

specific accounting processes in the financial

statements, for example. They comply with national

as well as international accounting and auditing

standards. The latter – as you are in the best

position to know – are gaining in importance in the

context of economic globalisation, because they

make an important contribution to the harmonisation

and regulation of markets and the removal of entry

barriers. International software solutions support

legislation, for example according to DRS, IFRS, FRS,

FAS, etc., enabling you to use one solution to comply

with all disclosure requirements.

It is important that you consider the certification of

the software and the corresponding test seal, which

confirm if the software is subject to relevant (local)

standards and legislation, for example if you comply

with the principles of data access and verifiability of

digital documents (GDPdU) in Germany. You also

need to consider whether the software solution

includes predefined charts of accounts and bank

files that are adapted to respective national formats,

as well as input tax and tax on sales and purchases

in the corresponding documents and forms for the

target markets. This guarantees you the highest

level of timeliness and accuracy and thus relieves

some of your administrative burden.

International also means supporting

different legislations

Multilingualism and currency systems

In order to execute business transactions at an

international level, an IT system must also support

different currencies and exchange rates, so that you

can carry out a conversion between currencies, or

post or transfer transactions such as invoices and

payments directly in the relevant currency. It goes

without saying that the same applies to your

reporting: with a multilingual software solution you

can prepare and issue your reports in the relevant

language and currency; the software should also take

into account exchange rate fluctuations.

User interfaces and master data in the relevant

country language also speed up data entry and

therefore increase efficiency.

Multiple languages and support of

different currencies creates more

simplicity and collaboration

10

Addressing Challenges Using Software

The importance of flexibility

Covering current and future

requirements

As a result of the financial crisis, it has become

even more important for you, as CFO, to generate

reliable information basis for decision-making in

order to restore any potential loss of confidence in

your company. You now have to analyse, check,

control and manage more than ever. In this context,

new long-term key figures or key performance

indicators are increasingly gaining importance as

measurements of performance and the "overall

health" of your company, for example the speed and

accuracy of processes as well as customer

satisfaction.

Consider whether your software enables you to

flexibly adapt processes and then immediately

implement them, for example for signature

regulations or approval processes.

Strategy and planning

These two core tasks of a CFO require the

software to have an analytical aspect as well as

planning and budgeting functions. It is important

that the solution enables the selection of different

perspectives, such as an analysis of sales by

distribution channel by product line. Consider

whether your chosen software delivers integrated

evaluation functions that can be used immediately

and to their full extent, and that it allows results to

be presented in different formats, dependencies

and views. If these business intelligence functions

still have to be installed and it is complex to do so,

further costs will arise.

Ease of operation and implementation

The ease of operation of the software clearly

determines whether it will be accepted by users and

is a decisive factor in the efficiency potential that will

be actually realised. The ease of operation is best

established by direct use of the software. To do this,

contact manufacturers directly, for example at trade

fairs, congresses and customer, interested party and

partner events.

Flexible technology

Technology is also important in the context of

flexibility. Does your software support modern

standards? Is it flexible in terms of the use of different

database systems? Does it have integrated

development platforms, in order to adapt and create

objects, screens and tables individually? How flexible

is it in terms of its integration with other solutions? Do

not underestimate how open the software is in

comparison with existing systems. Can it also be

easily used online, on mobile and on desktop?

Discuss these topics with your Head of IT

Consider flexibility in terms of

technology and function

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Addressing Challenges Using Software

Procurement and operating costs

Costs are your area of expertise and therefore

require particular consideration. However, do not

simply calculate the procurement costs, but

compare the total cost of ownership (TCO) of

different solutions.

Consider:

• How often are new (payable)

releases issued?

• How much effort will be

required for the

implementation?

• How flexible is the software to

use?

• How easy is it for your own IT department to

implement changes without having to consult the

manufacturer or partner?

• How compatible is the solution with

existing systems such as database

systems?

• What are the costs of consulting,

training and optimisation?

The savings potential that you may be able to realise

if you replace several local financial solutions with

integrated international software is harder to

calculate but still very important. If, for example, you

operate separate accounting software systems in

each country, the costs will be several times higher

compared with a comprehensive international

solution that integrates countries and legislations.

This is due to the synergy effects that arise if only

one installation is used and the reduction in

adaptation, update and maintenance costs.

Furthermore, you speed up your processes and

achieve greater transparency and quality of

information.

It is also beneficial if your software is set up in a

modular manner, because you have access to all

functions and applications (production, purchasing

and sales, finance, CRM, warehousing and

inventory, etc.), but only use them as required. The

implementation is then gradual, with predictable

costs and realistic goals. In addition, modular

software also enables you to respond quickly to

strategic changes, by easily adding new modules.

Modular software protects the IT budget

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Summary

The overall potential of software

A business software solution that integrates the

"classical" applications of internal and external

accounting for both domestic and international

locations including legislation, currencies and

languages is the ideal tool for international

mid-sized companies.

Furthermore, the software must offer the necessary

scope of functionality to enable you to manage your

tasks, such as analysis, controlling and planning, in

a straightforward manner. As a result, you can

realise huge efficiency potential by means of IT

alone and once again carry out your strategic work

more effectively. You achieve an improvement in

quality, because you can access information more

rapidly, clearly and in a consolidated manner with an

integrated and comprehensive solution. Last but not

least, the work burden is reduced in the long term

and your stress levels fall, as the software reliably

provides meaningful information at any time.

Solution selection checklist

The following checklist is intended to provide you with

an overview of the key criteria for an international

solution that also meets the requirements of mid-sized

businesses. It is designed to help with your market

research.

13

Summary

Checklist: Choosing the right software for your needs

Provider: Yes / No / Notes

Functionality

Are all your key basic applications integrated (financial accounting including

accounts receivable and payable, investment accounting, cost accounting,

controlling, consolidation, etc.)?

How much expertise does the provider have with regard to finance?

Multi-Company

Does the software allow all company divisions (finance, purchasing and sales,

CRM, inventory, production) and subsidiaries to be integrated?

Internationality

Multilingualism: How many languages does the solution "speak"?

Currencies: Does the software support different currencies and enable the

management of exchange rates?

Legislations: Does the system integrate various legislations, including

accounting standards, reporting, forms, etc.?

Countries: In how many and in which countries is the solution available?

Flexibility

Does the solution have a modular structure, and does it allow a cost-efficient,

phased implementation?

Is the solution designed to expand, and is it therefore scalable? Does it allow

simple customising at a reasonable cost? Can individual adjustments be

made to processes, for example?

Operation

Is the software easy to operate?

Does it offer clear analysis in the form of dashboards, for

example? How much training effort is necessary for

users/employees?

14

Summary

Checklist: Choosing the right software for your needs (continued)

Provider: Yes / No / Notes

Technology

What is the underlying technology platform?

Does the solution support modern technology standards? Does it

support different database systems or is it limited to one system?

Can third-party systems be linked seamlessly via available interfaces?

Investment security

How long has the provider been on the market? Does it offer

investment protection? How good are its references?

How much attention does it pay to the further development of its

software? What is its product strategy with regard to the future?

Provider

To what extent does it specialise in mid-sized and large companies?

What is the sales process? Does the company have a direct contact for

its customers or do they operate via partners?

Support

What is the provider's support network like, is it local or global?

Remember to discuss service level agreements with the provider,

for example regarding the international availability in the event of support queries.

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Introducing Sage ERP X3

The ERP solution that sets the foundations for international expansion and growth

Sage ERP X3 is a business software solution

specifically designed for mid-sized companies as

well as for subsidiaries of groups and large

companies that have to fulfil international

requirements. The product has been proven as a

comprehensive solution for more than ten years. To

date, over 3,700 customers in 58 countries and from

a variety of sectors ranging from production and

services through to logistics have chosen

Sage ERP X3.

Thanks to its up-to-date technology, the solution

helps companies remain efficient and flexible in

global business. This is because Sage ERP X3 is

simple, fast and cost-efficient to use and can be

adjusted on an individual basis to meet the

requirements and challenges of mid-sized

companies. Furthermore, Sage ERP X3 is geared

to the specific requirements and challenges of the

financial reporting and accounting of mid-sized

and international businesses. To this end, the

solution supports many languages, currencies

and legislations.

A pan-European organisation within the Sage

Group, which specialises in products and solutions

for the mid-sized business segment, operates

behind Sage ERP X3. It realises joint activities and

initiatives, for example in research and

development, sales and marketing, or

implementation and support. At the same time, Sage

relies on and continues to extend its local expertise

in the respective countries. As a result, Sage

customers not only have access to global resources

and contacts, but Sage unites a high level of

national and international expertise, ensures that

solutions are constantly up-to-date and accelerates

development in line with legal conditions and

technological progress.

If you have any questions about Sage ERP X3 or would like to arrange a free demonstration of the product, then please call: +44 (0)800 952 0082.

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Sage ERP X3 globally

3,700 customers

58 Countries

Sage North Park Newcastle Upon Tyne NE13 9AA United Kingdom Telephone: 0800 952 0082 Email: UKEME@sage.com

www.sage.co.uk/sage-erp-x3