Fishbowl’s CFO, Brian Lanier, shares the importance of driving operational efficiency with data.
Making data a priority seems fundamental, but when you think about it at a high level, for a finance leader to make their company operate more efficiently, data takes the highest priority.
Throw in the fact that a CFO also must look at other priorities, like cost management, performance, growth, talent, and compliance, and the list of priorities gets stacked a little tall. But can a CFO truly master those other areas if their data isn’t prioritized and understood?
Brian Lanier, CFO at Fishbowl, gives us a peek at his experience with driving operational efficiency at Fishbowl and other SaaS companies he has had the privilege of leading. Brian’s main responsibilities as CFO are reporting financial metrics, gathering the data needed to help different departments identify operational efficiencies and opportunities to eliminate waste, and implementing controls and risk mitigation across the company.
Suppose you are a finance leader or interested in how SMBs can prioritize operational efficiency. In that case, Brian‘s offers a few suggestions from his experience that can help identify the relevant insights and dig deep to make sense of the data.
The importance of metric reporting
“Not only are we talking about tracking metrics for different departments and individuals, but it’s my job to look at the company as a whole and how everything ties together.”
“For SMBs, I begin with high-level metrics to assess the overall health of the company, in order of priority,” such as:
- Cash flow and runway
- Total revenue and growth rates
- Profitability, such as net income
- Balance sheet strength, including debt and liabilities
“After having these things in order, I can now dig deeper. I look at our overall pricing structure to make sure we are aligned with the value we deliver to our customers, as well as how we compare to competitors. This is a starting point that will drive your subsequent analysis and is essential to understand.”
“Next, I look at the gross margin and departmental costs, and continue to dig where the data leads me. The more data and metrics you uncover, the more clearly you can understand your company and where the opportunities for improvement lie. Every company will look different, but the analysis is similar. Do the costs make sense for your company or compared to industry benchmarks? What are the levers you can pull to impact the financial performance of your company?”
Utilizing a CFO dashboard
“Once a finance leader understands the metrics critical to your business, you focus on the levers—, where you have the most leverage in the company.”
“For example, every company’s largest expense will look different. Assuming your largest expenses are labor and materials, a small change in your materials cost could have more impact on your business than a drastic change in marketing spend. Once you identify that lever, based on your cost structure, you can see where to focus your time.”
“Once your dashboard is built and you have access to data for your most critical levers, then you can track the health of those levers,” such as:”
- What is the gross margin for our products?
- At what rate are our customers churning?
- What is our revenue per employee?
“For best results, continue to monitor those levers against benchmark expectations, as well as changes and trends over time.”
“It’s very hard to identify where you can become more operationally efficient without having access to the data. As an example, if you’re in manufacturing and you don’t have the right data to identify what your cost per unit is or what the most important cost levers are, you won’t be able to identify which products might be losing money, or how to best correct the problem.”
“It all starts with data. Once you have a system that can capture the data on a granular level, you can see where waste could exist. Also, having a system that provides access to data gives you the opportunity to drop manual processes to automate them, which can drive a powerful dashboard and workflow. This gives you real-time information about your products, costs, and trends.”
“Data prioritization is what’s going to lead to greater operational efficiency and transformation. With data at your fingertips, you can expect a return on your investment, a more prepared finance leader, and a more efficient business.”