Why CFOs Must Prioritize Data Quality for Sustained Business Growth

In the modern business landscape, the significance of data is universally acknowledged; however, the quality of this data is often underestimated, despite its profound impact on daily operations. The majority of operational failures can be traced back to substandard data. Surprisingly, most organizations do not manage their data with the diligence they afford other critical assets. A study by HFS Research in collaboration with Syniti involving over 300 leaders from Global 2000 companies, found that fewer than 40% have established metrics to assess the repercussions of poor data.

The call for a paradigm shift is clear. It is imperative, especially for CFOs, to take assertive steps to ensure the cleanliness of their data, unlocking growth and technological advancements for their businesses as they progress into the future.

The Vital Role of High-Quality Data

For any digital transformation or AI initiatives—areas heavily invested in by CFOs—high-quality data is essential. The lack of quality data can severely compromise the effectiveness of new digital processes. As AI becomes increasingly crucial, the quality of data has never been more important.

This quality also plays a critical role in mergers, acquisitions, and divestitures, aiding in substantiating deal rationale, identifying customer and supplier synergies, and facilitating successful integrations.

A staggering 85% of leaders from Global 2000 companies recognize that effective data management significantly boosts revenue, profit, and shareholder value. This awareness marks a positive shift in understanding.

Challenges with Data Trustworthiness

Despite this growing awareness, many CFOs remain skeptical about the reliability of their organization's data. A BlackLine survey revealed that 37% of senior finance and accounting professionals do not fully trust the financial data at their disposal. Additionally, a study by Horváth highlighted that 57% of CFOs view poor data quality as a major obstacle to fostering a data-driven culture.

A third of financial leaders surveyed by BlackLine attributed their mistrust in data to its origins from multiple sources, complicating the management and integrity of the information.

Consequences of Poor Data Quality

The repercussions of inadequate data quality are extensive:

• Incorrect material setups in new systems can stall order placements.
• Billing address errors can delay customer payments.
• Inconsistent records can obscure trade balances and customer/vendor relationships.
• Misunderstandings in global customer relationships can damage credibility and coordination.

These issues not only complicate decision-making but also undermine a CFO’s role as a trusted advisor.

The Proactive CFO

Today's CFO transcends traditional financial roles, driving operational performance and shaping corporate culture to spur growth. As trusted advisors, CFOs need precise data reflective of the company's real-time operations. They should take a proactive stance in both measuring and enhancing data quality.

CFOs must acknowledge that data issues often stem from flawed processes, leading to a vicious cycle of inefficiencies. Addressing data quality should be a preliminary step in resolving operational challenges.

Best Practices for CFOs

CFOs should:

• Start by understanding their data as they would any other business asset—identifying key data elements, their origins, and those responsible for their accuracy.
• Measure the extent and impact of poor data quality to pinpoint specific business challenges.
• Prioritize data governance across the organization, establishing clear data rules and accountability.
• Implement master data management (MDM) to unify critical data, ensuring consistent reference points and facilitating data sharing across systems and departments.

Rejecting data produced outside trusted systems is crucial. By thoroughly understanding data rules and related business impacts, CFOs can better design processes to avoid future data issues.

In an era where data drives decisions, CFOs cannot afford to passively await solutions from IT departments. Instead, they must spearhead efforts to promote a Data First culture, tackle process inadequacies, and enforce robust governance. Such proactive measures will cement their reputation as strategic and reliable leaders, essential for guiding their companies toward sustained success.