Finance and IT: Getting the Crucial Collaboration Right

A 2019 Robert Half survey found that 82 percent of CFOs collaborate more frequently with their company’s chief information officer (CIO) than they did in 2016. It’s a statistical sign of the growing partnership between finance and information technology (IT) that has become the new operational standard, says Michelle Reisdorf, Chicago regional vice president for Robert Half. “With technology affecting nearly every business area, teams must work together to pave the way for smooth integration of new systems and processes and a focus on higher-value work,” she says. “Organizations that fail to effectively collaborate risk losing revenue, operating with inadequate business systems, committing regulatory missteps, and watching IT costs run amok.”

Brian Klingbeil is the chief strategy officer at Ensono, a Downers Grove, Ill.-based IT service provider for large enterprises working with everything from legacy to modern systems. Over the past decade, he has seen the relationship between finance and IT transform. “You can’t even order a pizza without computers and software being a key part of the experience,” he says. “IT isn’t just a back-office set of systems, it’s integral to a company’s revenue stream. IT is now part of the product itself.”

Rich Nanda, Deloitte’s U.S. strategy offering leader, says the firm spends a lot of time developing this vital partnership between finance and IT. “Finance has transformed from controllership to more of a business advisory and co-pilot role,” he says. “Finance needs to have a sophistication about what’s going on in the outside world and the implications on earnings and ROI.”

That begins with understanding what the IT team and technology as a whole has to offer. “We need new sources of data and intelligence,” Nanda says. “Old technology can’t keep up. Finance and IT need to work together to build those capabilities.”

The Art of the Possible

Finance and IT teams both have unique and deep knowledge of how their organizations operate, but without collaboration each team is only seeing a fragment of the whole. When Klingbeil was senior vice president of financial planning and analysis at a global IT company, he wandered into the IT department one day and quickly realized that what he saw on his spreadsheets was only a small part of the bigger picture.

“My entire perspective changed,” he says. “There was so much information and knowledge available that never made it to my general ledger.”

While IT has access to a treasure trove of data, the department itself may lack the knowledge or ability to synthesize that data in a way that can lead to strategic insights. “Close relationships between finance and IT leaders can fix that,” Klingbeil says.

Reisdorf says the basic goal of a partnership between the two is to ensure the organization’s systems and strategies are effective. “High-level, organization-wide initiatives ranging from technology investments and data lakes to security and compliance require the expertise of finance and technology executives—and a strong working relationship between the two—to succeed,” she notes.

Once the collaboration between finance and IT starts clicking, Klingbeil says it’s like lifting a curtain. He offers an example: “We knew the unit price we were charging a client was low, but we thought we were making it up in volume.” Data from IT revealed a different story: The client represented 3 percent of revenue but 21 percent of service desk volume. “We had never matched the data,” he says. They parted ways with the client soon after the analysis.

What else is possible when finance and IT collaborate?

Smarter IT investments: One of the quickest and most impactful outcomes of this partnership will be more intelligent and targeted IT spending. IT spending is estimated to rise to $3.9 trillion globally in 2021, and as the cost of IT rises, so does the necessity of seeing returns on that investment. Ongoing digital transformation initiatives require a substantial allocation of resources and have an enormous impact on a company’s future performance. The IT team can provide expert guidance on which technology can best help to achieve business goals and increase competitiveness, while the finance team can offer financial and operational insights. “Every time we choose to do one thing, we choose not to do something else,” Klingbeil says. “Picking the right investment that will have the biggest financial impact is key.”

Improved information security and compliance: With organizations becoming increasingly reliant on technology, the need to protect sensitive data has never been greater. Digital breaches come with a very real price tag. Finance and IT leaders must coordinate and develop measures to address the risks posed by cybercriminal activity and compliance demands.

Actionable data analytics: A solid working relationship between leaders in finance and IT can produce the right combination of technologies and processes to extract the most accurate and actionable information for the business—invaluable for driving strategy and measuring success.

Rapid scaling: “How quickly you can get to scale is a marker of when things are going well,” Nanda says. “Think about how technology has been implemented traditionally. It took a long time to get an entire organization on board.” With finance and IT working together, the process is different—and far faster.

Stability under stress: Nanda says the pandemic was an interesting study in how well new systems perform under stress or rapid growth. Some systems crack. New enterprise software should be able to withstand stress, whether that’s more data from new sources or more people tapping into systems. By combining the insights of finance and IT, systems become more stable and durable.

Adaptability: Legacy systems make it hard to pivot under new demands. “What we know about business today is that more curveballs are coming,” Nanda says. “We’ll be adding customers and suppliers who expect capabilities that are adaptable and nimble. Are we building that in with the tools we use?”

Be Curious and Brave

With the benefits so undeniable, the next step is starting to build a strong, collaborative partnership out of a relationship that has traditionally been largely transactional. Ensono CFO Scott Grossman says it all starts with curiosity and a refusal to be intimidated by the technology itself: “Be the brave person in a meeting who asks the questions,” Grossman advises. “A lot of people are wandering around faking it. When finance teams show genuine curiosity and a desire to learn about the business at a deeper level, the usual outcome is that IT is excited to teach.” He adds that once finance displays a willingness to learn, the IT team will become students as well, learning their effect on the company’s balance sheet.

Once budget season rolls around, collaborating finance and IT teams will find the process easier. When everyone understands the company’s financial goals, they can work with a common understanding.

At that point, the collaborative relationship has become positive and fruitful. Grossman suggests choosing one project to fine-tune the partnership: “Then get into a cadence with IT to move on to the next improvements.” Recurring monthly operating reviews to share ideas and analyze metrics will keep that relationship alive and successful.

The Operational Connection

Digital transformation means more links between finance and IT and more potential value to strong relationships and collaboration between the two. It also means that the actual connection between IT systems and the balance sheet is more concrete than ever. The financial impacts of technological failures can include fines from regulators and governing bodies, system downtime, lost clients, and security breaches.

“If a system goes down, we stop transacting,” Klingbeil says. “Finance can calculate the costs associated with that and help IT build a business case to maintain proper business continuity and disaster recovery.”

Nanda says as we continue to embed technology into more business workflows, it’s very likely that data and systems will have different exposure points. “Inevitably, a cyberthreat will take hold,” he says. “Nobody’s cybersecurity is perfect. Be proactive and intentional in recognizing the risks, putting plans in place, and preparing for inevitable compromises and how you will manage them.”

IT should fully understand the financial implications of technological failures, and financial leaders should learn exactly what the risks of insufficient or poorly executed digital investments look like. With an active, curiosity-driven partnership, finance and IT can find solutions that protect both parties—and the organization as a whole.

A Two-Way Street

A successful partnership between finance and IT requires change on both sides, Nanda emphasizes. In the past, business and functional experts developed technology requirements and then handed them off to IT to implement. There may have been some collaboration and iteration if IT struggled to find a solution within budget, but Nanda says the old process suffered from “a short-order cook mentality.”

Seduced by the ease and effectiveness of the likes of Amazon and digital assistants like Apple’s Siri, organizations today are seeking intuitive and highly digitized business enterprise models. “You’re seeing companies figure that out, but we still spend a lot of time on that old model. Both finance and IT have to appreciate the level of change needed and commit to it,” Nanda explains. “The business side needs to allocate resources to the technology side in a less transactional way. The technology side needs to bring ideas that push the business in different directions and be a catalyst instead of just delivering a product. These teams need to work together for a greater period of time and with more intense focus. This is a cultural change.”

Klingbeil stresses this point as well. “Finance wants to know why IT’s budget is going up,” he says. “Well, IT is making everyone else more efficient. It creates a struggle, and IT tends to not make the greatest case for themselves. Finance can help with that. Get curious. Find out what they’re doing. When you do, you’ll see cost savings across the company and create even more when you fund IT properly.”

Meaningful collaboration between finance and IT means that ideas and knowledge are flowing freely between two of the most important strategic centers in any organization. By moving beyond annual meetings and transactional relationships, this partnership can propel an organization into a very successful future.