Don’t wait for your company to be cash strapped and facing slowing growth to learn if there are costs in your budget that really shouldn’t be there, Jason Lin, CFO of cloud-based budgeting software company Centage, said this week in a CFO Thought Leader Podcast.
Lin, a 20-year finance veteran who joined Centage in May, previously worked at TripAdvisor, the online travel platform, and Monster.com, the one-time Internet darling that’s seen its share of the job-hunt market give way to rivals, including LinkedIn and Indeed.
When he was at TripAdvisor, the company was growing quickly and was in a strong cash position, but Lin wanted to make sure the budget wasn’t hiding unnecessary fat. So, channeling a popular reality TV show at the time, he launched a competition called The Biggest Loser and asked company executives to identify the biggest cuts they can find in their areas without creating a material impact on their operations.
“It was just amazing how much misalignment there was around the numbers in the budget,” said Lin, “everything from, ‘Oh, I didn’t even know that was approved and still in the budget’ to a misunderstanding around larger company goals and initiatives.”
The chief lesson, he said, is that CFOs shouldn’t assume their colleagues are aligned with the company’s business goals or that communications are getting to everyone equally.
“To drive change in an organization, it starts with open communication and collaboration,” he said.
Be prepared to make concessions
Another lesson he’s learned over the years is the need for CFOs to recognize not every decision should be viewed as good or bad based only on the financial sense it makes. That’s especially the case when you’re with a company in the middle of a growth spurt, because in these cases, it can make sense to spend money on initiatives whose value will only be known later.
“Part of the job of CFO at a growth company is to understand when you need to make certain concessions," he said. You might be saying to yourself, ‘We probably do need to invest in that; it might not make sense compared to our current budget that we just reported to our CEO or to our board, but this is the right thing to do operationally.’ Just being comfortable with that, knowing that you’re looked to as a driver of growth and not just a guardian of the financials, means sometimes you’re making concessions from a financial perspective.”
These kinds of trade-offs are going to be falling in the laps of CFOs more frequently because of the changing nature of the job, he said.
Far more than in the past, CEOs and corporate boards are looking to CFOs to be change-makers, and that means you need to see yourself as more than just a guardian of the financials.
“We’re seeing so many companies go through digital transformation,” he said. “We’re right on the brink of the age of machine learning, artificial intelligence. What’s amazing to me is the office of finance is right in the middle of it.”
Non-financial metrics are forward-looking
Centage is a cloud-based SaaS company, so among the metrics he looks at every day are new business sales, pipeline progression, and renewals.
“In SaaS, there’s that leaky bucket analogy,” he said. “It’s how much water — new business — you’re throwing in on top and from the bottom, you want to stop the leaky bucket, what you’re losing customers on the renewals. As long as we’re doing well on both ends, we’re going to grow.”
Non-financial metrics are similarly key for him as CFO, because these are the SaaS metrics that point to the company’s prospects for business down the road.
These metrics, he said, “dig in one level deeper on renewal rates. What’s a leading indicator to your renewal rate? For us, that’s customer success at the beginning of the process, so we’re looking at how many customers have successfully on-boarded in an appropriate amount of time that we set internally.”
He also looks closely at how company employees are feeling, because they are the business stewards whose enthusiasm translates to customer enthusiasm for their products.
"So, [we look at] employee morale and satisfaction, and just being energized about the company’s direction and mission,” he said. “We do this through employee surveys, face-to-face conversations. We even have a skip-level lunch, where [staff] meet with the CFO or CEO and talk about employee views on company culture. It’s a type of data that’s outside of normal that we’re tracking.”
He keeps tabs on his own finance and accounting team’s satisfaction level, too, because his success derives to a great extent on how well his team is collaborating and feeling they have a chance to grow professionally.
"It's really been about pushing career development within the team and cross training, beyond our titles," he said. "I think this is the best way to support our internal customers, but it's also great for my team's professional development."