Speaking CFO-ese: Learn to speak the language of budget approval
With Sean Jazayeri, CIO, Avanade
How many languages do you speak every day? I don’t mean French, Hindi, Spanish,
Chinese or Swahili. To do our jobs successfully, we constantly speak to
different people – executives, peers, assistants – in their own languages. We
get what we need from them by communicating ideas, benefits, and requirements
within the context of their jobs.
It seems that one of the toughest languages to speak is CFO. CFOs are an
unusual breed. They have a unique ability to take what you believe to be a
simple request and turn it into an extended series of meetings filled with odd
twists, hairpin turns, and land mines that can, at best, derail you, and at
worst, send you spinning off to a world of numbers you never knew existed.
With that said, you shouldn’t quake with fear at the thought of communicating
with your CFO. While it may be difficult to get him to nod affirmatively when
you present a project, it’s not impossible.
The first step in trying to get the CFO to approve a project is determining how
difficult it will be and then planning your presentation accordingly.
For me, every project falls into one of four groups.
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Company-wide initiatives
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Revenue producers
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Cost reducers
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Intangibles
The first group—projects that support company-wide initiatives—can be slam
dunks. After all, if your company wants to open an office in Holland, they’re
fairly well prepared to spend what's needed to do that.
The words "revenue producing" almost always cause a CFO's face to light up like
a kid in a candy store. And the phrase "cost savings" has been scientifically
proven to cause some Chief Financial Officers to do backflips. Therefore,
projects that fall into these two groups are more likely to get approved.
Nevertheless, a misstep here can leave you with an unconvinced CFO and a much
tougher approval process. Who says that revenue will increase or costs will
decrease if we do this project? The CIO? The marketing director? And how much
does this "expert" estimate that we will gain or save? It's important that the
financials you provide are current and validated by someone in Finance.
Translation: deliver credible numbers from someone the CFO trusts.
Then there are the projects I call Intangibles; those that are crucial to the
success of the company, but might not show immediate benefits. So how can you
get the CFO to buy off on projects that don't immediately improve the company's
bottom line?
First of all, don't fly solo. Partner with the business owner. For instance, if
the project is one that will yield better competitive information, partner with
the VP of Marketing. Make him or her stand with you when you present. Your job
should be to present the costs and to give the CFO the confidence that the
project can be accomplished. Without that partner present, the CFO will
undoubtedly want to know who’s driving the project. And you'll find yourself
doing a lot of explaining that would be more effective and credible coming
straight from the business owner.
Even though the intangible projects may not have immediate business benefits,
you’ll still need to provide something as a proxy for measurement. One way to
accomplish that is to show what happens if you do not proceed with the project.
While it may be difficult to quantify the ROI of something like a disaster
recovery project, it can still be done by making assumptions. For example, you
might deliver an analysis that says,
"There's a 1% chance of this disaster happening. Without the DR, we could be
down for five days. But with the DR we would be down for just one hour."
Then ask the CFO himself to estimate the costs of being down for five days vs.
the costs of being down for an hour.
While your assumptions don't have to be precise, they must be reasonable.
Be prepared to offer options so the CFO can feel like he's shopping for the
best deal. Giving the CFO alternatives such as "a five-day recovery Service
License Agreement (SLA) costs 'X', a one-day recovery SLA costs 'Y' and a
one-hour recovery SLA costs 'Z'," may be just what you need to get a commitment
to do the project.
No matter which group your project falls into, expect the CFO to be curious
about the risks involved. He'll want to know if this has been done before, who
the vendors will be and how long they've been around. Even if he doesn't ask,
these are important issues to cover. If he knows you’ve already asked the tough
questions and done all the homework, he'll feel a lot better about approving
your budget.
And never use words like "discretionary" or "optional." In CFO-ese, those words
mean, "spend the money on something else." These days, most companies can’t
afford projects that aren’t essential. If you feel strongly enough to pitch the
project, don't undersell the importance of it. CFOs have long memories. They
may feel okay about spending the money today, but in three months when budgets
are being cut, they’ll remember hearing your project was “discretionary” and
you’ll find yourself in the middle of Migration Ocean without a financial
paddle.
I’ll leave you with 3 simple rules. Even if you remember nothing else from this
article, remembering Rules 1, 2 and 3 will definitely improve your ability to
gain budget approvals from the finance team:
Rule 1: Don’t speak CIO, speak CFO.
You may be excited about migrating users and resources to Active Directory
because it will simplify your procedures and reduce workload in your
department, but the CFO wants to hear about ROI and Payback in numerical terms.
He may not use those words, but you’d better be able to answer those questions
for him.
Rule 2: Before pitching any project to the CFO, ask in advance what his
concerns and questions will be. Then do whatever you must to mitigate and
address those when you present the project.
Rule 3: Always—and I repeat: always—be prepared to answer the tough questions.
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