How payroll data can help CFOs better understand costs

May 3, 2022 | 5 Mins Caitlyn Simons

Payroll is often the largest single expense at multinational companies around the world. CFOs are the people responsible for full clarity, transparency and understanding when it comes to major business costs. Despite payroll being such a large expense in companies, it is often neglected when it comes to considering crucial parts of a business. A lot of data flows through the payroll process- when this data is examined and extracted into comprehensive reporting, then it can reveal a number of insights about your company’s current and future state.

Therefore, it is crucial that finance leaders get the data and reporting they need to understand payroll costs. Payroll can be complex and nuanced, there are often hidden costs involved which will also differ from country to country. Getting a full clear picture of exactly what is happening is not always easy and CFOs need a process that helps with visibility and transparency.

Any sort of software or technology reporting functionality that can help bring greater clarity, insight and hard data will be welcomed by CFOs. This article will be discussing a few reasons as to why payroll data can help CFOs and their finance teams when they are examining their companies’ major costs.

Clarity and transparency

No CFO can ever afford to be in the dark when it comes to payroll costs- they are simply too large to ignore. Having access to clear and concise reporting that is ideally standardized across countries in a single currency is what Chief Financial Officers need to make effective analysis and informed decisions when it comes to their business needs.

Without this, they may be flying blind or at the very least will lack full clarity on the true cost of labor in each of the countries in which the company does business. This is a state that CFOs do not want to be in, fully understanding what is happening with a company’s payroll finances is crucial if they wish to make accurate decisions that will benefit the wider business.

CFOs are methodical and data driven by nature, so they never want to be in a situation in which they are unsure, especially when it comes to a major operating cost inside an organization. Accurate and real-time data reporting can help with this issue and provide CFOs with all the information that they want when it comes to company costs and financial data- payroll reporting can be a valuable asset when it comes to delivering the info they need quickly.

Many CFOs are slowly learning that implementing better and more agile technology is needed for the level of detailed and comprehensive reporting required to give bigger picture insights and full clarity on payroll costs.

A digital transformation that supports automation is needed- many payroll departments are operating with legacy technology, and some are operating with no technology at all which makes it virtually impossible for CFOs and the wider leadership team to access the level of payroll data and total cost reporting they need to do their jobs. Much greater clarity and transparency are needed and because we are in a post pandemic world where cost management is a priority, CFOs have a greater need than ever for this kind of reporting.

Data consolidation is essential

Bigger picture reporting insights on operational costs can only happen when the CFO has the full data in front of them. It is very difficult for the CFO to make decisions or gain valuable insight when they cannot see the full picture. CFOs could possibly miss key gaps or oversights if they do not have the required access to bigger picture insights. Having comprehensive reporting can help CFOs stay on top of all their company’s payroll transactions and data, ensuring that nothing is being neglected.

This is why global payroll data needs to be consolidated. Companies today pay people across many different countries in many different currencies- a CFO cannot gain the insight they need when viewing just a few of these countries in a consolidated format- they need full consolidation of data and ideally, they need to view and compare costs across countries in a single currency.

Reporting functionality that automatically consolidates global payroll data across countries is hugely beneficial – otherwise there can be a great deal of manual input and work involved. Essentially global payroll professionals will be asked to transfer data from spreadsheets and try to manually consolidate labor cost figures which is time consuming and hugely inefficient. This does not lend itself to the kind of fast, agile, and responsive process that is needed for payroll reporting when it comes to requests from the financial operations department or the CFO.

What is needed for CFOs is reporting that can be pulled on a self-service basis, which also automatically consolidates labor costs and figures across several countries, but also globally and at a regional level, such as Europe. This would then mean that the CFO would be in a position to view the bigger picture on a global level but also have the ability to customize and drill down into specific things like costs per country, year, month or pay element- this is the level of detail needed to give true and actionable insight.

A competitive advantage

CFOs need to make decisions based on solid and comprehensive data. These decisions can often feed into the overall strategy of a company. Payroll data can illustrate a lot about a company’s operations, and the CFO can see how much is being spent within the company, where it is being spent and if this is a positive or negative thing for the business.

Payroll data may also indicate if a specific country is advantageous from a cost perspective in terms of having new hires in that region, this sort of information can lead to a company gaining a competitive advantage.

Additionally, the speed and accuracy with which this reporting is delivered can lead to a competitive advantage. If a company is leveraging innovative digital tools to generate advanced and comprehensive multi country reporting, then they are in a position to get the CFO and finance departments the figures and data they need around labor costs in a faster and more efficient way than their competitors are perhaps doing. Decisions can get made quicker and they will be based on more accurate and up-to-date data which could lead to gaining a competitive advantage, such as moving into a new territory or market and generating a revenue stream quicker than the competition.

Payroll data has a lot to say about the financial health of an organization, but it is of no value to a CFO if it remains hidden in multiple systems across several different countries. It needs to be released via innovative digital tools and extracted into a digestible format for easy analysis and understanding. This leads to faster and more agile decision making and the result can often lead to a competitive advantage. This is a situation where reporting technology is working not only for the CFO and the global payroll department but also for the greater good of the wider organization.

 

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