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Financial accounting vs visionary accounting: Becoming a next-level CFO

May 05, 2021

The growing need to discover and predict the future is changing our expectations of CFOs.

Like scanning the landscape through the windshield vs. what we just saw in our rearview mirror, the emerging CFO role is no different. For years now, it’s been gradually moving from historical recordkeeper into strategic forecaster, a visionary — and the COVID-19 pandemic has only accelerated this evolution and its necessity.

As CFOs look for ways to continue helping their organizations navigate the challenges of the pandemic and come out better positioned for the long-term, the topic of visionary accounting versus financial accounting has risen to the forefront. How can CFOs add more value to the organization? How can they take themselves — and the business — to the next level? How can they see the next level, and what exactly is visionary accounting?

Financial accounting vs visionary accounting

Financial accounting is the traditional role of the finance department. Intended to expose known trends, it’s primarily concerned with historical results. It offers a global perspective on the health of the business and communicates your organization’s financial position to outside parties. It’s compliant with general accepted accounting principles (GAAP) and government regulations. And it promotes the reporting of static, account-level information.

Visionary accounting, on the other hand, is future-oriented. Designed to influence employee behavior over the long-term, its purpose is to gain and deliver actionable intelligence to enable faster and more improved decision making.

Here’s a quick overview of financial accounting vs visionary accounting:

Visionary accounting Financial accounting
Thought process Multi-scenario, anticipatory, outcome-based, scrutinized more for effectiveness than adherence GAAP compliant, restrained by government rule, scrutinized more for adherence than effectiveness
Involvement Best when incorporating the contributions of many Best when limiting the number of contributors
Outcome orientation Focused on visuals, graphs, dashboards and lever-based triggers on every dimension in the business Focused on tables of static, historical, account-level information
Intended to Improve operations through scrutinizing individual business entities, departments, locations, etc. Provide a global perspective on the most recent health of the business
Risk influence Intended to expose risk/reward and opportunity/threat Intended to expose known trends
Concerns The what if? The what has been

While financial accounting looks at things from a yes-or-no or black-and-white perspective, visionary accounting looks to expose gaps in desired outcomes. Modeling a variety of potential outcomes through the analysis of multiple scenarios, it answers questions like, does the business move in the right direction if you…? Are your strategic goals aligned with what the models tell you? If not, how wide is that gap? Will the gap grow over time? Will it shrink? What aren’t you considering?

Visionary accounting is the evolution of financial accounting — a maturing of your organization that takes you to the next level. While you need financial accounting to maintain compliance, adding a visionary accounting mindset coupled with human and technological capabilities is how you mature a data-rich finance department into a strategic business partner. It’s how you become a next-level CFO.

How do you use visionary accounting to become a next-level CFO?

The first step to executing visionary accounting is for you to reorient all business leaders toward a focus on the future. It’s about accepting the past while asking of yourself, and those responsible for operational effectiveness, what you want to happen in the future and what indeed might happen. Everything should focus on long-term planning horizons — one, two, five and even 10 years out.

The second step is to increase your collaboration with other departments with the goal of becoming their strategic partner. You want to identify their goals and objectives and figure out how you can reorient their line of business to help them achieve those goals. Financial accounting tells departments, these are the numbers you need to meet. Visionary accounting gives departments actionable intelligence, based on the metrics those departments requested, to better measure their own effectiveness. Next-level CFOs lead instead of react. They spearhead the discussions with other department heads to figure out how to collect the data needed to get and present the outputs needed to better run the business.

It’s no surprise, then, that the third step is to create a strategic vision focused on how to achieve a set of goals. And once you have that vision, you can create models around strategies to measure inputs and outputs. This then enables you to explore what-if scenarios. When you constantly inspect the business and its operations in a variety of anticipated outcomes, you can invent new ways of doing things.

Visionary accounting lets you drill down, change one lever and alter the outcome for the entire business, instead of forcing you to look at the entire business in one snapshot, as financial accounting does. It continuously looks for more levers to pull in measuring that effectiveness and incorporates data from sources anywhere inside or outside of the organization. Visionary accounting benchmarks even the smallest of details to determine what the numbers should be and how to achieve them. As you expose more levers to pull, you will better quantify risk.

Financial accounting exposes known trends, but it doesn’t tell you how to mitigate risk and close gaps. For example: a manufacturer taking on a new product line will determine whether bifurcating resources across lines will make both less effective, or create new economies of scale and grow margin. 

Visionary accounting tools

Of course, the biggest challenge CFOs face is gathering actionable data. Part of the work is understanding what data sources and contributors you can trust. Getting sales forecasts from the sales department isn’t as effective when you’re taking the risk that they don’t fully understand or haven’t accounted for what’s going on in the marketplace.

That’s why there are a range of tools already designed to help CFOs turn data into actionable intelligence. You probably already utilize accounting software, but that’s focused on the financial accounting side of things. Visionary accounting requires a deeper level of sophistication that comes with financial planning and analysis (FP&A) and related software solutions.

If you’re interested in learning more about how to implement visionary accounting, click here. Our FP&A specialists can help you model out your desired vision and outcomes and identify appropriate measurements. We can help you determine what type of software solution would work best for your organization. We’re here to help you establish the foundation of visionary accounting.

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Author(s)

Tony Cantor, PMP
Senior Manager
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