What CFOs Should Be Learning From Private Equity Firms

Every major technological shift creates a new category of business data. The internet created clickstream data, smartphones created location data and cloud software generated operational data at unprecedented scale.

Fast forward to today, and artificial intelligence (AI) is turning everything into data. AI systems enable companies of all shapes and sizes to extract value from previously unstructured information such as documents, emails and images. Activities that were once difficult to quantify, including sales execution quality, customer engagement patterns, employee productivity, process consistency and more, can now be measured with unprecedented precision.

This increased visibility is changing the nature of performance management. Organizations are no longer limited to measuring outcomes. They can now measure the activities that produce those outcomes.

The challenge for CFOs, however, is determining which metrics matter and which simply generate more noise.

Read more: Good CFOs Automate but Great CFOs Anticipate

The Evolution of Operational Visibility

The shift that AI brings to internal business operations is not too dissimilar to the role a private equity investor frequently plays in across their portfolio companies. While financial engineering and rightsizing often dominated headlines, the most successful private equity investors build value through a laser focus on measurement, operational transparency and continuous performance optimization.

Today, advances in AI, operational analytics and enterprise software are making many of those capabilities available to a much broader set of organizations. Modern platforms can analyze customer calls, monitor workflow patterns, evaluate project execution and identify operational bottlenecks across entire organizations. Rather than relying on periodic reviews or anecdotal observations, companies can now generate continuous streams of operational intelligence.

For CFOs, that distinction matters. Financial results are lagging indicators. Operational behaviors are often leading indicators. And today’s CFOs face mounting pressure to improve performance amid slowing growth, persistent economic uncertainty and increasing scrutiny over investment returns. Many have already exhausted straightforward cost-reduction opportunities. The next phase of value creation will likely require finding new sources of productivity and growth without undermining long-term capabilities.

In that environment, private equity’s operating playbook offers a relevant framework around how organizations can create significant value by identifying the operational behaviors that drive performance, measuring them consistently and improving them systematically.

For example, new PYMNTS Intelligence research in the June edition of the Growth Corporates Working Capital Index found that the strongest performing companies—rather than asking how to optimize their cash—are the ones asking how to improve visibility over that cash.

See also: CFOs Pull Forecasting Insights From Payments Data, Not Economic Headlines

The Finance Function’s Shift from Cost Management to Value Creation

When measurement becomes disconnected from action, organizations generate insight without impact. Effective measurement begins with a clear understanding of strategic objectives. Organizations must first determine the outcomes they seek to improve and then work backward to identify the behaviors and processes most likely to influence those outcomes.

“We see inconsistent and incomplete data structures, bad data, dirty data,” Michael Younkie, vice president of product management at Billtrust, told PYMNTS. “We see challenges around legacy ERP (enterprise resource planning) systems with limited AR API capabilities.”

The objective for CFOs today is not merely to spend less but to generate more value from existing resources. This mindset differs from traditional transformation programs that rely on periodic restructuring efforts or large-scale efficiency initiatives. Instead, performance improvement becomes embedded within daily operations.

“The office of the CFO is broadening its mandate,” Boost Payment Solutions Founder and CEO Dean M. Leavitt told PYMNTS in an earlier interview, adding that while decisions about how companies pay and are paid “were traditionally a secondary issue for most CFOs,” that decision-making hierarchy is now changing as finance leaders come to recognize the working capital implications of strategic B2B payment design.

More like this: The CFO Checklist for Data Readiness in Automation Projects

Rather than relying primarily on cost reduction to meet financial targets, organizations can pursue a more nuanced strategy centered on understanding and improving the operational behaviors that generate value. The ultimate objective is to create a feedback loop in which operational visibility drives better decisions and better decisions drive stronger results.

The promise is significant. Better visibility can reveal hidden inefficiencies, unlock productivity gains, strengthen customer relationships and accelerate growth. Yet measurement is valuable only when it leads to action.

As CFOs embrace increasingly sophisticated analytical tools, their success will depend less on how much data they collect and more on their ability to identify the few operational drivers that matter most.

In an era of abundant information, competitive advantage may belong not to the organizations that measure everything, but to those that understand exactly what is worth measuring.