CFOs Desperate for Data to Recalculate the Cost of Office Space

When chief financial officers (CFOs) need to make decisions about a company’s utilization of physical space in today’s world of remote work, one thing they need but often don’t have is real-time data.

Should a property be kept or closed? Can an office be consolidated, with some floors being put into “hibernation” in order to reduce the costs of utilities and cleaning? How can the office environment be made more comfortable for employees?

“It’s a very complex decision,” Density CFO Ori Franco told PYMNTS. “One, data has not been available and, two, there are many people that touch that decision.”

Data can inform these decisions by bringing transparency to the real estate costs per square foot, the portions of the existing space are not being used, and whether staffers tend to use desks, conference rooms or common areas.

Providing Insights for Decision-Making

Density provides its customers solutions via a platform that helps companies measure, analyze and optimize the physical space of their workplaces, comparing it to its intended purpose and other benchmarks.

“Previously this data has all been anecdotal,” Franco said. “We provide that visibility.”

It’s a tool that’s in demand. With COVID-19 starting to look like it is in the rearview mirror, more people are getting comfortable with the idea of returning to the office.

In addition, there’s a growing interest among companies in sustainability and reducing their impact on the world. This trend contributes to their desire to shed space that they don’t need.

For the users of Density’s platform, one of the benefits of understanding how they utilize their space is that they can rationalize their investment in space and understand the return on investment from investing in space, Franco said.

Real estate is typically a firm’s second largest expense after payroll, Franco said. With near real-time data on how it is being used, companies can better decide whether to renew a lease and whether to consolidate space.

Managing the Real Estate Portfolio

Other benefits include being able to improve the workplace experience and to manage the real estate portfolio. Here, Density provides insights into how employees tend to use the office space in which they’re currently working.

“It also builds a strong culture when you have more people in a smaller space,” Franco said.

The company’s Atlas product also overlays cost data so that customers can better understand the price per square foot and the maintenance costs. This provides actionable insights by enabling customers to see the amounts they might save if they make changes.

“It’s actually pretty amazing to hear [customers’] response,” Franco said. “It’s like, ‘Wow, I actually now have data to make these decisions,’ where previously they didn’t have this concrete data.

“The visibility is sort of eye-opening for our customers,” he added.

Dealing With Macroeconomic Challenges

Along with real estate, today’s CFOs must also cope with the challenges presented by the economy. When an organization is dealing with a macroeconomic environment like today’s, one key role of the CFO is to be a business partner to the rest of the organization, Franco said.

That means, for example, working with the sales team, manufacturing team, supply chain team and customer success team to ensure customers are getting value from the company’s products.

It also means focusing on operating expenses, with the CFO providing transparency to the rest of the organization.

“In every function within the company, there needs to be a strategic reason for spending what we’re spending and then understanding the return on that spend and making the right business case across the organization,” Franco said. “This results in growth, stronger unit economics or long-term efficiency.”

Meeting the Need for Data

Another part of the CFO’s role involves putting in place the fundamental building blocks of a finance organization at the company.

This includes implementing the systems and the reporting that are especially important in today’s environment as companies work to balance growth versus profitability, unit economics and managing expenses.

“If you don’t have the right tools to report, you can’t do a good job managing margin, managing costs and making decisions around growth versus unit economics,” Franco said.

When it comes to accounts payable (AP) and accounts receivable (AR), Density does almost everything in the cloud. The company has the right controls in place, it has virtual mailboxes and lock boxes, and the finance team is fully distributed with the tools they need to work remote-first and efficiently.

“I think the vision is to bring efficiency to the team and efficiency to our reporting process to allow us to minimize the tactical work and really focus on accuracy, data and processes to create efficiency in the organization,” Franco said.