APRIL 2017 | WWW.CFO.COM REVIVING MANUFACTURING INSURANCE’S INNOVATION CFO GAP Tech Companies To Watch 20 vendors transforming the way businesses operate CFO WEBCASTS Topics: What’s top-of-mind for CFOs Experts: Sharing leading-edge thinking Viewing: Live or on-demand CFO Publishing’s finance- driven webcasts bring together industry and academic experts to discuss the most pressing issues facing senior finance executives today. Explore the latest developments in accounting, technology, performance management, financial reporting, tax, human capital, and more! Don’t miss the opportunity to stay current on issues that are important to you, while also earning CPE credits. Visit www.cfo.com/webcasts to register today. FEATURES April 2017 Volume 33, No. 3 COVER 23 STORY ›› Tech Companies to Watch Disruptive Influences In areas from cyber defense to tax compliance to database management, these 20 companies are changing how businesses operate. By the Editors of CFO ›› Avalara ›› Automation Anywhere ›› FinancialForce ›› Sprinklr ›› Oomnitza ›› Workiva ›› SecurityScorecard ›› Slack ›› DocuSign ›› Neo Technology ›› Zuora ›› Reckon Point ›› Atomiton ›› Rubrik ›› Adyen ›› Aviso ›› Agari ›› Veem ›› Qlik Technologies 34 ›› Zoom 40 34 ›› Special Report: Commercial Insurance Gearing Up For Insurance’s A Manufacturing Innovation Gap Revival Technology, political will, and a Why corporations sometimes focus on the customer could lead can’t get the coverage they to a rebirth of manufacturing in the really need. By David M. Katz United States. By Russ Banham Cover: Getty Images. This page, Getty Images (2) cfo.com | April 2017 | CFO 3 CONTENTS 10 April 2017 Volume 33, No. 3 Up Front 6 ii From the Editor 8 ii Letters 10 ii Topline Z Internal promotions to CFO Z retail CFOs face border tax Z flaws in cash-flow forecasting Z class-action settlements rise Z FASB updates pension reporting Z data breaches multiply Z determining the order of financial statements Z and more 12 15 | RISK MANAGEMENT 18 | STRATEGY Is Internal Audit Doing Its Job? Making Profit the Priority Many internal auditors are slow Pre-IPO digital marketing hub to help employers prepare for major Zeta Global is highly focused disruptions like big regulatory on the bottom line. changes and cyber attacks. Z By David McCann Z By David M. Katz Motivated to Sell Pressured by external factors, 43% of executives plan to divest a 20 business in the next two years. Z By Sean Allocca 20 | TAX Tax Reform Affects States, Too The timing of federal reform, as well as the political culture and financial health of states, will affect companies’ state tax positions. Forgoing Cyber Insurance ZBy Larry Cusack Potential coverage gaps and 48 uncertainty over the value of policies make businesses wary. GE Transfers Tax Team Z By Vincent Ryan GE sheds salaries, while PwC picks up new talent. ZBy David M. Katz By the Numbers 48 iiThe Quiz 44 iiBUSINESS OUTLOOK 46 iiFIELD NOTES The Great Duke University/CFO Survey Results Perspectives from CFO Research Divide POTUS Primer: Services With While some U.S. states are raising corporate income Kill the Tweets A (CFO) Smile taxes to address budgetary crises, others are lowering The U.S. optimism index jumps to a Finance must adapt to the hybrid, tax rates to lure businesses 14-year high, but CFOs are critical services-added business model. to operate within their bor- of the president’s communication By Josh Hyatt ders. Take our quiz to boost tactics. By Chris Schmidt your knowledge of state cor- porate income taxes. 4 CFO April 2017 | cfo.com Thinkstock (5) 26,000 lbs. of structural steel lifted weekly. 27 ironworkers operating at heights. 3 thirty-ton tower cranes. 1 active construction site. BETTER UNDERSTOOD BETTER PROTECTED™ Tailored coverage as unique as your business. As the #1 preferred business insurer,* we listen carefully to your unique needs and tailor coverage and services to fi t them. To learn more, talk to your broker or visit libertymutualgroup.com/businessprotected. Commercial Auto I General Liability I Property I Workers Compensation *Based on 2016 survey of business insurance buyers on preference of national carriers sold via independent agents. © 2017 Liberty Mutual Insurance. Insurance underwritten by Liberty Mutual Insurance Co., Boston, MA, or its a liates or subsidiaries. FROM THE EDITOR Be Like Amazon.com ››On page 14 of this issue, we report on a study about fi- nancial statement place order. It turns out, according to the Georgia Tech Financial Analysis Lab, that when deciding EDITOR’S PICKS which financial statement to place first in an annual report, companies lead with their strong suit. Among the 400 com- panies examined, 68% presented the consensus estimates,” he wrote. balance sheet first and about 32% led In the Georgia Tech report, one off with the income statement. very large company led off its annual Very large U.S. companies tend to report with something different: the put the income statement first—64% of statement of cash flows. That com- the 100 companies with revenue above pany? Amazon.com. STRATEGY $30 billion did so. Only as companies Focusing on cash flows, as Amazon “If the forces in the world that get smaller do they tend to lead off has done since 2003, makes a lot of relate to sustainability are going with the balance sheet. sense. Earnings can easily be manipu- to affect a business materially, Annual report organization just lated, cash flow not so much. Classic it’s management’s job to take a reflects what we already know: Many corporate finance tells us that the longer view and figure out what institutional investors, media, and value of any business is the net present to do about them,” according to analysts are obsessed with quarterly value of its future cash flows. And, Tim Koller of McKinsey, in “When earnings numbers, so CFOs and their in fact, a focus on cash flow can free Sustainability Becomes a Fac- bosses at very large companies stress a business from the shackles placed tor in Valuation.” Read the article earnings numbers. on it by creditors and shareholders. at http://www.mckinsey.com/ business-functions/strategy-and- But management ought not join If a company can operate with very corporate-finance/our-insights/ in that unhealthy preoccupation. In a little leverage and never has to issue when-sustainability-becomes-a- letter to 500 CEOs in February, Black- additional equity, missing earnings oc- factor-in-valuation. Rock’s Larry Fink called on companies casionally won’t scare away investors. to stop providing quarterly earnings Unfortunately, few companies (and estimates, and instead focus on long- CFOs) have the audacity to challenge term value creation. “CEOs should the status quo, even in the layouts of be more focused … on demonstrating their annual reports. progress against their strategic plans than a one-penny deviation from their Vincent Ryan FINANCE Back-to-school time in Boston [earnings per share] targets or analyst Editor-in-Chief means the return of CFO’s Trea- sury and Risk Management Sum- mit, taking place September 7-8, 2017. This year’s speakers include CFO, Vol. 33, No. 3 (ISSN 8756-7113) is published 10 times a year and distributed to qualified chief financial officers by CFO Publishing LLC, 295 Devonshire the treasurers of MasterCard St., Suite 310, Boston, MA 02110 (editorial office). Copyright ©2017, CFO Publishing LLC. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, and Blackstone. Learn more at without the prior permission of CFO Publishing LLC. Requests for reprints and permissions should be directed to FosteReprints, (866) 879-9144; E-mail: [email protected]; website: www.fostereprints.com. Periodicals postage paid at Boston, MA, and additional mailing offices. POSTMASTER: Send https://theinnovationenterprise. address changes to CFO, 122 West 26th Street, 2nd Floor, New York, NY 10001. CFO is a registered trademark of CFO Publishing LLC. SUBSCRIBER SERVICES: To order a subscription or change your address, write to CFO, 122 West 26th Street, 2nd Floor, New York, NY 10001, or call (646) 839-0012; or visit our website com/summits/treasury-manage- at www.cfo.com/subscribe. For questions regarding your subscription, please contact [email protected]. To order back issues, call (646) 839-0012. Back issues are $15 per copy, prepaid, and VISA/MasterCard orders only. Mailing list: We make a portion of our mailing list available to reputable firms. ment-summit-boston-2017. 6 CFO | April 2017 | cfo.com Mark Bennington Seeing is believing. Uncovering anomalies is at the heart of audit’s value. With advanced technology in the hands of experienced professionals, KPMG audit teams can enhance quality by identifying anomalies which can lead to new insights. Find out how the ability to use more robust data and precision analytics can bring greater visibility to the business. kpmg.com/us/audit Anticipate tomorrow. Deliver today. ©201 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. LETTERS THE ➽ Let’s just say that CFO read- the commenter further vent- measured goal is to process and pay ers aren’t big fans of raising the BUZZ ed, “I will not pay a teenager invoices as quickly as possible.” minimum wage. ON $11 to $15 an hour to do mun- Contributor John Passmore, in In a Feb. 17 opinion piece CFO. dane tasks. Now moronic do- “How to Mess Up Investor Relations” (“Raising the Minimum Wage gooders have kept three to (Feb. 23), argued that it’s not ideal for Makes Economic Sense”), con- COM four high school [kids] from the CEO to take the lead role in an in- tributor Holly Sklar noted that getting work experience and vestor road show.