Motorway CFO: Marketing needs to give finance ‘a reason to believe’

Marketers need to give finance “a reason to believe” in the function, argues Motorway chief financial officer Liz Kistruck.

Kistruck was speaking alongside econometrician and Magic Numbers founder Dr Grace Kite at the IPA Effectiveness Conference 2024 yesterday (9 October) about the need to have empathy for the finance team, particularly in the context of budget season.

This empathetic attitude should be the starting point for discussions with the CFO about marketing budgets, Kite said.

“Like any negotiation, it starts with understanding what the people you’re talking to, the people you’re negotiating with, are going through,” she stated.

That means understanding the competing pressures that finance are under. Namely requests from the bottom up versus pressures from the top down.

Bottom up requests come from multiple parts of the business and promise to drive revenue in return for investment.

Top down pressures, though, come from a wider view of the world and take into account market pressures and where the potential is for growth. These top down pressures are often voiced by investors.

“There’s finance in the middle trying to balance these two views,” Kite said.

If I can see the cost has gone up, but revenue hasn’t moved, that is not a success to me, and I don’t care what charts you show me, the P&L is not lying to me.

Liz Kistruck, Motorway

As a CFO, Kistruck acknowledged the power of strong brands and marketing to drive growth, but what she wants in her relationship with marketing is for the function to present a case for investment that recognises the realities of the business.

“What I’m really looking for in those relationships is reasons to believe. [You need to] help me make your case so when I get challenged – whether that’s by investors, the board or third parties – I’m able to tell your story,” she said.

For finance, the financial statement, and in particular the P&L, is “the bible” and so marketing must always think about its bid for investment in those terms, she said. When budgeting for a cost, the finance team at Motorway will always think about the resultant income increase it will bring.

Profit is key for finance and so driving returns on that cost is essential. Most finance departments will have a particular “ratio” for return on investment in mind, Kistruck said.

“The great thing about P&L is that it doesn’t lie. It sees everything,” she said, adding there are times people hail something as a success, but that’s not translating in the numbers.

It’s time for marketers to speak the language of finance, not the other way round

“If I can see the cost has gone up but revenue hasn’t moved, that is not a success to me, and I don’t care what charts you show me, the P&L is not lying to me.”

The issue with judging the success of investment on P&L is that it operates on the basis of financial years, meaning it can be hard to judge the impact of multi-year investment.

“It’s even more challenging if you’re comparing investments that have different profiles. You might have a small amount of spend with some relatively immediate revenue written, or you might have a really big spend that’s going to take ages to pay off,” Kistruck said. “The finance team has got to weigh those two up.”

Finance is always thinking of investment in terms of it being in expense of something else, whether that’s capital, expertise or people, she stated.

Marketing needs to make a case for finance to invest in it above other costs. In finance’s world, it’s often a case of “this versus that”.

While marketers talk a great deal about the long-term payback of advertising, the immediacy of payback on media compares favourably to new hires in the product and tech team, for example. It is also measurable, can be paused if needs be, and is relatively well-understood, things that are all benefits in the minds of finance, Kistruck said.

Discounted cash flow is a metric highly valued by finance, it is a valuation method that estimates the value of an investment using its expected future cash flows. Magic Numbers has launched a free tool which does just that. It allows marketing to compare the return on their media spend to another investment, in doing so providing an estimate of expected revenue generated from both over the next three years.

This helps give marketing the tools to “huddle with finance”, Kite said.

She quoted something that Rupert Morton, former CFO of Secret Escapes told her about marketing: “A successful CMO moves towards the finance way of seeing the world, because the finance view of the world will win.”