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Journey to the CFO of the Future

 

Journey to the CFO of the Future

Like the role of meteorologists, the role of the chief financial officer (CFO) has evolved significantly in recent years. Once considered the keeper of all things financial (mostly historical-looking), the CFO has evolved into a trusted business partner who provides insights, predictions and recommendations that advance the business’s goals.

The CFO’s ability to make significant positive impacts on a business mirrors the impact meteorologists have had on our everyday lives. Weather patterns used to be observations of the past and anecdotal predictions of the future (e.g., “Red sky at night, sailor’s delight. Red sky in morning, sailor’s warning.”). With the invention and progression of technology allowing precise measurements and tracking of trends, the role of the meteorologist has evolved. Using today’s tools, data and advanced education, meteorologists can predict the weather forecast many days into the future, down to a granular hourly prediction for the following day and daily predictions for the following week.

Think about the positive impact this has on ships that deliver cargo. A captain used to rely on limited resources, namely keen instincts and observations, to complete a voyage safely and quickly, but now they have many more resources and greater flexibility at their disposal. Crew members can view weather forecasts and chart alternative courses, creating not only safe and timely passage but also competitive advantage.

Did weather pattern prediction happen overnight? Of course not! It has been an evolving journey — same as the role of the CFO. Business leaders have come to expect CFOs to provide valuable insights, and they depend on those insights to drive the business forward, just as we expect meteorologists to provide an accurate weather forecast that helps us plan our week.

What Caused These Changes?

A business’s baseline expectations of a CFO start with ensuring the stability of its financial operations. The traditional main responsibilities of the CFO have been closing books, billing customers and managing financial obligations. However, technology and access to information is streamlining these functions and creating profitability pressures on businesses.  Technology has increased the ways organizations can handle business transactions and made tasks and processes more efficient, shifting or eliminating some of the CFO’s historical responsibilities, allowing the CFO to focus on the core business and making significant financial impacts.

The CFO now needs to understand the technology being utilized and employ creative problem-solving to ensure financial operations keep pace with the changes in the business. The best way for businesses to protect margins is to leverage automation and efficiency where possible and redeploy financial resources to make the biggest impact on the business. Having the right technology in place ensures effective financial close processes, billing systems that keep pace with new products or new customer agreements, timely and appropriate vendor payments and inventory control that assists with cash management and bottom-line profitability.

The CFO journey has evolved into one of true leadership, with CFOs preparing financial reporting and analysis in order to advise on business decision-making. Many factors come into play when making business decisions — factors that enable a business to achieve its goals but may require upfront investments in areas such as customer experience or operating equipment. Cutting the most amount of expense or selecting the lowest-cost vendor does not always lead to the best results for the business. The CFO has access to all facets of the business as well as an understanding of the financial implications of business change. This may initially start with analyzing scenarios and presenting related financial impacts to aid in the decision-making process, but can lead to more robust discussions and creative recommendations by the CFO and their team.

Signs a CFO Is a True Advisor to Your Business

For years, the CFO role has expanded leadership scope within businesses, enabling greater, stronger investment in important resources. While it’s not uncommon to see human resources roll up to the CFO, we are seeing more IT departments following suit. IT departments represent a significant investment for most companies and require good planning and decision-making to ensure the appropriate balance of financial investment with business solution deliverables. When a CFO is a true advisor, they leverage their abilities to dig deep into processes, drive operational efficiencies and optimize spend to successfully make this transition.

Let’s not forget to discuss the data element. Each business has an unprecedented amount of data — although many times it’s not interconnected or in usable formats. A CFO should use this as an opportunity to solidify data by ensuring it is defined, organized, consistent and linked with other meaningful data components. Once the data is solidified, the finance team can drill in to pinpoint issues and then leverage the data to present logical business alternatives. No longer is the company guided by instinct or feel, but rather by real data with predictable results. When a CFO is a true advisor, they turn data into usable, actionable insights.

Finally, the culture of an organization continues to be a very important factor in attracting and retaining talent. As a leader within the organization, the CFO must be able to shape, envision and lead a culture that values individual contribution, develops talent and provides opportunities. A CFO’s cultural contributions allow you to build high-caliber teams that make positive impacts on the business, while paying reasonable rates, even in low unemployment environments.

How to Advance the Journey

There are three key skills all CFOs should work to enhance: process improvement, collaboration and continuous development. 

  • Process improvement is a way to look at a process stream to identify issues, make changes to reflect business needs and make business decisions. Adopting the mindset of advancing the business allows you to stay competitive and nimble in quickly changing environments.
  • Collaboration establishes relationships that enable you to learn and understand the business and grow from a back-office support position to trusted business advisor.
  • Continuous development is a mindset that not only allows the individual to always strive to learn more and be more, but also encourages everyone on the team to elevate their performance and avoid complacency.

When CFOs utilize these skills as well as advancements in technology, access to information and data-based insights, their opportunities are unlimited. The journey to becoming the CFO of the future starts with solid financial operations and reporting but can quickly lead to broader levels of involvement in decision-making, operational management and culture leadership. Ask yourself: How can you leverage the numbers and insights at your disposal to advance the products, profitability and people within your organization?

Author(s)

Jacquie Fossett
Jacquie Fossett, CPA
Manager
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