What It Takes To Be An Effective Chief Financial Officer (CFO) Today
From Number Cruncher to Value Driver
In today’s ever-changing and increasingly disruptive business landscape, no one business can sustain in the long run by sticking to outdated practices. Roles of key company personnel such as a CFO also gets disrupted and changed as a result. Contrary to popular belief, the role of a CFO has increasingly shifted from finance-related activities such as accounting and controlling to non-finance-related activities. A recent Accenture Survey revealed that 40% of CFOs spend majority of their time on non-finance-related activities (Accenture, 2018).
There however, lies a perception gap of what a CFO does between non-business leaders and the CFO itself. Many of these leaders still regard their CFOs as the main contributor to traditional finance areas and a change is required in order for the company to tap into the huge potential of a CFO in driving the business forward.
Understanding the cause of the shift
Demonstrating a CFO’s expanded role can be done in a multitude of ways but it is crucial to first identify the traditional finance functions that many are aware of and how it has evolved which resulted in a shift in a CFO’s role. The influx of Robotic Process Automation (RPA) and Artificial Intelligence (AI) has introduced automation solutions such as workflow management to finance functions. Up to 80% of finance functions (especially repetitive tasks) can be automated, releasing significant time to spend on proactive, higher-value business tasks (Accenture, 2018).
Furthermore, a CFO should appreciate the application of analytics to financial data which allows the identification of profitable business segments in the organisation. Cash stuck in certain areas of the balance sheet can be better spotted with analytics (Gerner, 2019) that in turn provides insights on how to devise plans to free up excess liquid assets to generate returns on them. Having to understand and learn the complex technicalities of analytics and automation processes on top of the existing roles a CFO undertakes, he/she can be greatly overwhelmed. The need for specialists should not be discounted as they are key to aid the CFO in his multitude of roles and be able to focus on what matters most: Identifying the next growth opportunities.
Closing the Perception Gap
A CFO’s scope of work should not be restricted to just finance activities but rather, should be involved in all decision-making processes across other functions of the organisation. In order to do so, all parties involved have to cooperate in providing information onto a single cloud-based platform. Take for example, complex financial data from the finance function gets translated into consumable information for non-finance executives to understand and utilise; likewise, information and reporting from various functions of the organisation gets feed into this platform for the finance executives to understand their business performance. A centralised data system as such allows key decision makers such as the CFO to strategically decide the need for a change in financial structures across departments, so as to meet business pressures while simultaneously keeping admin and reporting costs in check.
Through such a system, it not only results in better utilisation of information for decision making but at the same time, talents can be developed across all departments. The CFO himself can educate other key executives on certain financial technicalities while embarking on a change or when providing advice for a proposed business idea. For example, the CFO can provide advice on a marketing campaign with regards to its profitability and practicality before it gets rolled out. Such advice potentially reduces the failure rates of such campaigns and also allows the marketing team to have a clearer picture of the cost-benefit of such campaigns which will provide useful insights for future decisions.
The CFO of the future is likely to be a leader of change and transformation; he or she will have to motivate and inspire not just staff within the finance team, but within the various functions of the company as well. The job is moving from a specialist to a more generalist role within the C-suite and we observe that roles in the executive management team are no longer strictly separated. Each and every key executive member has to be well integrated into the company’s multitude business functions in order for better and forward-looking decisions to be made.
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