6 Expertise CFOs Want Now to Assist Firms Develop



It was once {that a} chief monetary officer’s major focus was on the standard capabilities of the job: monitoring money circulate and monetary actions; serving as a controller and accounting professional; limiting pointless spending; and guaranteeing that monetary choices conformed to plain working procedures.

These duties are nonetheless important, after all, however they’re more and more turning into secondary to the strategic roles CFOs are being requested to play. Because the tempo of enterprise accelerates and expertise advances, the fashionable CFO should take a broader, extra forward-thinking and growth-oriented strategy to the job.

The consulting agency Accenture captured this transformation in a 2022 survey, discovering that typical finance chiefs now spend most of their time spearheading companywide efforts to rework and optimize enterprise operations, with an emphasis on accelerating income and revenue development.

It’s a brand new actuality that I’ve seen play out amongst fast-growing small and medium-size healthcare corporations the place I’ve held quite a few management positions. These corporations not solely anticipate you to be a purposeful CFO, delivering on primary accounting duties, in addition they anticipate you to be a strategic CFO, working with the management staff to discover development alternatives and maximize profitability.

So how do you develop this strategic experience? By means of trial and error, I’ve realized that the best means is to focus in your current finance capabilities and duties—these capabilities which might be already inside your purview as a CFO—and elevate them to ship the strategic perception your organization wants.

On this article, I share six areas the place I like to recommend you focus. The event of the talents I talk about may be utilized broadly to development corporations and employed throughout a large spectrum—by fractional CFOs working with later-stage startups, by interim CFOs in distressed conditions, and even by finance chiefs employed by public corporations.

In terms of increasing and bolstering your current capabilities, I talk about the simplest areas first. The later ones, particularly company imaginative and prescient, will most likely eat extra of your time, however I anticipate you’ll discover that mastering them is properly value it to you and your organization. I embrace examples to point out you ways I put every of those ideas into motion.

1. Reporting and Forecasting

Reporting and forecasting are desk stakes for a finance chief. The proliferation of software program as a service (SaaS) and cloud companies has made it simpler and cheaper to combine highly effective accounting techniques throughout a company. A purposeful CFO should be certain that everybody who wants entry to those techniques has been absolutely onboarded and is utilizing them, whereas a strategic chief seems for alternatives to delve deeper into the data to floor actionable insights for the group.

The functional CFO performs routine reporting and forecasting, summarizes top-line financials, and reports results directly to the CEO. The strategic CFO undertakes frequent, proactive reporting, and uses results to challenge assumptions and inform operational discussions with leaders.

I can greatest clarify how you can develop this space by sharing how I demonstrated to at least one firm that absolutely onboarding a staff is a vital step—even for management. I labored for an early-stage healthcare companies firm the place the CEO tracked company financials on an Excel worksheet he saved on his desktop and up to date at night time and on weekends. This apply created apparent issues. First, his shadow financials had been typically incomplete. Second, his apply induced a disconnect that prevented the finance staff from growing a routine of updating info and producing helpful and well timed insights for the CEO. With out this routine, the CEO was flying blind when it got here to gross sales and profitability decision-making.

Once I joined, I helped the corporate standardize all of the accounting, operational, and monetary reporting templates, and the chart of accounts. The corporate and I then agreed on a reporting calendar for when the finance staff would give the CEO and board the newest revenue assertion, steadiness sheet, money circulate assertion, and customer- and product-level segmentation. That report additionally repeatedly offered info on the efficiency of particular person departments, evaluating the figures for every with that division’s finances, forecast, and prior-year numbers.

We didn’t cease with standardizing companywide reporting, nevertheless. We leveraged the data to advocate operational modifications that will enhance areas of monetary underperformance. This not solely freed up the CEO’s nights and weekends, but additionally gave us strategic perception into the corporate’s operations whereas decreasing the administration staff’s anxiousness and stress below the earlier fragmented reporting system.

2. Monetary Planning and Evaluation

The following logical step for a strategic CFO is to search for methods to use standardized databases and quantitative expertise in monetary planning and evaluation. FP&A is usually used to provide data-driven solutions to monetary and operational efficiency questions dealing with any facet of the corporate. Some are routine analyses, akin to evaluating the present interval’s efficiency to the prior one’s, whereas others are advert hoc analyses akin to calculating the return on funding for a brand new gross sales enablement expertise platform. A strategic CFO makes use of the identical processes and should tackle among the similar questions as a purposeful CFO however takes a extra proactive strategy.

The functional CFO analyzes financial and operational performance on an ad hoc basis and produces data-driven answers upon request. The strategic CFO generates operational questions proactively and independently, produces hypotheses and tests them, and uses results to analyze value drivers and performance of partnerships and acquisitions.

Once I joined a pharmaceutical producer as CFO, I discovered that few of the corporate’s senior leaders knew which buyer, product, or geography generated the best development or income. This grew to become an issue when the corporate needed to rapidly improve profitability. After implementing primary reporting enhancements, I carried out a complete profitability evaluation of the corporate’s a number of enterprise and buyer segments to start to reply broader strategic questions.

Utilizing FP&A enterprise intelligence instruments like Microsoft Energy BI, we pinpointed the sources of the best development and the best earnings and losses. We then broke them down by product class, product SKU, buyer, enterprise unit, and geography. However we didn’t simply produce a report that sat in colleagues’ inboxes. We looped in cross-functional groups to assist us design, develop, and glean insights from the studies, and hosted in-depth conversations with government leaders of every purposeful space about business and operational modifications that will maximize monetary efficiency.

Inside a short while, the corporate had a holistic understanding of which segments contributed earnings. Simply as vital, we had full alignment amongst senior leaders that we should always give attention to essentially the most worthwhile segments. This technique allowed us to almost double the corporate’s profitability in lower than a yr.

3. Threat Administration and Mitigation

If finance leaders thought threat administration was simply an administrative footnote to monetary oversight, then the COVID-19 pandemic and breakdowns in international provide chains upended that false impression. At the moment, CFOs should take a task in pushing groups throughout the group to make threat assessments and repeatedly tackle questions of mitigation. On the similar time, they should see threat administration by way of the prism of alternative, searching for the place it creates potential business openings.

The functional CFO outsources risk assessment to auditors to determine what needs improvement and develops a responsive action plan to address identified risks. The strategic CFO probes cross-functional teams for input on potential disruptors, develops a formal routine to mitigate these risks, and collaborates with other senior managers to track mitigation actions.

For instance, from 2017 to 2020, I used to be chargeable for a bunch of corporations that imported important elements for medical merchandise to China or assembled them there. The businesses loved cross-border, lower-cost arbitrage and persistently expanded gross margins for a few years. Nonetheless, once I joined, I might see operational, regulatory, and macroeconomic dangers on the horizon. We engaged senior leaders in thought-provoking quarterly discussions to anticipate potential hazards so we might dedicate sources and take motion to mitigate essentially the most urgent materials dangers. The groups persistently highlighted the potential operational and monetary dangers of cross-border commerce limitations disrupting important part shipments.

This proved prescient when a commerce battle flared up between the US and China in 2018. As a result of we had been ready by way of our threat planning, my group of corporations was in a position to decrease provide chain disruptions by leveraging backup part sources in different components of Asia and Europe. Integrating threat administration into the corporate tradition allow us to not solely scale back or neutralize dangers, but additionally restricted impression on the underside line, creating business alternatives for our gross sales and advertising groups to extend market share. We continued reliably delivering merchandise and options whereas our rivals had been nonetheless dealing with disruptions.

4. Digital Transformation

It’s routine for a CFO to ask division heads to do extra with much less. Finance chiefs can paved the way by doing so themselves, analyzing methods to automate back-office operations to free staff from repetitive duties whereas saving money and time. Automation also can assist the finance division because it offers with the fixed cycle of labor spiking inside tight timetables: month-to-month closes, pressing evaluation requests, and the crunch interval round mergers and acquisitions. Being perpetually wanting arms and hours inevitably results in excessive ranges of stress.

The functional CFO adheres to status quo workflows—often manual processes—for completing financial or operational workflows. The strategic CFO looks for opportunities to replace routine processes with automated digital tools.

I realized how needed this transition was firsthand. After a reorganization at a world manufacturing agency, my finance staff was staffed with simply two enterprise analysts. This lean staff was chargeable for reporting and analyzing monetary outcomes for 25 portfolio corporations each month inside two enterprise days. It merely wasn’t possible for 2 individuals to finish this spreadsheet-based copy-and-paste venture inside 48 hours. Automation was the one answer.

We invested a small quantity into robotic course of automation to deal with routine reporting processes and restructured the staff’s strategy, serving to the 2 analysts grow to be specialists in enterprise intelligence and visualization programming. Utilizing these applied sciences, the 2 had been in a position to full the reporting duties in a single working day. They used the time they saved to undertake evaluation and work with enterprise leaders to enhance the reporting with actionable insights.

Seizing on these learnings, our company growth groups took the same strategy: They automated their month-to-month outreach, permitting them to contact 10 occasions the variety of potential acquisition targets and thus domesticate a bigger accomplice pipeline.

5. Expertise and Tradition

One useful means a CFO can take a extra strategic position is by turning into extra straight concerned in recruiting and cultivating expertise. As an alternative of simply advising HR on staffing necessities, a strategic CFO will accomplice with HR to create alternatives to carry high-performing monetary expertise into the group.

The functional CFO partners with HR in an advisory capacity, but plays little to no direct role in facilitating learning and development plans and team activities. The strategic CFO partners with the head of HR to invest in talent development and takes an active role in recruiting, training, and retaining talent.

As an illustration, I as soon as helped recruit a really gifted government to a small healthcare machine manufacturing firm that my agency owned, though I knew we had been going to promote it throughout the subsequent yr. We requested this particular person to hitch because the vp of finance, stabilize the corporate, and efficiently full the sale—though we didn’t have a particular position lined up for him afterward. This is able to have been a tough promote had we not approached this candidate with transparency, honesty, and a dedication to retaining him in a senior position.

A yr after the sale, we delivered on the dedication and he grew to become CFO of our largest portfolio enterprise. Three years later, he was promoted to be the holding firm finance chief, overseeing all portfolio corporations.

As CFO, taking an energetic position in growing a high-potential finance chief meant I used to be contributing to the corporate’s long-term technique by serving to to safe an worker who might steer the corporate in a post-sale future. Whereas all of this transpired within the finance division, others in numerous purposeful areas observed and adopted comparable approaches to recruiting and cultivating high-potential expertise in gross sales, advertising, operations, and expertise.

6. Strategic Planning

Firms worth the exhausting knowledge and empirical mindset {that a} finance chief lends to strategic planning. The CFO can use this as a possibility to contribute to the transformation of an organization’s business objectives or capabilities, for example, by championing acquisitions or introducing partnerships to increase aggressive benefits.

The functional CFO ensures the company’s financial health, prepares for growth driven by the CEO, and maintains operational continuity. The strategic CFO collaborates with leadership to create a revenue and profitability growth plan for the next three to five years, and harnesses data and external expertise to envision how new technologies, capabilities, and partners can transform the business.

I had the chance to place this into motion whereas working with an rising markets cardiovascular diagnostic firm that made coronary heart screens. The corporate had aggregated terabytes of coronary heart rhythm knowledge by way of the 1000’s of gadgets it had offered. This knowledge was a novel asset, however the firm didn’t use the data for any business functions. As CFO, I thought of any giant supply of distinctive knowledge as a potential alternative in a world the place SaaS enterprise fashions may be commercialized rapidly.

I challenged the staff to make use of that knowledge as the premise of an analytics service whereas defending affected person confidentiality. After months of growth with native software program companions, the staff unveiled a brand new service to hospitals to offer real-time monitoring, evaluation, and alerts if the software program detected irregular rhythms in a affected person. The service deepened buyer relationships and added a extremely worthwhile income stream.

With better visibility and deeper insights in regards to the firm, the strategic CFO develops a perspective about what merchandise, capabilities, and M&A alternatives can create transformative worth for his or her firm. But it’s vital to remember the fact that what really elevates your contribution to a development firm comes all the way down to management.

The demand on corporations to satisfy targets is immense, particularly as macroeconomic pressures rise and enterprise capital, personal fairness, and public market expectations for monetary efficiency proceed to climb. Firms want management, and leaders should ship development. The strategic CFO is uniquely empowered on this respect. When the trendy CFO rises above their purposeful duties and gives useful strategic insights, they can assist their firm remodel and develop for the long run.

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