Gone are the days that a CFO’s (Chief Financial Officer) duties are limited to compliance, financial, and statutory reporting of the company. Today’s modern CFO is expected to do much more than just write checks.
Why do we call them the modern CFOs?
Although CEOs are still the supervising personnel, CFOs have an influence on where the company is heading. A good CFO drives the company’s direction to success with the aid of his knowledge and in-depth understanding of the company’s financial position. The big change is that while the traditional tasks of a CFO continue to be critical, the role has expanded.
What does it take to be the modern CFO?
While fundamental financial skills are still essential, there are other skills that the modern CFO needs to obtain. We have listed here the four required skillsets that are important:
- Leadership – Why is there a need for this skill? It is because today’s CFO is often asked to lead group-wide programs with the capability to translate accurate and clear messaging. This is a critical task that modern CFOs must be able to perform. He must be able to convey a crystal-clear message in order to keep his team and personnel on the same page.
- Operations– While leadership can be critical, there is a level of criticalness when it comes to operations. Today’s CFOs must have a strong understanding of the company’s business model as well as the industry in which it belongs. Given that knowledge base, the CFO will then offer his perspective and guidance to the operations team in a constructive way. When they are shown complex data, the CFO can give his predictions and analysis that therefore drive the decision-making of the company. Traditionally, CFOs control costs that drive profit and growth. But today’s modern CFO’s role has changed to benchmarking versus the other competitors and creating regional profitability analysis.
- Controls – Although CFOs ultimately are not the decision-makers of the company, they still influence every major aspect of the business such as the legal requirements. To do that, the CFO must ensure that there is adequate assessment and review the risk through both commercial and financial lens. Being able to manage the risks while the business continues with its strategic focus is a must.
- Strategy– We all know the importance of strategy in a business. A forward-thinking CFO knows that also. A CFO should support the strategy and help in its execution including funding.
What makes a successful modern CFO?
While many CFOs have the skills listed above, we can differentiate what makes a CFO successful in his role.
- A seat at the table must be obtained. There is little doubt that a successful CFO is a visible leader, a great communicator, and an influencer at the same time. This gives them full credibility and naturally a seat at the table of leadership.
- Finance must be engrained throughout the company. Not all CFOs see the value of having an informed team, or company that understands the value of finances and the information it provide. A successful CFO educates and embeds this information throughout the business which then gives the basis for the manufacturing, commercial, and operations on their decisions.
- Knowledge of software and technology is critical. We are in the digital age and technology is rapidly changing. It is important that CFOs are current with the latest trends. They should be able to adapt to new advancements while utilizing cloud-based solutions and ERP implementations. Since access to accurate and updated data is a major necessity for CFOs, software and technology should work hand in hand. Unfortunately, there are still companies that are not using current technology and still use automated reports for forecasting and predictive analysis. This is a hindrance to a business and a time-drag.
- Results are prioritized over efficiency. Unlike other roles, CFOs are now evaluated based on their effectiveness instead of their efficiency. Business owners want results to their desired outcomes. It is a CFO’s job to help facilitate that vision by making it a reality.
Now that we know what makes a successful CFO, we also need to know if today’s CFOs are ready for this challenge. In a 2014 Accenture study, it stated that CFOs have taken the right steps and there is an advancement in finance because of their role. But in a 2018 survey, The New CFO Mandate, there have been different views on where CFOs create the most value. Another survey entitled The View from the Top showed that 45% of the CEOs voiced their worry because of CFOs’ lack of commercial knowledge as well as experience.
While the CFO’s role has been taken to the next level, there is still room for improvement. As the role of the modern CFO continues to evolve, let’s look at some key areas that are rapidly expanding.
Key areas of focus for the future CFO
- Obtaining finance experience in various roles to include some commercial and operational functions of the business.
- Gaining international exposure to have a better understanding of the global perspective.
- Joining programs to improve his/her leadership opportunities and team-building skills.
- Investing in digital technology and software.
If there is an increased expectation, there is an increased demand as well. Some of the best CFOs have the right people on their team and within their organization that they may coach, mentor, and develop leadership skills with. Having a knowledgeable team in place will help ensure the success of the business or businesses that the CFO is partnering with.
- SVB’s Collapse and the Changing CFO’s Ability to Adapt to Adverse Conditions - March 18, 2023
- The Benefits of the Employee Retention Tax Credit for Your Business - February 18, 2023
- Ways to Check the Reliability of Your Startup’s Financial Projections - February 17, 2023