The Chief Financial Officer (CFO) has always faced a constant balancing act of helping the company achieve its economic growth goals and protecting it against financial risk. However the role has undergone a profound transformation due to changes in the economy in the last few years.
In a 2015 benchmarking survey, PwC described the changing role of the Chief Financial Officer along four dimensions: “Today’s CFOs are expected to play four diverse and challenging roles. The two traditional roles are steward, preserving the assets of the organisation by minimising risk and getting the books right; and operator, running a tight finance operation that is efficient and effective. It’s increasingly important for CFOs to be strategists, helping to shape overall strategy and direction, and catalysts, instilling a financial approach and mind set throughout the organisation to help other parts of the business perform better.”
Consequently a new profile of Chief Financial Officer is born with a presence in all areas of the company. This new profile may be referred to as the CFSO (Chief Financial Strategy Officer), which integrates a large capacity to interpret numbers with a deep understanding of business and developing technology. Let’s look in more detail about what this change actually means…
Chief Financial Officer: The day-to-day strategist
The modern business can be influenced by many external changes: legislation, internationalisation, lack of consumer confidence, weak markets and an increase in competition, to name just a few. In this context, the CFO needs to promote efficiency and transparency in their daily work. To fulfil their responsibilities they must obtain relevant data to carry out deep and rigorous analysis of the strategic vision of the company and its environment, which can facilitate intelligent decision making.
In order to define an appropriate strategy for the business the CFO must have the technological resources required to access real time data and reports.
CFO’s are increasingly looking to define a strategic capital investment plan to include how the organisation embraces technology; identifying the metrics to measure the benefit of allocating funds to that plan, as well as obtaining its digital objectives and measuring its technological success. These are exciting times for those CFO’s who are willing to fully embrace the ever changing world of IT for themselves and their organisations.
The PwC 2015 benchmarking study highlighted that many financial areas are still seeing 25% or more of their FTE time spent on what they class as wasted activity, or on performing processes manually that could be automated. Top CFOs highlighted standardisation and process optimisation relating to billing, accounts payable, and reporting processes as drivers of cost reduction (40%). The study also found that top CFOs spend 20% more time on analysis versus data gathering.
With tools such as predictive analytics and big data, companies can transform the finance function, to anticipate potential risks for the company and take preventative action or develop models of market behaviour in certain situations.
Chief Financial Officer: The catalyst for change
Once the CFO has a strategic vision for the company they must be able to communicate this to all stakeholders. Customers, investors, employees and partners are increasingly demanding a more transparent management of financial data. Gone are the days when the CFO’s responsibility was limited to giving the company’s results.
Becoming an effective agent of change requires CFOs to possess the leadership and communication skills to work with CEOs to outline the vision and overcome resistance. They must possess the strategic insight and ability to challenge accepted ways of doing things and demonstrate why an alternative would be better. They must have the ability to prioritise their own agenda and find the time and resources to dedicate to change projects—a challenge itself at a time when the CFO role continues to become more demanding and complex.
Kurt Kuehn, the former CFO of UPS, elaborates on how the CFO must be the catalyst behind change: “When we drive company strategy and create value that makes business healthier and more successful, that’s when we really earn our pay… the CFO can become a tireless proponent for changes that help accelerate growth. The changes can affect the entire company, ranging from decisions about products and services to outsource to which processes should remain inside the company because they’re strategic. The role of growth catalyst may be new for many CFOs, but it’s one we are well suited for and one we should embrace.”
Empowering your finance operation by embracing and investing in technology
Leading CFOs are now helping organisations take a much closer look at processes, using their enterprise-wide perspective and objectivity to determine the rationale for change, prioritise initiatives, and then drive them through the organisation as efficiently and effectively as possible.
Technology is increasingly proving to be an important enabler of this new role. CFOs and other managers have access to the information to identify the need for change, make well informed decisions, and prioritise different initiatives.
CFOs can also provide better tools for their finance teams both in terms of time and accuracy. By turning data into action with analytical tools such as persona-based dashboards and embedded Power BI available within Dynamics 365 for Operations, finance and executives can manage by exception rather than chasing for financial insights.
Often, Financial Controllers or Directors have to deal with disjointed and disparate financial information in order for them to assess and manage risk. They often fall foul of not being up to speed with key finance details. With Microsoft Dynamics 365 Enterprise, all information is brought together in one solution, and core jobs are carried out faster with the help of role based workspaces. For example “Financial Period Close” workspace helps the team see task statuses, dependencies, closing roles, progress and deadlines in order to get the period closed in a timely manner.
We have previously blogged about how technology such as Microsoft Dynamics NAV 2017 can provide financial reports within just a few minutes. Business Intelligence (BI) tools such as Microsoft Power BI can add value by providing consistent, well-structured and real-time data to accurately report on the situation of the company. In addition, this data can be converted into relevant information to decide where to invest to achieve the best ROI.
Download the Microsoft whitepaper “7 trends that are changing finance”. For more information and practical advice on how technology is helping CFOs, contact Prodware today.
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