Chief financial officers (CFOs) of mid-sized businesses are more frequently being called into top-level discussions around demand and price pressures, business model changes, information strategy and resource allocation. Additionally, over 75% say they have an advisory or decision-making role on the entire company agenda, as opposed to having no role or being an informer, according to IBM’s Global CFO Study.
Many mid-market CFOs are now seen as the ‘right hand’ of the chief executive officer (CEO). “The recession has sealed the fact that the finances are the crux of the organisation because there is no company or business if you can’t get your finances right – so everyone is increasingly looking to the CFO,” said Alison Curran, a business transformation consultant from IBM Global Business Services in an interview with gtnews.
Clive Lewis, head of small and medium-sized enterprise (SME) Issues at the Institute of Chartered Accountants in England and Wales (ICAEW), agreed: “The recession has brought finances right to the fore and it is now a much more integrated part of management, which makes more demands on CFOs. If you can’t get the cashflow and profitability right, then you may not have a future as a company. More people are asking more questions then they ever did before and finance has got to respond in a meaningful, relevant and timely manner. At the beginning of the recession, the CFO probably got involved in cost reduction – the gut reaction to the downturn – and now it has moved on to cashflow management, re-financing where necessary, etc.”
Despite the CFOs’ elevated decision-making role, the vast majority of those surveyed pointed to a significant gap between the importance of key CFO agenda items and their effectiveness in execution. The largest gaps were found in driving integration of information (32%), talent development (28%), advising on corporate strategy (27%), and managing and mitigating company risk (24%).
“I think CFOs are feeling the strain,” added Curran. “Talent is one of their key concerns: they need to make sure they have the right skills and people to help them support the business in making the right decisions.”
The top challenges facing midmarket CFOs are the pressure to reduce costs, the need for faster decision-making, and the demand for financial transparency.
Midmarket CFOs believe that external pressures (economic, industry, regulatory) will increase over the next three years, while 51% believe that they must make major changes to respond.
Other key findings of the survey were:
- Nearly 60% are not satisfied with their operational planning/forecasting analytical capability.
- Over 40% produce financial metrics manually.
- 50% lack a common planning platform; 36% lack a common reporting platform.
- 47% are poor to average at anticipating external forces.
Detailed analysis from the study showed that one group of finance organisations, called ‘value integrators’, were found to consistently outperform their peers in key financial metrics by driving two main qualities across their organisation:
- Finance efficiency – the degree of common process and data standards across the organisation.
- Business insight – the maturity level of finance talent, technology and analytical capabilities dedicated to providing business optimisation, planning and strategic insights.
Curran said: “If you combine strong business insight with strong financial efficiency then you become what we have termed a ‘value integrator’. It is not just about having the right tools in place, but also having the capabilities in a much wider sense, such as talent and skills, to interpret the data and improve your forecasting and planning capabilities, which in the current environment have become much more important. The ability to predict not just what may or may not happen, but to be able to react more quickly to what happens. The turbulent world has created an increased need for that.”
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