The role of the modern chief financial officer (CFO) is changing. In fact, the entire finance department is evolving. It’s becoming more strategically-focused, more value-focused and importantly; more future-focused.
Today’s business transformation landscape has been subject to a plethora of IT and operations departments transformations, with claims of improved efficiency and business innovation across the board. All too often though, the finance department has been absent from these conversations. This is an oversight that should be rectified.
In the most successful organizations, the finance department will be key contributors and challengers to strategy and business development by providing a critical and independent sanity check in validating the needs of the entire organization.
In this regard, the CFO and their respective teams are as important to business transformation as operations and IT teams. But in an ever-more uncertain business environment, what key steps should the CFO take to support success?
Focus on the future
Whatever the size of your business, the ability to build for long-term success will be vital. After all, every hour spent preparing for growth now could save your business 20 times that investment over the long term, putting your business in a far better position to respond to future changes in the market.
There are many types of forecasting activities that can benefit your businesses: demand planning, sales forecasting, inventory planning, capacity planning and financial forecasting, to name just a few.
In the most successful companies, forecasting is the primary driver that guides strategic decision making. As such, it is critically important that CFOs and finance teams utilise forecast models that are based on reliable data, encompass the full spectrum of likely scenarios, and are integrated with the rest of the business to show the full ‘cause and effect’ of scenario changes as they ripple through an organization. Being able to understand these scenarios requires having a clear oversight of the business.
Understand and align the business
CFOs wanting to answer important strategic questions such as; ‘where should we play’ strategically, ‘how should we play’ commercially and ‘how do we win’ need data they can rely on.
Answering these questions is not as simple as it may seem. Most organisations operate a top down approach to strategy, and whilst this continues to be the most effective method for ensuring alignment, much of the critical information needed to answer these questions will be spread functionally throughout multiple areas of the business.
Complex businesses today operate across multiple regions, in multiple currencies, and multiple time-zones, selling a variety of products. The multi-dimensional nature of business ensures that any chance of answering these questions will see the CFO needing to begin with a multi-faceted analysis of the status-quo.
I can’t begin to tell you the number of times I’ve heard the story of the strategic planning meeting where the marketing department disagreed with the sales department, who in turn questioned the integrity of the metrics coming from the finance department. Any leader driving digital transformation, regardless of the department, will need to create a ‘single source of truth’ with which the whole organization can agree on. This should be accompanied with the appropriate tools to make it accessible to everyone involved.
By nature, most accountants aren’t afraid of dealing with numbers, and their ability to understand the challenges facing a business makes them a formidable force when armed with the right data. It’s for this reason that I believe the finance team should play an active role when it comes to digital transformation.
Leverage new technologies for accurate reporting
Forward-thinking CFOs should be equipped with forward-looking data gathering and analysis capabilities to turn data into insight and, most importantly, insight into foresight.
In a recent survey for CFO, more than 50% of respondents said it took them longer than three months to complete a budget. Additionally, only 23% of respondents had confidence in their company’s ability to manage uncertainty, mainly due to outdated financial planning and analysis tools and processes.
A vast range of strategic and business transformation issues add to the reporting challenges faced by finance departments. As the nature of an organization’s business models and the structure of the markets they operate in develop, the need to provide insight through good reporting and analytics becomes vastly more important.
Accurate reporting is a key method for communicating an organization’s story, its strategy for future investment, approach to risks and opportunities and the way it monitors ongoing performance. In this respect, it’s vital that CFOs and their respective teams are equipped with innovative financial reporting tools to maintain this accuracy. Ultimately, businesses that fail to provide investors and analysts with the information they need could face a higher cost of capital and greater difficulty in finding investment. Another important benefit of better reporting comes in the form of building and improving trust across stakeholder groups.
The use of outdated, inflexible tools, such as Excel, can also create difficulties in effective analysis of data and the timely response to business changes, but it’s not just the judicious procuring of data that provides challenges. In a survey conducted by Quantrix – featuring CEOs, CFOs, controllers, CIOs and IT managers from business-to-business and business-to-consumer organisations – 42% of respondents reported that the number of requests for ad-hoc/“what-if” scenarios has increased dramatically as businesses attempt to respond to ever-increasing uncertainty. This only further demonstrates the need for finance teams to constantly remain “on their toes” in order to efficiently respond to business demands.
In a survey by CFO magazine, 90% of respondents said they need to do more with financial and operational data to gain critical visibility across their operations.
Failing to do so could impact their ability to compete in an ever more competitive market – so, for this reason, many are considering powerful financial planning and modelling technology solutions, to augment other investments such as data visualisation and business intelligence software.
So, what does it really take to be a visionary CFO? It’s all about having access to the right data at the right time.
A 'digital treasury ecosystem', where the CFO or treasurer makes real-time financial decisions on their tablets, is not far beyond the reach of currently available technology. In such an ecosystem, there is no direct reliance on banking partners or the company’s broader organisation - just an executive and an interactive dashboard powered by interconnected digital technologies, writes Eric Cohen, PwC.
For treasury professionals across the globe, regardless of the size and type of organisation, two words are likely to be high on the agenda - sustainability and efficiency, says Owen Balloch, Marketing Manager at Alaris, a Kodak Alaris business.
Most of major banks are starting to think about a robo-advice model for companies that are not ready to invest in a treasury department, says Ian Rand, CEO of business banking at Barclays, tells GTNews in an exclusive interview.
It’s no secret that treasury teams are changing quickly. While treasury ‘lifers’ are still invaluable, increasingly treasury teams are looking for technology experts and those with “soft skills” for more strategic treasury roles.