How does the modern CFO think? How has their role changed?
Blog //30-05-2022

How does the modern CFO think? How has their role changed?

by Daniel Docherty, Director of Strategy

During the pandemic, the role of the CFO was transformed overnight by unprecedented changes with the need for digital transformation and enhanced business strategies. As we prepare for a post-pandemic world and reimagine how it may look, now is the time to take a closer look at what the future role of the modern CFO will look like.

Recent economic slowdowns have left businesses with a greater uncertainty on how to weather the storms ahead. The modern CFO will have to focus on reducing costs, optimising pricing structures, alongside allocating capital across all major areas of a business by taking into account risk, cost, and possible return.

Moreover, CFOs will have an increasing role in strategic business decisions, which include
  • How to maximise customer engagement
  • Which customer groups to target
  • Which markets should be entered, and which should be avoided
  • How capital should be allocated
  • Assessing the cost of each directive and how they affect the business as a whole

As CFOs address complex business challenges posed by new obstacles, a more strategic approach and refined skillset are needed. These leaders must be more tactical, compassionate, and digitally savvy than ever before by breaking down the traditional silos that once existed within their organisations, strengthening the role of finance, and planning for success in times of uncertainty.

How are CFOs different from in the past?

CFOs traditionally focused on budget ownership and critical asset protection, but behind the scenes during the pandemic, these skills required a radical re-evaluation of conventional business strategies to weather the storms ahead. This included the introduction of non-traditional skills into the finance function, including business agility, digital transformation, analysis in real-time, empathy and storytelling through data.

During the 20th century, the position of CFO didn't exist; financial managers were responsible for the accounting and budgeting. For the most part, they were not involved in decision-making processes, and only became more influential when financial regulations became complex. As the CFO position began to emerge in the 1960s, it became much more prevalent in the decades that followed.

Leaders in finance have become a crucial component of any business and must be able to keep track of both the big picture and the workings of each department. It's obvious that no other senior position provides the same degree and breadth of strategic insight. Over the past decade, much has been said about the changing role of CFOs. CFOs are no longer limited to overseeing financial management and reporting activity; today's CFOs are responsible for everything from digital transformation and investor relations to strategic growth.

How has the relationship of the CFO with the rest of the business changed?

In the post-pandemic workplace, a strong relationship between the CFO and CIO is critical to facilitating growth. In the past couple of years, we have seen the rise of the strategic CFO. Communication focused on strategic problem-solving was an essential feature of many organisations' navigation of the pandemic and remains an essential aspect of planning for post-pandemic success.

When aligned and sharing a leadership vision, CFOs and CIOs, in partnership with CEOs and other senior leaders, will make the most impact on their organisations. In addition to improving finance processes to drive employee engagement, a strong relationship between the CFO and the CIO generates value within an organisation, enabling operational pain points to be effectively resolved and value-added platforms, frameworks, and processes to be implemented.

Communication between leaders enhances a team's ability to operate effectively. It results in a corporate culture that supports employees in ways they value most - a culture they want to be a part of and one they want to stay in.

In the modern company, the modern CFO will help to tie all the different pieces together while the CEO remains the visionary leader. The result is a more forward-looking leader and the chief executive's most essential strategic partner, influencer, and change agent. 

The modern CFO must work together with other members of the C-suite to develop an integrated approach to the organisation's business and a broad understanding of its value chain. This includes:

  • A talent agenda that is driven by human resources
  • IT to drive digital transformation throughout the organisation
  • Optimisation of supply chain, logistics, production, and procurement processes
  • Marketing and Sales functions to enhance visibility and target key customers

Which skills must a CFO have?

The role of the CFO must evolve as the demands of the business change. The primary responsibility of CFOs used to be reporting results. What's needed now is a CFO who understands the company's goals and strategy - someone who can forecast rather than just report and control. This shift has continued to evolve from the CFO just pulling, crunching and reporting the numbers to being a central member of the leadership team. This involves setting a direction that enables success, spending more time on financial planning and analysis, and working with various department leaders.

Modern CFOs will need to stay on top of changes relevant to their role and their company as a whole, so they must be knowledgeable about changing trends. When done correctly, this will streamline new initiative implementation, regulatory procedures, and finance procedures. While CFOs have made strides in the technology landscape, they still have a long way to go to integrate finance departments and functions into the broader digital transformation.

Be digitally savvy

Keeping up with the latest technologies and optimising strategies is essential for CFOs if they want to remain competitive. With businesses prioritising digital transformation strategies, it is important that internal teams are able to use resources effectively and get executive support for onboarding new products and services that will help them achieve ROI and related revenue targets.

Now, more than ever, executive leadership should be receptive to feedback from their teams and implement the necessary improvements to retain talent. In addition to understanding the technologies and processes that can help an organisation's bottom line, CFOs need to become advocates for the adoption of those technologies, creating efficiencies, increasing agility and improving employee retention.

Focus on future talent in finance

CFOs of today must understand that identifying, retaining, and empowering the right talent is crucial to an organisation's success. The ability to attract and engage the right talent has never been more important to the success of an organisation, especially in the current climate of the Great Resignation. As CFOs continue to drive business strategy and facilitate cross-departmental conversations, it is crucial that they leverage their knowledge and resources in this capacity.

In an era when talent is highly valued - and competition for talent is fierce - the finance function will need to have fluency in technology as well as integrate it into the recruitment and development process. The modern CFO must establish a digital transformation roadmap that incorporates an integrated talent recruitment strategy, implement this financial transformation roadmap, and leverage tech to streamline manual tasks, which will allow additional time to be invested in value-adding, strategic thinking.

Form strategic collaboration across the business

Developing effective strategies post-pandemic calls for CFOs to establish strong relationships with their executive counterparts. This includes the important element of facilitating regular interdepartmental conversations.

At the height of the pandemic, businesses needed to adapt quickly to a fully virtual workplace. In the aftermath of a pandemic, business strategies now focus on sustaining a virtual or hybrid workplace successfully. Regardless of whether the work environment is physical or virtual, strong communication efforts are imperative to fostering a collaborative environment. The CFO must lead this effort to improve team communication and relationship building while rethinking existing procedures that are only marginally as effective now as they were pre-pandemic.

Therefore, the modern CFO must view their role as an agent of cultural change: identifying interdependencies, providing successful alternatives, fostering greater understanding, securing executive support, and ultimately creating a more unified organisation.

Continue to learn and be open to feedback

A key responsibility of the CFO of today is to interpret raw financial information and translate it into meaningful commentary and actions. It is imperative that the CFO engages all relevant stakeholders in this process, so that comprehensive strategies can be developed - from the C-suite to the junior members of the team.

While it's true that the CFO also has responsibilities to keep costs down and mitigate risks, these responsibilities shouldn't stifle innovation. In order for the finance function to move from efficiency (its cost of serving business needs) to effectiveness (its ability to deliver on those needs), feedback loops are not only required for proper evaluation, they also serve as a catalyst for successful business transformation.

The impact of technology on CFOs

While it may not seem that the finance function is the obvious choice in leading digital transformation, CFOs are increasingly being called upon to be the digital pioneers within their business. In today’s organisations, technology and finance are no longer separate.

Thanks to technologies such as Cloud accounting software automating processes, this has freed up the time of the modern CFO to provide value add analysis which in turn has strengthened the relationship between the CFO and the CEO. It has also reinforced the role of the CFO as the CEO’s ‘sounding board’; a position that has become more critical as technology gives ever greater levels of understanding and insight.

‘Big data’ has become a buzzword over the last few years, stemming from the sheer volume of information that businesses now collect through various digital avenues, be it social media, website analytics, self-service payment solutions or CRM. Business intelligence analytics and dashboards have helped finance teams to visualise this “Big data” at the click of a button and increase the availability of such information. Via Cloud accounting technology, access to real-time financial and business data has made it much easier for the modern CFO to efficiently extract accurate and relevant data for the CEO. This meant that the needs of the business could be responded to quickly and efficiently.

With access to greater business insights, digital transformation is turning the modern CFO and their team into business enablers, using technologies to make decisions that improve processes, create efficiencies and reduce costs, allowing the business to remain ahead of the competition and be prepared for the future. As technology continues to become the backbone of businesses, much of the work within the finance department will continue to become automated by sophisticated and intuitive finance management systems.

Get future-ready with Advanced Financials

The pandemic demonstrated that CFOs were very agile in adapting to new business challenges with no blueprints for the future, alongside being in the driver’s seat when it came to meeting increased demand and leading business performance through financial reporting.

The role of the modern CFO is going to become more complex as it continues to evolve. Although there are some challenges on the horizon, modernising your processes with a robust Cloud accounting software solution like Advanced Financials will provide your finance team with the right tools to instantly access financial data in real-time to help drive business strategy and decision making.

Here lies the opportunity to step up the way that business performance is measured in the context of digital transformation. Now is the time to provide your finance team the ability to focus on strategy and performance by consolidating multiple platforms in one place, reducing manual tasks and producing real-time business insight automatically.

Get in touch with one of our experts today.

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Daniel Docherty

Daniel Docherty

PUBLISHED BY

Director of Strategy

Daniel joined Advanced in May 2019 to lead our Software as a Service portfolio, moving on to lead the overall Finance Management, Spend Management and People Management strategy. He brings over 18 years of experience in core business and finance solutions, working with customers from a wide background of industries and scale.

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