The role of the CFO has changed significantly over recent years due to world events and evolving technology. As a result, the expectations of the CEO have shifted too, in terms of what they require from their CFO.
Today’s CFO is expected to work closely with the CEO, serving as a second in command when it comes to big decisions. They have become somewhat of a strategic advisor, offering support and counsel where possible.
But what does this mean for the skill set now needed to be a finance chief?
In this article, we highlight the specific hard skills and soft skills a CEO expects from their CFO today. We also explain how the role of the CFO has evolved over the years and discuss what the CFO of the future will look like.
How has the role of CFO evolved?
There have been many developments over the past decade which have changed the landscape of the financial arena (and therefore the remit of the CFO).
For a start, the makeup of a finance team is now far more extensive, so there are a lot of people to lead within a variety of roles. CFOs must understand a wider array of activities, while honing their personable skills to communicate effectively with these individuals.
The typical finance team may have changed structurally, but so has the typical business. This means that CFOs must seek positive results for a broader collection of stakeholders. Not only this, but there has been a realisation within finance that long-term strategic thinking is preferable to quick wins (which inevitably influences the methods used).
If you consider technological developments too, processes have become almost unrecognisable to what they once were. Deeper insights are more readily available, which expands what is possible for the CFO.
Increasingly, they play a pivotal role in determining which path their organisation will tread going forward. There are more moving parts than ever, yet CFOs are still expected to be experts with core financial functions (such as forecasting, budgeting, reporting, and risk analysis).
They must also now be masters of change management, while facilitating an innovative and progressive culture. To drive growth and transformation, they’re required to be analytical, adaptable, reactive, and proactive.
Many finance departments have become a diverse team of problem-solvers. Finance today is all about bridging the gap between financial data and business strategy.
To weather the turbulence of the pandemic, CFOs had to transform their skills beyond being the gatekeepers of the budget. As part of this, non-traditional skills became prominent in the finance function, such as digital transformation, real-time analysis, and storytelling.
Which hard skills does a CEO want their CFO to have?
Forecasting is more complex than ever because of events over recent years. Companies are struggling to predict annual sales due to fluctuations in demand and rising costs. As a result, CFOs must use their full range of predictive and planning skills to help the business meet its targets.
Cash flow knowledge
It is essential for any CFO to be aware of the cash available to their organisation, as this can be the difference with keeping operations running. In the event of all income drying up, they should know how much liquid cash is in reserve, and how long this would sustain the business for. This requires them to understand the sales cycle, expenditures, and other metrics.
Data and analytics influence decision-making, drive company growth, and minimise instability. In addition to facilitating scalable growth, data can assist with enhancing operations and strategy. Profitability must be maximised using data. It is one of the biggest factors influencing CFO success now their role has shifted to the analytical realm.
As CFOs can no longer rely on old practices, they must stay on top of the latest tech trends. Putting innovation at the centre of the finance function will enhance the culture and accelerate growth. CFOs are now at the forefront of digital adoption, using these tools to boost agility. As well as avoiding single points of failure, they must ensure all systems integrate effectively.
To lead strategic initiatives, CFOs must develop the company's gameplan in collaboration with other directors. It is imperative they understand the whole business and form strong relationships with other directors. Strategic planning involves identifying the company's strengths and weaknesses. Due to their comprehensive knowledge of financial performance, CFOs have naturally become strategic leaders since the pandemic.
Financial fundamentals (such as core accounting processes) are still important for CFOs. A solid foundation of the basics makes decision-making easier and instils confidence in the rest of the finance team.
Risk and compliance
CFOs are responsible for predicting and managing risk, since they are the top level of defence against threats. A wide range of risks must be managed, such as technological risks and competitor-based risks. Legislation is also changing faster than ever, so they need to keep up with this to keep the company compliant.
Which soft skills should a modern CFO have?
CFOs are required to communicate in new ways given the range of stakeholders. To create comprehensible and helpful insights, they must take data from the past, project this into the future, and convey these messages through tailored storytelling. During times of turbulence and change, they must communicate transparently, while getting the finance team onboard with decisions.
In addition to staying on top of financial obligations, the CFO must bring the finance function together and provide stable leadership. They will need to make assertive individual decisions while also staying aligned to the values of the organisation.
The CFO will have to provide a unique perspective when the CEO is looking for assistance with problems. If they have the skill to recognise patterns and spot threats before the CEO, this is highly beneficial.
They will need ambition to drive both the business’s progression as well as their own development, by staying on the cutting edge. They must constantly push the boundaries of their personal learning so they can provide forward-thinking ideas to the CEO.
To ensure the business's longevity the CFO must aim to maintain an overarching perspective of both internal and external factors. They should take all the available information into account (not just numerical data) when serving as a strategic figurehead for the CEO.
The CFO's ability to be flexible is crucial when the company needs to pivot quickly. They should have a keen eye for transformation opportunities too, while having the authority and confidence to execute changes effectively.
What is the CFO of the future?
As the CFO’s input into strategy increases, they will need to hone a wider set of business-related knowledge. It will be necessary to take their communication capabilities to another level as storytelling becomes an even more important component of financial reporting.
Future CFO strategy will need to be innovative
The CEO's hunger for strategic input will not wane, and this will only grow as they expect the CFO to provide even deeper insights. As competitors continue to gain better results, financial analytics must be used for planning, modelling, and forecasting, all of which need to become more intricate and accurate.
Additionally, in order to use data in more complex ways, CFOs will need to utilise the latest financial Cloud tech to help drive the business into new markets, and to identify opportunities around product development, customer outcomes, and innovation.
Future CFOs will need to be flexible with forecasting
With the current economic crisis, CFOs are operating in trying times. It’s likely that these turbulent conditions will persist, so they must become proficient at assessing global events and predicting their impact.
CFOs of the future will nurture strong relationships
It will be the CFO's responsibility to build strong relationships with tech experts within the business, so they can continue to drive innovation and implement transformational strategies. Legislative changes are becoming more frequent and complex, so their regulatory expertise needs to be developed further too.
There’s also a need for their management skills to evolve. Since mental health and personal wellbeing have become more widely understood, emotional intelligence has become a sought-after characteristic. For the finance team to perform at their best, CFOs will need to lean on this skill.
On top of this, they should improve their hiring process to ensure all new employees are aligned with the company's objectives and innovative culture.
Future CFOs will embrace their creative and analytical side
Historically, the CFO's role has been very transactional, but going forward, they will need to demonstrate unrivalled analytical skills. Although it has already been mentioned, it’s important to emphasise this point.
Tomorrow’s CFO should be highly creative too. Automation is taking over repetitive financial tasks, so they will need to embrace their creative side to think outside the box and solve increasingly complex problems.
At Advanced, we help CFOs to future-proof their skill set through the power of technology. Our Cloud-based financial management solution, Advanced Financials, allows them to embrace their analytical side. It provides accurate, in-depth, and current data related to financial performance. Tap into your creative side by automating repetitive financial tasks.