Business executives want to bounce back from all the mishaps brought by recent economic crises. The Chief Financial Officer (CFO) as a key stakeholder in a company will undoubtedly play a major role in this post-crisis recovery. Why? Because financial meltdowns have made firms realise the true benefit of having an expert at the vanguard. Consequently, successful businesses now consider CFOs to be more of an asset than an expense. So, what exactly is the role of the chief financial officer in a company?

 

Despite the setbacks, CFOs are most positive about the future of finance. In a survey by Gartner, for instance, 867 CFOs were interviewed in 24 countries to find out how they intend to manage the business post-crisis. The results show that all CFOs understood that they will experience a remarkable decline in revenue and will need to adjust spending accordingly. CFOs understand that the pandemic has driven the need to speed up digital transformation programs and most of them are firmly committed to spending to overcome prior losses. What should be done immediately to accelerate the digital enterprise and the digitalisation of the finance function itself?

 

In this article, we will discuss the roles, duties, and skills of CFOs. We reveal what they think should be prioritised this year to drive value. Then we identify the top 10 opportunities CFOs want to capture. We will argue that CFOs need to accelerate the digital enterprise and the digital finance function to drive post-pandemic recovery.

 

At Taylor Wells, we believe that only through accelerating digital transformation can businesses expect revenue to return to or exceed prior profits. By the end, you will learn the roles of CFOs and what new technologies and techniques they need in their business to drive efficiencies and insights into accelerated business performance.

 

 

The Roles, Duties, and Qualifications of the Chief Financial Officer (CFO)

 

The chief financial officer (CFO) is an organization’s highest financial officer. Senior leaders, such as controllers and vice presidents of finance, and operational personnel report to the CFO. A background in accounting or finance, as well as an advanced business degree, such as an MBA, are necessary for CFO positions. But it also demands a high level of soft skills. What are the duties of CFOs?

 

The Function of a Chief Financial Officer

 

The function of the CFO has changed dramatically during the previous few decades. The following are the roles of a modern CFO:

 

1. Chief financial officers maintain the company’s liquidity. For instance, CFOs ensure that client payments are completed in whole and on time and monitor spending to ensure that there is enough cash on hand to satisfy financial responsibilities.

 

2. Chief financial officers guarantee a high return on investment (ROI) for their firm. It considers an investment’s profit or loss as a proportion of its cost.  Since ROI is a very simple key performance indicator, that does not consider all variables, for example, net present value. CFOs help determine whether a venture will generate a fairly strong ROI to justify the costs.

 

3. Chief financial officers forecast possible future outcomes. The CFO is responsible for interpreting numerous unit estimates, including sales trends, labour and HR-related spending, and raw material prices, to generate profit projections for the executives and stockholders.

 

4. Chief financial officers certify that financial reports are reliable and accurate. These documents comprise balance sheets and cash flow statements, which assist both key stakeholders in understanding the financial state of the organisation.

 

Chief financial officers must have the necessary skills to accomplish these functions. What specifically are these?

 

Essential Qualities for an Effective Chief Financial Officer

 

1. Chief financial officers are excellent communicators and leaders. They provide advice and assistance as well as interpret detailed data into clear, succinct, and usable information. This assists them in managing teams and transformation efforts.

 

2. Chief financial officers are disciplined. CFOs are responsible for ensuring proper risk assessment and mitigation, as well as compliance with applicable regulatory or other legal obligations. As a result, they must manage risk as the company implements its objectives and initiatives, as well as maintain a solid internal controls system and financial reporting procedures.

 

3. Chief financial officers are strategic. CFOs set priorities and ensure that the strategies are financially feasible. Moreover, their knowledge is extremely useful for developing predictive models, assessing macroeconomic patterns, and adding non-financial data. This includes conveying the strategy and its progress to external partners and customers.

 

CFOs are the ones responsible to drive recovery after the crisis but they are experiencing a range of critical issues. Principally, 1) meeting current demands to speed up growth and digital models while restoring the business’ financial health. But also, 2) running the function in the best way possible. What actions can they take?

 

Top 10 Opportunities for CFOs to Capture This Year

 

CFOs are entering a period of remarkable transformation in finance.  New technologies are emerging which can help to drive efficiencies and insights into the performance of the business. Below listed are the top 10 opportunities for CFOs in 2021. These opportunities have been identified by CFOs as key areas of investment to drive growth over the next 2 – 5 years.

 

Invest In A Digital Enterprise

 

1. Make sure digital strategies and business outcomes are aligned

 

CFOs are poised for business model pivots. Not only to new products but also opportunities. In essence, the crisis discovered new customers and sources of demand for all businesses. These “new customers” want access to the business via digital giants. Many customers want free stuff but are also willing to pay for premium. Pivots will take a total mindset shift (not a new segment) as customers now demand multichannel, transparent pricing, easy to use e-commerce and quick delivery.

 

Therefore, strategic plans are highly likely to highlight business-driven digital initiatives. Many CFOS want to capitalise on mass migration to online and businesses are keen to accelerate growth using digital business initiatives. Some CFOS believe digital technology will lead to significant or total transformation for their business by 2026.

 

2. Flexible Planning and budgeting

 

New planning and budgeting will soon eventuate. 2021 may be the year when traditional budgets go (usually conducted every year). CFOs are finding that rigid budgets hinder the business’ ability to pivot and capture new opportunities as they come up. In particular, they find that generally after the budgeting exercise finishes, there is very little flexibility.

 

The focus of CFOs is now on a new dynamic type of planning and budgeting system. This means a system shifts with the market conditions. And a deeper consideration of contingency budgeting i.e, understanding cost categories for various scenarios. 

 

Expect 2021 to be the year when CFOs support agile, scenario-based, and iterative planning. Budgets that are created in line with shifting priorities of the business and realigned to support strategies to succeed. 

 

3. Reevaluate digital business performance management

 

CFOs need to re-examine how to quantify, fund and oversee digital business performance. Therefore, they must encourage a culture where investment management methods balance financial accountability and innovation and champion a test-and-learn mindset.

 

The increasing diversity of investment projects drives more investments beyond the scope of conventional capital budgeting procedures. As a consequence, new digital business cases will be harder to quantify with the use of return-based measures, potentially dismissing opportunities too early.

 

4. Fund digital growth and new business models

 

The most effective and efficient CFOs concentrate on differentiating costs and investments. However, most CFOs make investments their priority which is based on external factors like what the others are doing. 

 

CFOs’ top priority, then, as they aim for their revenue to return to or go beyond 2019 levels in 2021-22 is to fund new or even existing growth. Also, they have to focus costs on differentiating initiatives.

 

5. Invest and increase employee performance in a hybrid workplace

 

CFOs are financing the right investments to improve the performance of the employee in a hybrid workplace. Since some staff work remotely, CFOs are helping the business provide employees with what they need to be productive.

 

The recent crisis proved that efficiency oftentimes comes at the cost of flexibility. At the same time, it’s not possible to build resilience at any cost. Therefore, CFOs’ new role will be to ensure that the proper resources and support go to the right employees.

 

CFOs can also work with pricing teams. Our findings show that with the proper setup and pricing team in place, significant gains can happen in as little as 12 weeks. Using smarter price management techniques, the team can capture at least 1.0-2.25% more margin after 6 months. After 9-12 months, organisations are frequently generating 3-7% higher margins annually as they find more complex and previously untapped potentials, efficiencies, and risks.

 

 

Read about key category manager skills to drive a retail pricing project

 

To Hasten the Digital Finance Function

 

6. Free up capacity by reducing waste and redundancy

 

RPA (robotic process automation) is increasingly freeing up appropriate employees to concentrate on the most important decision-support aspects of their jobs. Hence, CFOs are expected to free up capacity from finance procedures that are repeatable and transactional. Adding machine learning, RPA is useful for more complicated tasks, like budgeting and forecasting. 

 

In other words, finance will be reevaluating the benefits of existing RPA programs and making sure that they are aligned with enterprise goals.

 

7. Invest in finance technology that delivers value

 

CFOs are increasingly thinking of investing in financial technology that delivers valueMany businesses continue to use difficult finance processes using outdated technology. Therefore, by utilising additional technologies to automate complex finance methods, CFOs can concentrate on recognising new value-adding services, like predicting pricing based on consumer behaviour.

 

8. Securely utilise data and analytics insights at scale

 

CFOs are increasingly championing approaches that radically simplify data and analytics experience for finance teams. To date, finance departments globally have been experiencing difficulties in generating insights that business leaders can use to make decisions. Oftentimes, finance teams need to call upon the help of consultants or professional data scientists because they have insufficient technical expertise themselves. The new aim for many CFOs, then, is to give finance teams a completely simplified data and analytics experience to improve output and reduce the need for specialised skills to do complex analysis.

 

9. Speed up the adoption of the cloud and obtain data analytics tools

 

Finance will continue to transfer key activities to the cloud. The pandemic has forced finance teams to operate remotely. Now, CFOs must hasten cloud adoption and acquire better data analytics tools. To do this, though, CFOs want the right vendors, at the right price, at the right time. As it will take good partnerships to deploy more complex solutions in locations that require enhanced speed. 

 

10. Make sure to hire, retain and develop finance digital skills

 

CFOs are beginning to hire, retain and develop specific finance digital skills that meet specific commercial requirements. As a result, digital skills are critical to support a technology-driven, “always-on” and real-time business. In addition, better talent in the right role enables finance teams to quickly course-correct and apply skills immediately to the time of need.

 

The increasing digital skills gap in finance minimises the function’s capacity to exploit digital technology capabilities successfully.

 

Discussion: Role of Chief Financial Officer in a Company

 

role of chief financial officer in a company

 

A digitised company leverages platforms that evolve continuously as the needs of the business change. Thus, a more agile company enables the business to capitalise on the latest technologies like machine learning. New technologies help the team keep the business moving in the right direction without long delays between upgrades. Or without the disturbance and risk that goes with improvement projects.

 

The changing tides of technology have modernised the finance functions and the role of the chief financial officer. Now the focus is on improving digitisation to revamp more efficient operations.

 

Gone are the days when the role of the chief financial officer in a company was just a financial machinist. In the next 5 years, the role of the CFO will transform into a modern-day strategist, embracing technology, and data science and championing digital transformations with a view to the future.

 

Implications

 

  • In this fast-paced business environment, CFOs are making more informed strategic decisions to deliver complex business outcomes. However,  functional strategies and overall enterprise objectives must be aligned.

 

  • In today’s digital, ever-evolving workforce, CFOs are creating the right teams with the right mix of relevant skills to solve more complex problems faster. An agile, decision-centric and forward-looking finance organisation is now required to support talent.

 

  • The development of intelligent automation with the support of advances in robotic process automation (RPA) is having a remarkable effect on the role of the chief financial officer in a company. These improvements are decreasing costs, minimising human effort, and freeing employees up to accomplish more strategic work.

 

 

Bottomline

 

Successfully overseeing a digital expansion can be a significant indicator that a CFO candidate can lead in these times of digital disruption.

 

CFOs of the future are keen to invest in financial technology now to deliver sustainable value instead of utilising difficult finance processes using outdated technology.

 

The new role is a digital strategist and less of an accountant managing budgets and P&L. CFOs are becoming much more involved in activities such as offering teams access to the right data or information, breaking down data and/or utilising predictive analytics to create better insights. This means that the role of the CFO has changed for the good. They are the new digital officers and business leaders of tomorrow. This means the CFO wants to adapt quickly to this futuristic mindset and accept new technologies and strategies to thrive in the forthcoming digital era. 

 

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