Key Takeaways
- The role of chief financial officer in a company now goes beyond finance to strategy and digital transformation.
- CFOs manage liquidity, investments, forecasts, and financial reporting.
- Effective CFOs combine leadership, communication, discipline, and strategic thinking.
- Technology, analytics, automation, and digital skills are reshaping the CFO role.
Business executives want to bounce back from all the mishaps brought by economic disruption and uncertainty. The Chief Financial Officer (CFO), as a key stakeholder in a company, will undoubtedly play a major role in this business recovery and growth. 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?
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Despite the setbacks, CFOs are most positive about the future of finance. CFOs continue to accelerate digital transformation programs as technology reshapes the finance function, 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 the priorities CFOs need to focus on to drive business value. Then we identify the top 10 opportunities CFOs want to capture. We will argue that CFOs need to accelerate the digital enterprise and digital finance function to drive long-term business recovery and growth.
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.
What Is the Role of a Chief Financial Officer in a Company?
The role of a chief financial officer in a company goes beyond managing budgets and financial reports. In this article, the CFO’s core responsibilities include:
- Maintaining liquidity by ensuring payments are completed on time and monitoring spending so the business can meet its financial obligations.
- Assessing investments and helping determine whether a venture can generate a strong enough return to justify its costs.
- Forecasting future outcomes by interpreting sales trends, labour and HR-related spending, and raw material prices to produce profit projections.
- Certifying that financial reports, including balance sheets and cash flow statements, are reliable and accurate.
- Leading strategically by setting priorities, checking that strategies are financially feasible, developing predictive models, and communicating the strategy to external partners and customers.
- Supporting digital transformation by helping the business fund growth, adopt finance technology, use data and analytics, and develop the digital skills needed for a technology-driven business.
These responsibilities show why the CFO has evolved from a traditional finance leader into a broader strategic and digital leader. This shift becomes clearer as the article examines the skills and opportunities shaping the modern finance function.
The Roles, Duties, and Qualifications of the Chief Financial Officer (CFO)
The chief financial officer (CFO) is an organisation’s highest-ranking financial officer. Senior leaders, such as controllers and vice presidents of finance, as well as 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 the role 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 recent 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 full 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. ROI considers an investment’s profit or loss as a proportion of its cost. Since ROI is a very simple key performance indicator, it does not consider all variables, such as 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.
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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 and turn it 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 control system and financial reporting procedures.
3. Chief financial officers are strategic. CFOs set priorities and ensure that 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 for driving recovery after the crisis, but they are experiencing a range of critical issues. Principally, they face two issues: 1) meeting current demands to speed up growth and digital models while restoring the business’s financial health; and 2) running the function in the best way possible. What actions can they take?
Top 10 Opportunities for CFOs to Capture
CFOs are entering a period of remarkable transformation in finance. New technologies are emerging that can help to drive efficiencies and insights into the performance of the business. Listed below are 10 opportunities for CFOs to strengthen finance and business performance. These opportunities reflect key areas where CFOs can invest to drive growth, efficiency, and resilience.
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 to new opportunities. In essence, the crisis revealed new customers and sources of demand for many 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 offerings. Pivots will require 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 the mass migration to online, and businesses are keen to accelerate growth using digital business initiatives. Digital technology continues to reshape business models, operating processes, and the finance function.
2. Flexible planning and budgeting
New planning and budgeting will soon ensue. Traditional annual budgets can limit a business’s ability to respond to changing conditions because they are usually prepared only once a year. CFOs are finding that rigid budgets hinder the business’s 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 the system shifts with market conditions and requires a deeper consideration of contingency budgeting, i.e., understanding cost categories for various scenarios.
CFOs increasingly support agile, scenario-based, and iterative planning, with budgets that are created in line with shifting priorities of the business and realigned to support strategies to succeed.Â
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 leading to opportunities being dismissed 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 based on external factors, such as what others are doing.
CFOs’ top priority, then, as they aim to restore and strengthen revenue growth, 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 employee performance 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 often 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, businesses can identify opportunities to improve margin, strengthen price management, and capture previously untapped value.
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. Alongside machine learning, RPA is useful for more complicated tasks, such as 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 value. Many businesses continue to use complex finance processes supported by 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. Often, finance teams need to call on 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 teams will continue to transfer key activities to the cloud. The shift towards hybrid and distributed work has changed how finance teams operate. 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 strong partnerships are needed to deploy more complex solutions in locations that require enhanced speed.
10. Make sure to hire, retain and develop finance digital skills
CFOs are hiring, retaining, and developing people with specific digital finance 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 when needed.
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
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 the disruption and risk that come with improvement projects.
The changing tides of technology have modernised the finance function and the role of the chief financial officer. Now the focus is on improving digitisation to create more efficient operations.Â
The role of the chief financial officer in a company now extends well beyond traditional financial management. The role of the CFO continues to evolve into that of a strategist who embraces technology, data, and digital transformation.
Implications
- In this fast-paced business environment, CFOs are making more informed strategic decisions to deliver complex business outcomes. However, functional strategies must align with overall enterprise objectives.
- 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 these teams.
- 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 to focus on more strategic work.
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Bottom Line
Successfully overseeing a digital expansion can be a significant indicator that a CFO candidate can lead in these times of digital disruption.
CFOs are increasingly investing in financial technology now to deliver sustainable value instead of utilising difficult finance processes using outdated technology.
The new role is that of a digital strategist rather than 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 better. They are increasingly taking on broader responsibilities as digital and business leaders. This means the CFO needs to adapt quickly to this forward-looking mindset and accept new technologies and strategies to thrive in the increasingly digital business environment.
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