The days when CFOs almost uniformly had only deep accounting resumes and often served as controllers before moving into the C-suite are long gone. As the purview of the role expands, CFOs today have to take on more strategic roles and have earned prominent seats at the decision-making table.
But how do these changes manifest themselves in practice? What challenges are the modern CFOs facing, and how are they coping with the current business conditions?
This article explores how CFOs from mid-market businesses throughout North America are raising their finance teams’ profiles and shaping future business decisions.
To keep up in a pivot-quickly world, executives and board members have turned to CFOs to meet strategic needs and ensure the business’s financial stability.
Consequently, it should be no surprise that CFOs today devote a significant amount of time to financial planning and analysis. According to a study conducted by CFO.com, CFOs spend nearly 67% of their daily time doing financial and scenario planning while juggling multiple other responsibilities.
Thus, there’s no denying that CFOs are increasingly emphasizing data analytics and cash forecasting. In 2022, according to ‘State of Mid-Market CFO’s Office report’, over 44.3% of CFOs mention data-driven decision-making as a top executive priority.
With the right financial planning and analytics (FP&A) tools, CFOs can concentrate on executing the organization’s vision and strategy rather than sorting data and scrambling to prepare reports on time.
CFOs should invest in FP&A solutions that offer:
Collects and assesses historical data and past interactions with customers to generate high-level reports and dashboards.
While these dashboards help stakeholders understand a company’s financial metrics, they do not necessarily convey the scope of future optimization opportunities.
Examines and combs through large volumes of data to determine the cause of trends in an industry, aging buckets, credit scores, etc.
It enables you to measure bank balance fluctuations accurately and comprehend the nuances of cash flow while keeping your EBIT(DA) and net income in check.
Forecasts your cash flow and anticipates real-time customer payment patterns and behavioral trends. As a result, it enables your business to develop agile financial strategies. For instance, it allows you to pinpoint at-risk customers to collect from and prevent bad debts before they occur.
Cashflow forecasting provides CFOs an excellent opportunity to immediately impact growth and investment opportunities to drive better results.
Recommends insights and a course of action to maximize a particular outcome across processes and individual accounts.
For example, as a month or quarter nears its end, prescriptive analytics solutions provide actionable insights to optimize the month-end close process so all transactions can be recorded in less than a day.
Investing in such tools allow modern CFOs to adopt a fact-based approach to ensure the team has the best insights in their hands to make intelligent decisions.
From an operational costs outlook, staying lean and embracing technology has helped businesses scale without always adding to the headcount.
Numerous CFOs view investments in FP&A automation as such a differentiator that they have begun capitalizing technological tools as assets on the balance sheet for valuation purposes.
In the coming years, CFOs will rely on data more than ever, armed with new sources of insights to act on, access to real-time, and historical analytics and forecasting capabilities, CFOs will focus on building a data-driven finance engine. As businesses have a greater volume of data to review and analyze, the ability to identify and filter the relevant information will be increasingly important.
The finance analytics process generally consists of three steps:
Manually performing these steps consumes a substantial amount of the finance team’s time. As a CFO, it is essential to collaborate with the bottom line to identify practices under pressure and oversee a fundamental change in the company’s financial operations.
CFOs should help their teams identify relevant data and build a function that is a strategic business partner rather than a team that is only engaged in day-to-day transactional and recording processes.
Here are a few initiatives for achieving this goal and transforming your finance team from being data gatherers to data-driven decision-makers:
Consider acquiring an all-in-one financial platform encompassing procure-to-pay, order-to-cash, treasury, and accounting functions. This reduces the number of point solutions needed to enable seamless collaboration across financial operations by providing a single user interface.
Integrate your finance platform with existing accounting systems or other solutions to capture and consolidate all transactions and customer details.
Automate data collection wherever possible, especially for repetitive and mundane tasks such as remittance aggregation. This has two advantages: it ensures that this information is always captured and prevents data entry errors.
Ensure that your data is standardized. Drop-downs and systematic nomenclature are great ways to ensure you have the data you need for analysis in a correct and consistent format.
Identify an IT employee or service provider partner to understand the future of technology and develop a road map for an affordable yet high ROI digital transformation journey.
Between combining disparate data silos and implementing digital-first data analysis, CFOs must have a long-term perspective to safeguard their businesses’ long-term success.
CFOs often find themselves perched atop a fence. They have the public company, board, and CEO mandate on one side and the operative company on the other. They are the catalysts and the bridge between the two, continuously connecting, communicating, and working toward the same ultimate objective.
As a result, when it comes to an effective financial strategy, CFOs must first answer two critical questions before proceeding to strategy development:
These questions are answered by developing a strategic framework that identifies the company’s vulnerabilities (gaps). The primary objective of a strategic plan is to paint a picture of the business’s current and desired future states.
A strategic framework helps identify performance gaps in the business that the financial operations team can address through its short-, medium-, and long-term efforts.
Long-term elements within the plan may or may not be directly linked to a definite success point but serve as filters for making informed business decisions.
They allow a business to remain agile and forecast adverse disruptions, the next economic downturn, or the latest technological innovation that sends shockwaves through the industry.
The short- to mid-term (30 days to 90 days) plan outlines specific metrics, tasks, priorities, and ownership for the activities that need to be executed to move the organization closer to its long-term objectives.
Uncover industry-based findings and action items in this free guide to develop a financial strategy for the next 100 days.
CFOs choose to invest in analytical and forecasting tools because they see positive results —including growth, innovation, and reduced costs. Many organizations have already unearthed new business optimizations, seen higher levels of efficiency and productivity, and unlocked hidden cash.
With the right data and technology platforms, CFOs can navigate future risks with a foresight that few other C-suite members possess.
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