Four steps CFOs can take to build business clarity

Grant Halloran Profile picture for user Grant Halloran May 25, 2022 Audio mode
Summary:
With Planful Perform 2022 in full swing in Las Vegas, Planful CEO Grant Halloran lays out the new expectations the office of the CFO is facing - and how finance leaders should respond.

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Among the untold number of permanent changes in the past few years, at least for businesses, is the role of the CFO. Geopolitical issues, economic challenges, and even supply chain concerns were already rising before the world tilted.

Many of the consequences on the Office of the CFO were indirect. Digital transformation and workforce modernization initiatives suddenly became existential imperatives. In addition to virtual and remote work, many finance and accounting leaders began reevaluating their jobs. If the Great Resignation remade finance, it’s because skilled personnel have decided they want to work where their strategic abilities are valued, and not where they are forced to mostly execute tedious, low-value tasks day in and day out.

The most direct and prominent impact on CFOs, however, has been in their duties as business leaders. Enterprises are calling upon the Office of the CFO to increase participation in decisions outside of its own departments, including HR, operations, marketing, R&D, and beyond by creating data-driven, finance-forward cultures. To achieve these ends and facilitate business clarity in this new era, CFOs must expand their scope. Those who do will thrive in this Golden Age for CFO technology, but only if they have the information necessary to act strategically and with confidence.

First, they must embrace cross-departmental collaboration at a personal level. A deep understanding of all facets of the enterprise is now central to being an excellent CFO. Dropping in on department meetings outside of finance and participating in strategy sessions are necessary steps, as is offering a helping hand when needed. Moreover, keeping lines of communication open with leaders across the enterprise builds trust, encourages quality interactions and, most of all, helps foster business clarity.

Second, they must move beyond financial and commercial data to embrace operational information. CFOs excel at understanding the first two—and certainly, operational data is a challenge due to its myriad sources and formats. Yet precisely because operational data drives the business, its integration can answer numerous fundamental questions about how to allocate capital to the best advantage. If finance leaders want to know how to move the needle in the sales organization or what is holding back new product development, the intersection of operational, financial and commercial data will provide the answers.

Businesses of all types are using this heterogeneous approach to great advantage. One Chicago-based company, a global manufacturer of natural chemical products, has moved from playing catch-up against supply chain woes and spikes in prices of raw materials to a highly proactive stance, simply through operational modeling. Its new posture enables it to quickly adjust prices on more than 12,500 finished goods, maintaining margins while skillfully forecasting the impact of change on its customer base of 6,000-plus users.

Third on the CFO’s to-do list is redefining risk. Finance’s responsibility for — and definition of— risk has expanded far beyond merely protecting the organization. Today, risk management requires understanding and then advising on how to responsibly propel the business toward its broad strategic goals. Senior leaders depend on their CFO to recommend ways to judiciously apply capital, which demands wise use of the accelerator as well as the brakes. Again, only with a broad and deep view of business data can CFOs have the appropriate, comprehensive insights to make such decisions with confidence.

Fourth, CFOs must move with agility to incorporate new accounting and FP&A tools. Finance leaders have not always had the same close interaction with IT that the marketing, HR, and production folks have had. Yet, while IT holds the key to much of the enterprise data finance needs, only finance knows how to manage the thorniest challenges affecting the financial function.

IT solutions designed for the Office of the CFO are solving problems at every turn and to be finance-owned. New tools that incorporate artificial intelligence and machine learning (AI and ML) technologies are automating the low-level, mundane work that takes accounting and FP&A personnel away from more strategic efforts. AI and ML, along with good integration processes, are also providing the speed advantage required for smart analysis of operational data.

Prioritizing modernization projects begins by asking internal financial teams about their biggest pain points. These workers are the ones dealing with bottlenecks and repetitive work; inquiring about their needs for modernization is an excellent starting point. Next, move outside of finance to the larger organization. Changes are good that peers and business stakeholders have an opinion about how the finance function is operating, and how finance can help achieve their critical goals. These steps will help set agendas for quick wins in financial IT, and establish a long-term vision.

Upheaval is a common experience among CFOs these days — however, a silver lining is that it’s also ushering in a new Golden Age of CFO technology. Solutions are accelerating on both the workflow and strategic fronts. Software platforms are mitigating the impact of the Great Resignation by reducing routine work and giving new purpose to highly-educated and motivated employees. For CFOs themselves, the changing nature of business is forcing a new and more holistic perspective that, happily, increases visibility and opportunity. Enlightened financial leaders are embracing that perspective — and they’re finding it provides, in this new post-COVID era, a new pathway to future success.

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