The Unique Agenda of Today’s Chief Financial Officer
The role of today's CFO is to deliver insights through the murky; bring clarity to the blurred; provide direction to the meandering; and, spur action to the motionless.
Policy makers, economists and many thought leaders are flummoxed on where the economy is heading.
And that should not matter to you or your colleagues.
Headlines are less meaningful, while your experience and leadership are more valuable than ever.
Where there is disruption or ignorance there is opportunity. Especially when they are taking place in your domain of expertise.
Here are some ways to take advantage of your strengths while tackling today’s CFO challenges.
First, capture the imagination of your team.
The potential of the CFO’s team is growing exponentially due to two key changes.
Depending on the state of your current team, it’s possible three areas need to be addressed to open the gates to their imagination and prepare them for the future. A mindset shift that helps them see the potential in their future, a map that sets the course to build skills for tomorrow and a practical means to start building the bridge from today to the future. Here are some resources you can tap into to help.
Second, the disciplines honed and credibility gained by delivering and analyzing historical information transfer seamlessly into finding forward looking insights from forecasts and analytics. There may be some development needs based on using new technology and current techniques but asking questions and finding answers while creating insights are at our core. Data based decision making is not a new concept to CFOs and their teams.
The libraries of Prashanth Southekal, Irina Steenbeek Glenn Hopper and Dave Sackett can be especially helpful to develop your data & analytics skills and to stay abreast on the future of technology.
Now that you have more tools to capture the imagination of your team and can see how our past has set the path for future growth, let’s tackle some of the key challenges CFOs are facing today.
Funding: Higher interest rates and a jittery banking industry are making both Borrowers and Lenders pause to reassess needs and offerings. Key steps you can take to prevent a surprise or even capture an opportunity include:
1. Update your cash forecast based on today’s conditions. Forecast a minimum of one year ahead and be sure to tie cash back to your balance sheet forecast and earnings to the P&L forecast. Shortcuts at this stage, i.e., not including the balance sheet and income statement in this exercise, will inevitably lead to errors and discrepancies that could put the company and your job in jeopardy.
Aids: Ken Fick hits the nail on the head with this piece on Financial Forecast Cycle Time, part of his 5 part series, 5 Indicators That Your Company Needs A Finance Transformation.
Our 13 week cash forecast tool can easily be converted to a 13 month cash forecast tool. Get started here, Cash Forecast Model.
2. Revisit or draft your Capital Plan. Changes in the company’s situation may be having an impact on your investment decisions, working capital, revenues, margins and expenses. All these factors will affect your capital plan. If any of them has changed significantly since your capital budget was approved, revisiting the plan with your Board and executive team is an important step in good governance.
Aid: Use CFO Success Series: Treasury Part 1- Capital Planning as a guide in updating or creating your Capital Plan.
3. Stay in close contact with your current and potential capital sources. Now is no time to let your network go stale. Especially capital providers who are and have been supportive of you and the company. A lunch date or catch-up call may seem inconvenient today, but will go a long way if things get tight. The investment in your cash forecast and the Capital Plan will pay dividends at this point.
Aids: Read Why Your Company Needs a Good Banking Relationship and Jim Grew ’s series on cash and bankers, starting with Is Your Banker Jet Fuel for Growth?
Talent: A shortage of talent is putting a damper on the success of many CFOs. Not only are colleges graduating fewer accounting and finance professionals but there is a question mark on the long term viability of a career in accounting. If you are having trouble sourcing and retaining talent here are some aids.
1. Start with understanding the size of the problem.
Aids: The Cost of Employee Turnover Calculator will help you compute the cost of turnover for your company. It's simple and straightforward framework makes sharing it with your executive peers a meaningful learning experience for the team. Frequently, it underscores the high returns you can earn from new retention strategies.
If the main roles of your human resource department include recruiting, learning and development and building culture you will find the Human Resource Department Return on Investment Model and Human Resource Return on Investment Tool that goes with it valuable. The steps used to capture the inputs are eye opening. The results will open your mind.
These first two aids will help you quantify the opportunity.
Here are some concepts to help you capture the opportunity.
2. Determine what to measure.
This is nearly as important as the measurement itself.
Recommended by LinkedIn
Aid: To identify what Chief Financial Officers should measure when assessing the effectiveness of their people strategy read 11 Metrics Leaders Should Use to Measure the Effectiveness of Their People Strategy . These metrics are divided into 5 categories,
3. Developing employees is a good remedy for unplanned employee departures.
In a 2022 poll professional development opportunities led the list of top areas to invest in to improve company culture.*
Aid: For leading-edge expertise on talent development, you can’t miss by visiting Julie Winkle Giulioni’s library. It’s packed with tips and advice to include in your professional development leadership tool box.
4. Leverage individual experience to harness the full potential of the team
Inexperience meets experience where digital natives meet digital immigrants.
The press occasionally highlights the rift between generations and concludes these are creating mountainous, hard to solve problems in the CFO suite and within business teams in general. I don’t look at it that way. The newer and the older have many complements that can make our teams much stronger.
Aid: These complements and the talent evolution in finance are described more thoroughly in, The New Generation of Financial Talent – Where Do You Fit?
Technology: The continuous growing opportunity for finance leaders remains in technology. It will further enable our talent, increase effectiveness, improve operations and help us drive deeper insights into our businesses, our markets, our strategies and our growth.
The problem for the CFO is twofold
Here is some help to support your technology transformation:
1. Start by getting your arms around the size of the opportunity.
Aids: This article explains The Business Value of IT Calculator, a simple and intuitive approach that executive teams can use to understand where the company stands on its utilization of Information Technology.
Once again refer to Ken Fick’s series 5 Indicators Your Company Needs A Finance Transformation is a great resource to help you identify where your finance team stands on the development spectrum. Although not specifically written from a technology perspective, it becomes clear when technology is holding you back.
2. Technology is no longer sequestered in a remote data center
Technology teams have historically been hived off from the business team creating a bureaucracy of protocols, systems, delays and over budget projects. (not to blame the tech folks, this has been a leadership issue). A realization that technology is not separate from ‘the business’ has moved technology to the forefront of every leader’s mind.
Aid: This piece from Peter Adams and Rick Koski perfectly describes which direction to head, Making Smart IT Investment Decisions
3. Automation is improving the finance operation.
Aid: Benchmark you automation projects against the list provide by Ravi Bhardwaj in this piece Automation Is Transforming Finance Operations Will more investment in automation yield higher returns?
For tips and a practical approach to using artificial intelligence read our series, For Chief Financial Officers: A Practical Approach to Using Artificial Intelligence
For more tips on CFO centric material on Funding, Talent and Technology visit CFO.University and type in the topic of your question in the Keywords bar. Hit submit and learn away. Or should that be ‘a way’?
* LinkedIn’s 2022 Global Talent Trends
I enjoy learning what is on your mind, so please feel comfortable getting in touch and teaching me.
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