The business marketplace and today’s economy are rapidly changing, forcing organisations to adapt to new trends. This makes fiscal awareness and agility are critical to survival, to say the least. As a result, this places the CFO (Chief Financial Officer) at the helm to drive and facilitate transformation. Here, we explore how to be a great CFO.
What Does CFO Stand For?
Firstly, let us get the basics out of the way. The Chief Financial Officer, or CFO, is in charge of financial strategy and its operations. In many industries, CFOs are the highest-ranking position after the CEO.
So it’s not surprising, the role has changed dramatically over the last decade. Traditionally, the CFO encompassed two main purposes:
- Stewardship of company assets and risk minimisation
- Managing the books
Essentially, the role was inward facing with a focus on quality control and compliance. In the digital economy, the focus changed to a more outward facing role. The rapid adoption of technology means the role can contribute towards business value and market opportunities.
Therefore, today’s CFO must be a strategist and facilitate other aspects of the business performance.
Responsibilities of the CFO
In today’s age, some of the responsibilities and duties of a CFO now include:
- Financial planning and handling financial risk
- Curate financial data
- Oversee cashflow and expenditures
- Manage investment and taxation issues
- Create and implement financial policies and internal accounting processes
- Report on company financial performance to the executives and board
- Contribute to the development of the company’s strategic direction
- Work with the CEO and board to drive change in the organisation
Skillset of the Successful CFO
To manage such an intricate portfolio, a successful CFO must bring along a diverse set of skills. Besides financial and accounting qualifications such as a CA or CPA certification, they need ongoing professional training and a blend of emotional intelligence and visionary traits. Above all, there are some useful skills that are necessary in being a great CFO.
- Planning capabilities, both short and long-term
- Managerial experience
- Strong communication and leadership abilities
- Business acumen and industry knowledge
CFO vs Accountant: What is the Difference?
As a business with a great accounts team, you may wonder what a CFO can add to the mix. Of course, keeping good books and ensuring compliance is essential and satisfies external stakeholders like the taxman. A good set of books is also essential as the foundation to good management reporting. That’s where your accountant comes into the picture.
However, if you want to grow your company and explore new opportunities, you may want the skillset of a CFO on your team. While there is some overlap between the roles of an accountant and a Chief Financial Officer, they each have a distinct purpose.
The Role of an Accountant
The inhouse or external accountant will spend time differently and cover things like:
- Day-to-day reconciliations like banking, debtor, creditors, and tax accounts.
- Payroll transactions and records
- Basic reporting focused on balance sheet and profit & loss statements
- Monthly, quarterly, and annual lodgements
- Year-end compliance
The Role of the CFO
In contrast, the CFO extends their tentacles into all aspects of the business. For example, some duties include:
- Budgeting and scenario modelling
- Cash management and forecasting
- High-end reporting to stakeholders including the board
- Advisory functions to the executives and board
CFO Best Practices
As technology is the catalyst to freeing up the CFO’s time, it allows dedication to more important facets of the business.
CPA Australia shared 10 Lessons from Leading CFOs. Using these sentiments, we have come up with some points towards best practices on how to be a great CFO.
How Does a Great CFO Spend Their Time?
CFOs have a great opportunity to deliver value within the organisations. In today’s world, the CFO spends less time on finance activities.
Analysing and communicating value takes a higher focus in this role.
Shouldering the CEO, the CFO is more likely to get involved in strategic projects.
The modern and progressive CFO today is customer-oriented and helps build a bridge between market reality and desired strategic goals.
Applying financial leadership, brings the CEO and Board closer to understand what the achievable business outcomes are.
Digital Age
Over the last decade, the advancement of technology has really changed the role of accounting professionals. CFOs have been at the forefront of introducing new technology to businesses as part of their role. As a result, adoption of cloud accounting brings the ability to significantly improve processes and positively affect productivity. Shee Laine from Claye Ventures experienced this firsthand. Automating repetitive processes and streamlining workflows improved client services resulting in significant time-savings.
“By using Xero and connected apps, we were able to eliminate the whole process of dealing with paper documents and manual data entry altogether. This translated to 50-70% time saved. This means we can serve 2-4 times more clients.”
Shee Laine – Claye Ventures
Identifying New Opportunities
In a perfect world, a great CFO is proactive and seeks out opportunities for the business to grow. Of course, this requires understanding the big picture, the goals of the organisation as well as strong analytical skills. Above all, the CFO needs financial acumen to dissect data and information to understand what it means. This may seem obvious, but if you are a technician, you may not be comfortable in this leadership position.
“As CFO, it’s about more than the finances; the role also requires smart business strategies and marketing. Nowadays, CFOs have to truly understand their businesses so they can successfully give an opinion or lead a strategy.”
Annuar Marzuki Abdul Aziz, CFO and Chief Investment Officer – KLCCP Stapled Group
Working and Collaborating with Stakeholders
Looking forward, the ability to communicate and present the vision to enable negotiation with stakeholders are important. Accordingly, this puts social skills as a must-have for a great CFO. If you see collaboration as an important ingredient, applying it at the leadership level as well as at the operational end of the business, makes sense. Essentially, a great CFO facilitates co-operation across the company.
“Engaging with your managers in preparing budgets, and working with them on their financial reports, is crucial. Everyone in this organisation, albeit with different degrees of financial literacy, is very involved in the budget process and engaged in getting their finance reports.”
Max Meikle, CFO – Variety WA
Getting your Hands Dirty in Change Projects
Driving change throughout the organisation, is a trait of a great CFO. Strong leadership will involve not only seeing the opportunities but managing the process of change.
“In a growth business it’s more important you understand the kind of levers you can pull, how hard to pull them, what order to pull them in and where your untapped potential is. You also need to be cognisant that if you pull all the levers at once and drive too much change at one point, you could break the business. “
Scott Scoullar, CFO – Summerset Group Holdings Ltd
In Summary
Ultimately, starting out as a CPA provides the necessary accounting knowledge and builds a good foundation for an aspiring professional. Then, to grow to be a great CFO, add to your skills and knowledge in other aspects of the business. Developing a visionary outlook will make you indispensable. Also note, that having the accounting and data skills will complement your leadership, analyst, and strategist within.
So keep in mind, being a great CFO really means getting involved in many aspects of the business and drive the strategy towards growth. The role of CFO isn’t for everyone in the world of accounting but a great CFO can make a big difference to the success of a business. Is that what you want to do?