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The Changing Role of the CFO

Business changes rapidly at the speed of competition. It is often very challenging for companies to adapt to keep pace with such innovation, particularly when it comes to Chief Financial Officers (CFOs) who must look beyond spreadsheets and quarterly reports.

The role of CFO is becoming more fluid as well. Data plays a key part in this evolution, and can be beneficial to everything from cost and revenue analysis to setting up payment terms with suppliers that can improve cash flow. By necessity, the CFO’s role within a company is more strategic than ever, helping to create a proactive business mindset, rather than a reactive one.

The performance aspect of the CFO is becoming clearer in an age where all companies seek a competitive edge.

A competitive edge can come by streamlining business processes using best-in-class technology — and by striking down silos within various company departments.

Beyond the competitive edge, CFOs must contend with cash flow management and strategically crafting vendor relationships.

The Accounts Receivable (AR) and Accounts Payable functions (AP), tend to be looked at as back-office functions that are not necessarily strategic to the business.

However, it is in the strategic cost and cash flow analysis, followed by the implementation of proper decisions based off of that data analysis, that leads to increased profit margins, improved cash flows, and overall better ROI. Data, not surprisingly, is key to cash flow, with understanding of how, when and why some departments are running well and others are not.

Companies often have multiple sources of data. The data may be collected and warehoused in disparate platforms and information systems — those systems may never talk to one another as they were designed for an entirely different and narrow purpose. With information moving slowly, if at all, data is stale, and usually less than optimally actionable.

The result? When faced with closing the books monthly or each quarter, CFOs wind up needing to rely more on educated guesses than they should.

Since data is not captured in one place, offline analysis is vital. Consolidating data, and examining it carefully, means that uncovering a holistic view of what is going on — and what should be done — becomes a bit easier. This is especially true with managing accounts payable and accounts receivable functions.

In general, companies want to pay suppliers as late as possible, without incurring fees. The company that negotiates 60-day payment terms has a window of cash flow management that can be much better than 45-day payment terms. However, firms without robust information systems in place for data collection, synthesis and dissemination may wind up paying well before due dates and not getting that benefit.

Conversely, if discounts are in place with early payment terms, but without clear lines of communication and payment actions (even of the automated kind), then cash flow, again, is less robust than it could be. Benchmarking plays a key role in finding and identifying ways to fix what is less than ideal from a performance aspect.

If you are a business owner or CEO within the San Francisco Bay Area or Silicon Valley, in need of an experienced part-time CFO to help your company improve cash flow, accounting and billing process management, as well as profit margins, our highly skilled outsourced CFO services provide direct access to high-quality expertise in a cost-effective manner.

CFO Growth Advisors (CGA) specializes in unique and highly effective growth strategies that are tailored to help companies grow more quickly and efficiently while improving sales & profit growth. Contact us to learn more.

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