Within many companies nationwide, and especially within San Francisco Bay Area and Silicon Valley small and midsize businesses, there is an increasing reliance on the leadership of the CFO.
And with artificial intelligence and other advances enabling businesses to make speedier, better-informed decisions, the stage is set for CFOs to step up their games as proactive internal challengers and identifiers of new opportunities for positive business growth and increased revenues.
But this isn’t happening often enough.
Experienced CFOs excel using technology and top talent to exceed targets for service-level metrics for key transactional and accounting processes. They produce thousands of reports faster as they gain access to an increasing amount of real-time data.
The trouble is, too many CFOs know they’re not creating as much value for the company as they could. For example, while the financial planning and analysis (FP&A) function is facilitating the budgeting process, many CFOs are not really challenging those plans by providing crucial financial insight that only they have a true understanding of.
When finance functions fail to fully deliver on their potential, it’s often because they can’t divert focus away from areas that are not adding value — reconciling reports and closing the books, for example. By overinvesting their time and energy in those areas, CFOs have little left to devote to more important activities, based on the company’s chosen strategic priorities, such as supporting performance management, organizational scale, improving cash flow or strategic business planning.
Not surprisingly, many chief financial officers continue to struggle as they attempt to evolve the role of finance with two often-conflicting objectives: saving money and making the department more efficient, vs. helping the business make more fact-based and effective decisions. But CFOs can change course by adopting the mindset of a business owner, and then making clear choices to become more efficient in routine activities, generating savings that can be plowed into carefully selected, more profitable endeavors.
Based on experience, CFOs typically face three major challenges when they set out to boost their role. We’ll look at them one by one.
Challenge #1: Knowing where (and where not) to excel. Does the industry you operate in require you to excel more in strategic planning or in risk management? Does your company strategy require you to outperform competitors in effective organizational scale or in financial analysis? The truth is that some finance roles generate more strategic value than others and are more critical for helping a company outpace competitors.
Knowing where to invest begins with understanding the industry, strategic priorities, and organizational needs — and then evaluating the finance function with fresh eyes, stepping back to closely assess the changes that need to be made.
The best companies start by evaluating the characteristics of their industry — the speed of change in the market, for example. Next, they consider the company’s competitive strategy. Does it differentiate on quality, innovation or on price? Does it view growth as a priority? And then there are the company’s capabilities and culture to evaluate. How risk-oriented are the company’s executives?
Challenge #2: Understanding where your business stands. After determining the strategic areas of where a business particularly needs to excel in, CFOs need to assess how much potential for improvement exists within an organization and how much in the way of new capabilities they need to build.
Finding an expert CFO who has solid finance capabilities, as well as insight into strategic and operational business processes that go well beyond those of a traditional accountant requires a detailed assessment of both skill and then cost for each role required. Increasingly, companies are using outsourced, part-time CFO services.
Challenge #3: Closing the gap. Once a small or midsized business has a clear understanding of of where they want to be best in class, what that looks like, and what they need to get there, the next stage involves CFOs becoming trusted business advisors. This begins with the spearheading of building a solid case for the various operational changes and the design and implementation of a concrete roadmap of the initiatives to roll out in a multiyear process. Success requires unwavering support from CEOs, business owners and top management. It also requires an early risk assessment to identify the barriers to change — and a plan for mitigating those risks.