CFO, Chief Financial officer is one role which we assume that we understand completely. Let me help you unravel a few of its branches to attain the importance of this role. CFOs are playing a major role in a company as they are entitled to manage the entire financial data as well as the operational strategies. The role has its limitations and liberty in each company as it often depends on the structure, size, and processes of the organization.
So what are the roles and responsibilities performed by Finance Chiefs ??
To carry out a role & responsibility one must carry certain characteristics and qualities. Even for our Finance chiefs, it is a must to have some of the qualities for example CFOs needs to have a vision and foresight of the financial capabilities of the company, CFOs tell their CEOs what will happen in the future, A holistic view of the overall business, A Results-oriented mindset, Analytic, Data-Driven, Adaptive and also proactive in every action. If we were to talk about areas, it can be said that the modern age CFOs are involved in human resource authorities:
● Challenges faced in managing payrolls
● Maintaining laws and legal aspects
● Developing Entrepreneurship and Business Strategies
● Presenting the Data Visualization
● Managing legal, financial, and administrative data
It is needless to say that the financial world has become more high-tech. Therefore, the chief financial officers need to be much skilled and tech-savvy to face the upcoming challenges in this competitive world.
Do you know how the role has evolved over time ?
The role of the CFO has undergone some significant changes over the years. If we look back almost thirty years ago, we will see that the major role of a CFO was to keep a book or record of the company history, maintain the financial statement, and develop statutory compliance. Now, if you look at the current corporate market, the scenario has been drastically transformed.
Some of us can predict the probable reason behind such changes in the Role of a Finance Chief. However, we are going to explore some more reasons, which are significantly influencing such evolution.
In today’s world, accountants and strategists tend to think of some unique methods to capture the market value. It is needless to say that the usage of diversified technologies, i.e, machine learning, Artificial Intelligence, and data analytics, has changed the mindset of the CFOs. You can now assume how competitive this market has become. It is thus quite obvious, the companies have been more likely to hire new talents, who are quite adaptive towards these modern-age technologies. Who doesn’t like to deep dive into the broader exposure, especially, when they have conducted extended market research.
We must admit that most of the CFO’s area of skill-set is based on the broader aspects of the current business market. In this field, they considered first looking at the conformance, i.e. conducting extensive research on the business market that aligns with the legal and regulatory factors. However, one can always consider the stewardship of the organizational assets.
In this competitive business market, we tend to collaborate with a set of finance chiefs. A set who are skilled, vision to make the team efficient to adapt the new Digital world & can transform the processes into completely digital with Expense Management solutions such as Happay, Esign solution such as DocuSign, ERP solutions such as Oracle, Net suite and Contract management solution such as Ivalua wherein the finance operation reshapes itself into paperless operation.
What skill set determines his candidature?
Skills such as managing all kinds of corporate spending, Reimbursements, Petty Cash, Business Expenses, Payments, Cards, Travel, and more are equally important. We have stepped into an Era wherein decision-makers decide with data and digital dashboards. Hence, A chief who can completely create a space for visibility & control of Finance becomes more and more important. In fact, with all these the finance operation reshapes itself into a paperless operation and helps the decision-making in the areas such as policy check, leakages, spillage, and expense records.
What are the major KPIs of a CFO?
A CFO proactively gets the idea about the Investment planning, Money Management, and Capital Structure of the company. If we have to look at the major duties of the CFO, we can find that they are mainly managing the financial risks, keeping a track of the expenditures, structuring long term financial planning, handling both the taxation, Companies law and contracts, and investment issues. It is quite significantly noticeable that the role of the CFO has been evolving in the last 30 years.
The KPI dashboard of CFO in the current business market must include the following aspects:
1) Current Ratio
2) Quick Ratio
3) Total-Debt-to-Equity-Ratio
4) Operating Cash Flow
5) Working Capital
6) Per-share earnings
7) Gross Profit Margin
8) Return on Equity
9) Employee Count
10) Compound average growth ratio
11) Interest coverage ratio
These KPIs are the specific subcategory of the financial KPIs. These are quite helpful for a CFO to make fruitful & profitable decisions regarding the company’s financial data to drive towards the right direction. CFO takes care of these areas and presents a clear outlook to drive benefits in the future. Moreover, it helps in measuring the associated risks as well the future growth possibilities.
What influence does a CFO have in organizational performance?
4 ways to define
❖ Converting information into strategic insights
❖ Strategy Commercialization
❖ Alignment of Realistic Strategies with the business Decision-making process
❖ Improvement of the decision making quality by developing a structured scenario planning strategy
So what additional responsibilities does a CFO perform?
Not only these but with time CFOs are also responsible for stabilizing the Bottom Line. What do you often look for when you think of reducing the costs? Of course, the best procurement team secures the bottom line costs. During this pandemic situation, many of the companies have tried to do so. They were simply cutting down the operational costs. But, have you ever thought of saving the costs when the suppliers were unreachable, non-active suppliers during a lock down?
With the help of the organic database and strong bonding with the suppliers, the current business marketers have been able to drive such initiatives. It enables the process to provide sourcing-as-a-service when the internal team feels an urge to develop their capabilities in a specific area. In general, it can be stated that the delivery model is that of co-sourcing, where the internal operations bring the process and category knowledge to bear, whilst relying on the local market intelligence of the in-house team to execute each market/sourcing engagement.
Many of the procurement or financial companies deal with the complete Source-to-Pay solution, yet flourishes in the market of Standalone-Services. This service can be controlled manually or using advanced technologies.
What benefits CFOs bring to an organization?
Now, you must be thinking what are the major benefits CFO or the team has been receiving right?
Just have a quick look at the following welfare:
● Predictable Implementation Cost
● Standard Reporting Across all Subject areas
● Robust Visibility Model tailored for your organization
● Role-based security and Secure Data Access
● The maximum profit on ROI
● Get rid of the complexity and risks
You can compare the CFOs with the procurement heads who are constantly fighting to get the best service out of the system. One can say the CFO is the one who maneuvers the ship but Procurement will always sail the ship in the best direction. In a nutshell, if you see CFO’s are thriving to act as a driving force to such digital transformation. These cost initiatives have not only helped in flourishing the financial market, but these have also made the businesses more agile and adaptive towards challenges. So if you are the one heading the Finance don’t forget to look for opportunities to contribute and experience in these areas as the Role and Headhunters
have been looking for the same.
In a candid conversation, one of the Industry Leaders added
“In the past, CFOs were challenged with turning the numbers into something meaningful, deriving insights, and delivering information to the rest of the organization with lots of integrity, flexibility, and speed. Today as a leader, CFO’s emphasize managing risk (VUCA world), driving performance, and forward-looking to steer into the Future. All in all
Ravi Gosala, CFO(CPET) Indorama Ventures PCL, Thailand
CFO (he/she) emerges as the first port of call for CEOs for advice and direction.”
Is he running the SHIP?
All of us need to gather some basic ideas about the efforts a CFO and a CPO have been providing to drive the company’s financial position. Do you know the procurement process is most likely quite a hard process considering the several moving parts? It is thus necessary to equip the business with the most suitable tools for maximizing the values and priorities. Here are some of the areas, which are benefited by the CFOs and CPOs.
❖ Alignment of the procurement with the business strategic procedure
CFO and CPO ensure to drive the procurement service by presenting a clear and concise outlet that gives the idea about the possible risks and potentiality of the business on a competitive ground. CPOs need to work with the CFOs for developing a balanced procurement performance scorecard. CPOs are positioned to influence the control suppliers who generally deliver strategic insight to the business CEO.
❖ Optimization of the working capital
When the procurement team works directly with the suppliers, they usually influence the strategic procurement process by managing associated working capital. The CFO can then present accurate cash flow information by negotiating advantageous payments and managing the stock levels.
More Contribution to be taken into Consideration:
- During any crisis situation, the CFO’s voice plays quite a critical role. But, it is a CPO who contributes directly to a firm’s resilience. It also has a strategic role in leading the business through the tough times ahead. Thus, it can be stated that in order to ensure better management of crucial situations, a close and coordinated relationship must be created between the CFOs and CPOs.
- Without the leadership of a CFO, performance efforts will lack a meaningful benchmark to bring success to the organization. Managers will be tempted to focus on projects that are clearly visible instead of those that promise the highest value. This is why, while planning transformations, CFOs play the broader role in modelling desired mindsets and behaviour while transforming the finance functions.
Conclusion
Hence, it can be stated that the contribution of the CFO and CPO is much commendable in terms of managing organizational performance. Moreover, managing these specific financial areas help the company to drive the ship towards a positive direction where it can ensure the strategic position in a highly competitive market. So, on a concluding note, the combined effort of the CPO, CEO, and CFOs.
Bibliography:
https://www.finallycpa.com/blog/how-cfo-influences-strategic-decisions
https://www.financierworldwide.com/evolving-role-of-the-cfo#.YUoDgLgzbIU
https://www.toptal.com/finance/interim-cfos/role-of-the-cfo
https://www.financierworldwide.com/evolving-role-of-the-cfo#.YUoE8rgzbIU
https://www.idashboards.com/blog/2020/08/12/5-critical-kpis-every-cfo-must-track/