The role of the CFO is continuously evolving in the modern business era. Let us look at five important imperatives that make a CFO a good architect for your business value:
- Strategy: objectives and agenda of a CFO must be closely aligned to your business strategy. The CFO is a key player in formulating business strategy and leads finance functions to deliver strategic objectives successfully.
- Operating models: A CFO must continuously evolve operating models to improve business scalability in a competitive business scenario. Global/integrated services will help reducing costs and gain access to value added services.
- Performance Management: A forward-looking CFO tracks business performance indicators well in advance. Finance functions include analyzing performance, financial outcomes both during decision-making and external market changes.
- Digital transformation: A CFO develops a deep understanding of the digital landscape and adopts digital transformation of finance functions. A CFO must assess the scope of digital evolution aligned with organizational capability.
- Development of financial capabilities: With an increasing collaboration of finance functions and business leadership, the need of the hour for finance professionals is to develop skills to support digital transformation and advance data analytics.in addition, specializations in specific financial aspects of business processes like trade promotion and pricing should be developed.
Outsourcing Finance Functions: A CFO Strategy
A CFO plays a key role in a company’s success. With the expansion of this role, key stakeholders are focusing on the finance functions to support major strategic moves; these functions go beyond the traditional finance functions; however, it does not mean that a CFO does not look into the routinely tasks.
Finance professionals must provide relevant insights related to business strategy, customer experience, and deliver all daily activities proficiently.
An article in a business magazine describes some of the challenges faced by CFOs today. Along with cybersecurity and regulatory demands, many finance leaders have an added responsibility of tackling talent issues:
Excerpts from the CGMA Magazine: “CFOs also are seeing the need to be more visible with staff. In a recent survey of 605 CFO Alliance members, 95% believed that culture had an effect on the company’s bottom line. However, 42% said that CEOs didn’t spend enough time focused on culture.”
Other than a CEO of a company, a CFO has a huge responsibility of maintaining business activities efficiently.
Finance leaders are looking towards BPO (Business Process Outsourcing) to handle some of the financial functions of their company so that they can focus on the bigger picture. In this way, business leaders will get ample opportunities to work on the internal organizational culture and daily activities.
Outsourcing drives long-term business strategy; it helps senior finance officials think beyond , exceed expectations, and gain a competitive edge.
Advantages of outsourcing
Daily Activities: To maintain a competitive edge, companies today Improve Daily Tactics – To remain competitive, today’s companies must incorporate enabling technologies providing instant access to KPIs, accounting reports, and other important financial information. Outsourcing allows CFOs access latest, cutting-edge technologies and processes. Advantages include better insights, sharing and accessing real-time information, and other key elements of business growth. Outsourcing also reduces costs, cycle times, and improves productivity standards.
- Think of the Bigger Picture: Everyday financial activities are critical for business operations. You cannot ignore them. However, these activities do not contribute to revenue generation directly. So, it is unable to deliver value when finance professionals are overloaded with routine tasks of finance and accounting. Outsourcing offers an opportunity to share the workload of transactional activities with a BPO, which gives ample time to focus on financial strategy and planning.
- Drive Business Strategy with Technology: To excel in the modern business world, companies need to evolve continually. Harness the power of latest technologies and equip employee skills to adopt a forward-looking business strategy. Outsourcing partners offer necessary IT solutions for delivering real value. BPOs understand enterprise needs, interpret financial data, and help CFOs leverage technology to support the organization’s business operations and overall strategy.
What is a Smart Solution for a CFO?
As mentioned above, outsourcing helps a CFO in the following ways:
- Reduced costs
- Increase cash flow
- Improve financial control
- Streamlining daily activities
- Improved business decisions and reporting
Best practices of budgeting also cater to the number of people giving inputs when preparing a finance budget. Creating budgets requires essential data from other applications like ERP, HR, Accounting, logistics, and manufacturing. Often, budgeting takes place in a feeder system where values are uploaded into the software application.
Another approach is driver-based budgeting. Rather than entering the budget data every day, you can deploy specific drivers, i.e. a variable affecting the budget items.
For instance, if you know about the production level and efficiency of product manufacturing it will be easier for you to prepare a budget for cost of goods sold. Similarly, when you are aware about how many people are working in the department, it will be easier for a CFO to determine financial benefits. Budget data using drivers yields accurate analytical reports.
Have you ever heard about a rolling budget/rolling forecast? It is an annual budget but run actually on a quarterly basis. At the end of each quarter, a CFO creates a new budget. Why do you need to create a budget? Because it helps you maintain operational efficiency, business is run better, and budget reports and graphs help the top management take better decisions. A software application helps managers create their exclusive analytical reports, what-if analysis, as well as other important simulations.
Last but not the least, a software application for finance functions helps a CFO make midcourse corrections, a key player in effective budgeting. Budgeting helps maintain a standard of supervision and control; an enterprise must choose how to generate reports month-on-month, develop tracking systems and early warning systems to take corrective measures. For instance, if one of the departments in your organization exceeds the budget by 30% in the first month itself, it will pose a huge problem for the remaining year.
Although, budget automation is a valuable tool for enterprises; it’s value increases if you follow best budgeting practices.
Managing Finance IT
The prominence of technology in finance function is continuously growing. A recently concluded global survey reported 70% enterprises look to adopt digital transformation of finance functions in 2016. Enterprises look to manage technologies continuously to stay ahead.
• Strategy. Aligning ERP enhancements with a comprehensive IT solution is what you must focus on today. Hence, you must look for easy-to understand business processes to enhance productivity and business efficiency. Prioritizing key elements of finance strategy will help you remain compliant with industry standards. As a CFO, you must work towards maximizing the potential of those key elements in order to use your resources optimally.
Ensuring the existing systems are utilizing full capabilities before you add more systems. In addition, you should not add systems in silos; they are meant to support the data extracted stored in silos.
• Configuration: Customization of IT solutions increase the total cost of ownership because of regular updates. Cloud computing offers an easy, quick and affordable solution to configure your IT systems for finance functions.
• Reporting: Financial controllers believe that enterprises must adapt their reporting systems aligned with your IT systems. Data-driven reporting systems must be installed in the early stages of IT implementation.
• User Experience: Financial specialists and experts from each department must adopt a forward-looking approach to enhance business operations. Significant training must be provided to employees to help them acquire required skills of understanding unique customer needs. Before investing on any IT solution always do your homework on the ROI of integration, changes, and customization of IT solutions.
CFO - A Technology Evangelist
CFOs in the modern business era have unique insights as to how to operate their businesses. They are quickly transforming into a catalyst of meaningful business transformation with the help of IT infrastructure of your enterprise.
Recently, a study conducted by Accenture and Oracle, concluded that enterprises are looking to transform their finance processes on a global scale. 68% of the participants agreed that a CFO has emerged gradually as a powerful evangelist in terms of implementing technology within business processes.
Cloud computing, big data analytics, mobility solutions, and social media marketing tools are indispensable tools that every business must incorporate in their marketing strategy in order to maintain the competitive edge. The rapid pace of ever-evolving consumer trends drives business leaders to train their employees to use such technologies efficiently and effectively.
A CFO and the entire finance department of an organization must help their business direct investments in such a way that the top management can arrive at the best IT purchase decisions to address specific entity needs.
With technologies like Hadoop, an open source data analytics tool, a CFO will be able to make effective and high-level business decisions with the help of greater insights that might have been overlooked earlier. CFOs will be able to achieve quick resolution and better accuracy in tracking an enterprise’s cashflow; simultaneously, a CFO can predict and avoid negative outcomes that could lead to detrimental consequences.
Are you ready to become a technological evangelist, then?