As digital transformation accelerates, finance leaders need to ensure they have the skills, not just the technology, to lead through change
In an increasingly digital workplace, chief financial officers (CFOs) must understand underlying technology to effectively guide their business.
Bringing automation into the finance function can give CFOs new and unique insights; the challenge is to use the data for the benefit of the business now and in the future. Some 87 per cent of business leaders count this as a top priority, according to Gartner, which means CFOs need a greater understanding of technology.
“CFOs should have an understanding of what technologies are coming down the track, what competitors may be leveraging to their advantage and where their own tech stack may be lacking,” says Seamus Hennessy, CFO at online education company Udacity.
This requires a 360-degree understanding of the technologies in their sector, something that even 20 years ago simply wasn’t necessary, but is now an increasingly essential part of the CFO toolkit.
“CFOs in larger businesses will find data insights guide many key business decisions. The growth of machine learning has seen data scientists and data engineers working hand in hand with the senior finance team. This can help free up CFOs to concentrate on the more strategic side of the role, but having an understanding of how data is used and interpreted at the granular level is essential,” says Hennessy.
Brian Montgomery, finance director at Workday, says that in the wake of an unstable economy and constantly shifting consumer behaviour, CFOs need to provide data-led insights in real time to help the business pivot quickly.
“Agility has become the number one priority and that’s what the CFOs of the future are aiming to achieve,” he says. “This is why technology’s potential to transform finance functions has become one of the most exciting parts of a CFO’s job. The reliance on data and move to cloud-based solutions has caused a fundamental shift in how the finance function works.”
CFOs can set their own metrics and pull together forecasts instantly. They are becoming hands on with the data and starting to own everything from basic configurations to reporting. However, this will ultimately require a new skillset. This doesn’t mean finance leaders need to start learning how to code, but going forward CFOs must collaborate with other departments, from human resources to sales and IT, to help drive more agile decisions across the organisation.
As the leader who is providing real-time data insights such as forecasts, the CFO has a strategic role to play in leading a company-wide transformation towards agility. To achieve this, having interpersonal skills to support and empower leaders in their decision-making will be key.
Anticipating and addressing emerging scenarios
Another key advantage of automated data insight is its role in enabling CFOs to model different outcomes and take a more strategic approach.
“A strong appreciation of enterprise technology is essential with data and security considerations being the critical basics ahead of artificial intelligence and machine learning, which are very much in the forefront of future thinking,” says Ian McLaren, CFO at Govia Thameslink Railway.
“As we move from having digitalised the basics, we are now seeing a lot more pull towards experimenting with ‘what if’ challenges and questions being given to our data team to address emerging scenarios.”
While the finance directors of the past were largely reactive, with the majority of time spent reflecting on historic data, the role is now much more forward looking, according to James Roberts, CFO at Time Finance.
As the new-look CFO emerges, the top finance roles quickly change to being proactive and acting as a genuine right hand to the chief executive, challenging the number-crunching, back-office stereotype.
“Whether it’s as a sounding board or instigator of innovation across the business, the modern CFO is not only focused on projections and sales forecasting, they’ll act as a stand-in to the CEO when needed,” says Roberts.
“This expanded job role works perfectly when the CFO and CEO have a shared vision of company values and stops a truly effective CFO from being commoditised in future since they become unique to each business with their role being less one dimensional.”
When properly applied, automation of the finance function is key to improving margins, reducing human error and raising efficiencies. CFOs should be doing all they can to upskill in this area if they aren’t already, he says.
“Automation should ideally be partnered with growth. When repetitive parts of roles are handed over to automated functions, employees can focus on more exciting and valuable areas, not simply be replaced. If used thoughtfully, automation will undoubtedly provide benefits for us all,” Roberts adds.
Data insights help drive business decisions
Jaco Vermeulen, chief technology officer of digital transformation experts BML, says it is important to avoid information overload and get the right data, at the right time, accurately and presented in a meaningful way.
“Most CFOs’ consideration when indicating automation is in driving efficiency and accuracy for finance functions,” he says. “CFOs require skills not only in financial indicators, but importantly business-decision analytics.”
Dr Alan Parkinson, professor of financial education at University College London School of Management, stresses the importance of digital skills, which will require continual investment.
“Given the pace of change and the competitive potential of good data insights, leaders of any kind have to be able to understand what their data is telling them,” he says.
“From a financial management perspective, there are no definitive set measurements or standard parameters for data analysis that you can teach which will apply to all businesses universally. It is incumbent on the CFO or financial leader to understand the business well enough to set up their own metrics, with the data they have available, and to know enough to ask for the right data to be made available if it is not already.”
How the CFO role is evolving
Russell Gammon, chief innovation officer at Tax Systems, says it is no longer just about automating manual tasks as now the CFO has to ensure systems are in place that can talk to one another.
“The imperative for the CFO is to ensure any digital transformation is now blended across the organisation as a whole,” he says.
CFOs have seen the number of functions reporting to them increase by 20 per cent over the past two years, according to a recent McKinsey survey.
“CFOs now have to worry about their traditional areas of work, but also manage their companies’ new areas of focus such as digital transformation,” says Laurent Descout, founder and chief executive of treasury fintech Neo.
Todd McElhatton, CFO at Zuora, adds: “Traditional finance as we know it is a thing of the past and is giving way to new flexible business models and advanced technology. The future of finance relies on automated technology to free teams up to focus on more strategic efforts to drive sustainable growth, compliance and accuracy.”
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