Traditional finance departments have long been seen as a collective of ‘bean counters’, primarily concerned with spreadsheets and numbers. But, finance leaders are fast becoming essential partners to the CEO, providing data and insights that form the basis of future business strategy.
“Today’s finance leaders have an opportunity to develop their role into something that is central to their organisation, helping to identify innovation, efficiency and future strategy,” says Anita Szarek, global CFO of business spend solution Pleo.
Recent research suggests that there is indeed a shift in how CFOs work. The latest McKinsey Global Survey on the role of the CFO reports that today’s finance leaders are frequently involved in long-term strategy and management decisions, and two-thirds are involved in digital transformation. 97% of business decision-makers see a dynamic change in the CFOs influence across the business, particularly in operations, marketing and legal teams, according to Pleo’s soon-to be-published The State of Business Spending report coming in January.
This combined responsibility for crisis management, technology and strategy is exactly what Szarek sees as her remit as a CFO, in both current and previous roles. “What we are seeing is an awareness that CFOs need to embrace digital technology to drive efficiency and reduce costs,” she says. “But that is only half the story. Adopting automated and digital systems in finance also allows the CFO to identify new opportunities for efficiency and innovation.”
In recent years, Szarek has seen enormous growth in the technology sector, meaning CFOs were expected to direct money towards anything that promised continued growth. “One head of talent reported they had to fund new positions because the cost of not hiring people was actually higher than the cost of hiring them. It was about driving growth, being extremely ambitious and taking lots of risks,” says Szarek.
With the recent pandemic, global supply chain challenges, inflation and an impending recession, that attitude has changed. “Today, I see my role as CFO as providing visibility,” Szarek says. “I take on board the KPIs and targets, I look at where we are performing well or not, and then I use data to show the business what the future looks like and what levers we might want to pull to steer the business in a certain direction.”
As CFO, Szarek focuses on forecasting and scenario planning. Her finance strategy team has grown from 4 to almost 50 people in the last year, reflecting the importance of this job. “Our objective is to help the business deliver better performance, and that requires better forecasting. It’s about moving away from focusing on growth to focusing on the efficiency of our growth.” Better forecasting ultimately means making better decisions earlier. For example, Pleo recently cut 15% of its headcount after a period of rapid growth over several years. “We did that to be proactive,” explains Szarek. “We know that we are heading towards a recession, and while we have a lot of cash on the balance sheet, we know the runway is going to be extended, so we need to make a correction to be ready for the future rather than trying to respond when it happens.”
Making these earlier and more informed decisions is possible with quality data. Powerful technologies such as cloud computing, AI and machine learning mean that today’s finance leaders can analyse thousands of data points across multiple systems in near real time, identifying trends and deviations with more speed and accuracy.
“Data means I can go to my leadership team and say, these are the KPIs; this is how we are performing,” explains Szarek. With visibility over the enterprise data that matters most, CFOs can be a voice for change within their organisations. The key is knowing what the impacts of these insights will be on efficiency and performance.
When selecting digital tools, Szarek advises fellow CFOs to look for best-of-breed cloud solutions that use APIs that can work together in a single ecosystem. “You might start with Pleo, which can capture data for expense management, invoices and reimbursements. Then you could add accounts receivable and cash flow management. Together those three systems can provide a powerful insight into working capital and how to drive efficiency in our cash flow,” she says.
Of course, these tools bring automation to key finance processes, but saving time is just the beginning of the story. “The real power is in providing better insights and forecasts so the business can make better decisions earlier,” says Szarek.
CFOs may need to push themselves into this strategic role rather than waiting to be invited, notes Szarek. For example, in some organisations, the business still sees the CFO as someone who focuses on accounting, book-keeping and cost optimisation. For finance leaders that find themselves in this position, Szarek’s advice is to first build their skills and second build their team.
“If you want to be a strategic partner, don’t just focus on cost-cutting; look for opportunities to drive growth and innovation,” she says. This is easier if you structure the finance team so that some people sit within business units that are closer to the business. “I have people that I call finance business partners who sit in the business, and they’re thinking about growth and sharing challenges so that we can use tools and data to start to address these challenges.”
Second, Szarek says CFOs must become extremely familiar with data tools, models and governance. “You need to think through and redesign your data infrastructure and governance. In most companies, people hate processes. So make it your job to build in the processes and structure by identifying and implementing the right data tools. When you have that, you can play a fully strategic role.”
The rise of financial data and the increasing strategic importance of cash flow planning present CFOs with an opportunity to become a strategic partner to the CEO. There are three key behaviours that can separate a good CFO from a judicious one.
Three tips for today’s CFOs
Stay close to the business and be curious
Strategic CFOs diligently attend meetings and communicate across the business. They situate their team in various departments to gain a birds-eye view of the organisation. The CFO should know what the commercial team is struggling with or how the sales team are performing.
Data first, second and third
The CFO has access to a wealth of data that can inform other parts of the business. To be seen as a strategic advisors, they must identify where they can share data reports to improve someone else’s process or efficiency.
Step outside the comfort zone
If a company has a challenge with design and they don’t have the capacity to solve that problem, a proactive CFO can seize the opportunity to lend support. They can ask questions, understand the problem, and help with creating project management or a suitable process using their unique resource.
To discover how your company and its finances can be prepared for 2023, visit bit.ly/cfo-webinar