The Anatomy of The Modern CFO
The role of the CFO in modern business is changing.
Your CEO is looking for you to take a more strategic and operational role.
Your team (and indeed, the entire company) is looking to you to effectively communicate the company’s financial vision and to translate those goals into something meaningful for their day-to-day responsibilities.
That means going beyond being seen as the “number cruncher” and playing a more active role in shaping the company.
In this article, we’re going to explore what a modern CFO should look like. We’ll discuss the role of tech in the modern CFO’s role, and what a CEO is looking for when bringing on a new Chief Financial Officer.
Then, we’ll discuss five critical traits of the modern CFO to work on in your quest to stay relevant and become the strategic partner your company needs.
Modern CFOs: The Changing Role Of The Chief Financial Officer
Traditionally, the CFO was essentially a rear-view mirror advisor to the CEO.
That is, they’d pull together financial data from the previous period, and explain this in layman’s terms to the CEO, board, and other stakeholders.
It was then was up to the CEO to drive the strategic direction of the company, and, in a top-down manner, ask the CFO to do what was necessary to deliver it.
In many cases, the CFO acted as somewhat of a handbrake to an overzealous CEO’s lofty ambitions.
Through our conversations with CEOs and finance leaders, we’ve noticed this is changing.
The CFO now works much more intimately with the CEO, and that CEO/CFO relationship has become one of—if not the—most important relationships within the senior leadership team.
Today, CFOs are getting more and more involved in the operational side of things, with a view to acting as a more strategic partner to their CEO.
They’re paying more attention to how the company operates, and all of the components that flow into the revenue the business generates, looking at each of these components through a financial lens to identify potential areas of improvement.
For instance, if the CFO knows the process behind how their company produces its goods (down to the supply chain), they can create more accurate forecasts based on production capabilities, supply slowdowns, headcount estimates, and so on.
This puts a much more intense focus on relationships from the CFO’s standpoint, not just with their CEO but with the COO and department heads like the VPs of Sales and Marketing.
Of course, in order to focus more closely on relationships and operational understandings, modern CFOs need to offload some of that good old number crunching.
Thankfully, the financial technology industry has their backs, allowing this transition to happen seamlessly.
The Role Of Technology In Modern CFO Success
In recent years, a number of very important FinTech (financial technology) categories have emerged on the scene, making the jobs of finance professionals a whole lot easier, not to mention faster.
Automation was the first big influence. Simply by setting up a few basic rules in a software platform, finance leaders could automate a ton of data collection and processing.
Now, CFOs had instant insight into real-time financial performance.
What’s more, finance teams could plug multiple specialized software tools into one another, enabling real-time data sharing and decision-making.
Such innovations have also lowered total costs (as automated bookkeeping tools can reduce payroll costs), and improved the efficiency of tasks like month-end close and creating financial statements.
Today, technology does more than help you analyze the past.
Forward-thinking and strategically-focused CFOs are looking to software solutions that help them plan for the future.
Indeed, in PwC’s 2022 Pulse Survey, nearly half of the surveyed CFOs said that building predictive models and scenario analysis capabilities were their biggest priorities.
Well, excuse the blatant product plug, but we’ve kind of got that one sorted.
Finmark from BILL is among the most future-focused of FinTech categories: financial planning, analysis, and modeling.
Tools like Finmark integrate your historical and real-time data into forward-looking models. The most effective modern CFOs use this innovative tech to:
- Build and analyze multiple financial scenarios to prepare for risk
- Forecast revenue and track actuals against expectations
- Collaborate with team leaders to build more accurate and realistic budgets
- Automate hiring planning based on growth benchmarks and revenue driver analysis
- Design fundraising plans that give potential investors the financial data they need
These advancements beg the question:
With all of this important work essentially taken care of by intelligent software tools, what’s left for the actual CFO to bring to the C-Suite table?
What CEOs Are Looking For In A CFO Today
The cynic might read into all of this and assume that the CFO can be dispensed with: “We can get all of the information we need from software, that saves us an extra salary!”
IBM’s recent CEO study tells us that the Chief Financial Officer is actually more essential than ever: CEOs say the CFO is their most crucial C-Suite partner.
The key to success as a CFO is to use the tools at your disposal (your software, your data, your team) to free up time for strategic thinking and collaboration.
- Collaborating with department leaders to understand how the business works operationally
- Collaborating with the COO to action strategic financial plans
- Collaborating with the CEO to create those plans in the first place
From the CEO’s standpoint, they’re going to be looking for CFOs who can:
- Take full advantage of the advanced capabilities of modern financial tech
- Translate those complex financials into a comprehensive and comprehensible story
- Provide recommendations for strategic action and direction
- Work well with other C-Suite and VP employees
- Communicate the impact of financial direction to the wider team to increase buy-in
So, how do you become the financial leader your CEO is looking for? You work hard on these five traits.
Related: CFO Checklist: Your First 90 Days
5 Critical Traits Of The Modern CFO
Looking to bolster your long-term viability as a CFO in the modern business market?
Start by continuously developing your abilities in these five traits:
1. Strategic Thinking
Above all, the best CFOs in the modern environment are those that are strategic thinkers.
That means taking the data you have, and all of those insightful graphs and trends your financial modeling software gives you, and asking, “So what does all of this mean?” and, more importantly, “What should we do about it?”
Let’s say, for example, that you’re looking over the financials for the last quarter. You notice that your ad expenditure was much higher than the previous quarter, which blew out the budget for this period and meant that profit was lower than anticipated.
An immediate reactive approach would be to order the marketing VP to cut ad spending.
But a more strategic approach would be to dig into the historical impact of ad spending on revenue. Perhaps historically, your ad spending doesn’t correlate to new revenue in the same quarter, but does cause an increase in the following quarter.
Cutting ad spend would solve the budget problem, but would actually hurt you in the long run from a revenue standpoint. And you, like all good CFOs, know that you’ve got to spend money to make money.
Strategic thinking also bleeds into strategic hiring, which focuses on developing the overall skill set of the financial team rather than simply filling seats and roles.
That, of course, segues us nicely into the next important trait of the modern CFO.
Great modern CFOs look at the skillset of their current team, and compare that to their strategic vision for the finance department.
Then, they analyze gaps and make decisions as to how to fill them.
This might, for instance involve investing in additional training, providing one-on-one coaching, or using software to supplement skills gaps.
It might also simply involve hiring specifically to fill those skills gaps.
According to PwC, 57% of CFOs say that in the next 12-18 months, they plan to hire in specific areas with the aim of driving business growth.
3. Effective Communication
Communication is an important skill across the board, especially for C-Suite executives.
But it’s especially critical in the context of the modern CFO role, who needs to be able to translate complex figures and trends into statements and recommendations that everyone can actually understand.
Modern CFOs have a knack for turning data into a story. They don’t just say, “Our performance on X metric last quarter was Y.”
They say, “Our performance was X, because Y happened. This tells us Z about our business, and means we need to do A, B, and C.”
Great communicators in the CFO position also work hard to relate financial performance and plans to the day-to-day activities those in operational roles perform.
For example, “Increasing annual revenue by $3m” is something most people can understand at the company level (we all get how money works), but doesn’t always relate to their actual work (How does what I do every day contribute toward that goal?)
Strong CFOs are able to break those ambitious goals down into smaller chunks that make sense at the department level, and collaborate with department leaders to communicate that information down to the level of the individual role.
Over the course of any period of time, a company is going to face some challenges.
Indeed, you’re going to face some financial challenges.
Budgets won’t always go the way you thought. Prices may increase exponentially due to economic conditions. Revenue growth might going to be slower than anticipated.
Heck, even some positive unexpectancies can cause huge problems (your customer base grew at twice the rate you anticipated, and so you’re scrambling to hire and create the technical infrastructure to support that rate of growth).
The modern CFO is equipped to deal with all kinds of problems like this, and they take them in their stride.
To the most effective CFO, the financial problem does not cause panic, but activates their analytical and problem-solving skills immediately.
In some cases, they’ve already built a backup plan. Remember how important scenario planning was?
Which brings us to our second oh-so-convenient segue.
5. Technological Literacy
We’ve already covered the fact that a bunch of new software categories and platforms have emerged to support the strategically-minded CFO.
Of course, these tools are only as good as their user, meaning the modern CFO needs to be literate in the use of software like scenario analysis and financial planning platforms.
Thankfully, many of those very platforms understand the need for education, and provide a bunch of helpful resources on getting the most out of this forward-focused tech (check out our educational resources right here).
Be a Modern CFO
At the heart of the CFO revolution is intuitive, smart, and powerful financial software.
These tools allow finance teams to automate manual work, connect multiple tools, and use intelligent data analysis to pull together financial insights, forecasts, and analysis with ease.
All of this enables the modern CFO to be more strategic in their role, and to take on a more collaborative role in shaping the future direction of their company.
Now, this collaborative and strategic partnership is becoming an expectation of ambitious CEOs. Which means to keep pace, you’ll need to say goodbye to spreadsheets and calculators and dive headfirst into strategic financial planning.
It starts, however, with your right-hand man: the financial planning, forecasting, and analysis platform.
Get started with Finmark today. You can thank us later.
This content is presented “as is,” and is not intended to provide tax, legal or financial advice. Please consult your advisor with any questions.