Australia's 3rd Largest Economy

The Top Six Things Keeping CFO’s Awake

23-Nov-2017 10:03 | Tracy Dawson (Administrator)


By Rainer Ahrens and Domenic Molluso

The role of the CFO has changed. No longer purely compliance, a CFO has valuable skills, qualities and insights that converge with the CEO. The modern CFO is faced with the challenge of a role with many hats and not enough time to wear them.

Through a number of conversations with clients and working closely with numerous CFO’s across our network, we’ve identified six key areas that have helped today’s CFO be successful.

The Strategic Lens

Over half of the CFO’s we spoke to, indicated that their company’s strategy wasn’t part of their board meetings during the last 12-18 months. We also found that it’s common for the ‘strategy’ to be confused with the organisation’s goal or vision. It’s important to understand that strategy is the practical game-plan that sets the team up to achieve the business goals.

Today’s CFO is playing more of a partnership role and providing valuable input in shaping and driving wider business strategies. As the keeper of the company’s data, the CFO plays a vital role in assisting the board to refine action plans and clearly articulate objectives to all stakeholders.

Successful CFO’s are strategists. They influence the direction of the company and provide financial leadership to grow the business.

Conquering Cash Flow Management

The key to business success is a proactive approach to cash flow management. Research tells us poor cash flow management is one of the leading causes of failure in otherwise successful organisations.

Generally, those at the executive level understand the importance of cash flow management, however, it can be lost on operational staff. There is a clear distinction between companies that prioritise cash flow management and those that do not. From working with CFO’s, the common themes we’ve identified within organisations who manage their cash flow successfully include:

Frequent communication about the importance of cash flow management with staff, at all levels, to ensure that staff understand the impact of their actions (or inactions) on the organisation’s cash flow position;

  • Providing training to all staff, tailored to their role within the organisation, in order to support sound cash flow management practices; and
  • Regular reporting of the organisation’s cash flow position against targets and identification of the causes of significant variances from expectation.

Culture of Risk Awareness

Besides the basics of risk management such as reviewing insurances, having key-man policies and possibly conducting outsourced internal audits, it’s crucial to evaluate risk in terms of the organisation’s culture. Risk management is not tangible or static, it’s always evolving and can be impacted by constant changes.

Developing a risk-managing mindset can become a key competitive advantage for your company. By embedding risk awareness directly into the culture, it will significantly impact business performance and decision making at all levels.

Different parts of the organisation generate and are exposed to alternative forms of risk including financial, reputational, strategic and operational areas. Don’t underestimate the power of your staff’s unique insights and knowledge, in particular the short-comings of your organisation’s controls and systems. A CFO can tap into this knowledge more readily when assessing and collating the overall risk framework with the assistance of those around them – they do not have to do it alone!

Rethinking Performance Management

An effective Enterprise Resource Planning (ERP) system is paramount to managing the performance of any business. The ERP system needs to be scalable, accessible and easy to use but most importantly it needs to produce timely, accurate and relevant information for decision-makers.

Most ERP systems have the ability to produce large amounts of data, however the short-coming often lies with their inability to easily convert that raw data into relevant information.

Today’s CFO needs to have a clear understanding of the goals, strategies and key business drivers of their organisation in order to tailor the reports the ERP system generates to ensure the specific needs of the organisation’s various stakeholders are met.

Effective Change Management

CFO’s are well positioned to evaluate the success of potential changes and transformations. In today’s world, change is constant and a company’s ability to adapt and be agile is key to succeeding.

When analysing change, it’s important to evaluate if the change is necessary and fundamental to the business. The best starting point is to proactively research the pro’s and con’s of the change and consider all alternatives, including preparing an own cost-benefit analysis to ensure there is a clear understanding and reason for the change.

The most important part of any change is the communication strategy. By taking ownership of the conversation, you can control the underlying message and clearly communicate the value and reasoning behind the change.

The Right People in the Right Roles

One of the largest and most important assets an organisation has is its people. One of the most common challenges facing organisations today, is having to manage a multi-generational workforce with different values and motivations.

In order to attract, employ and retain the right people for your organisation, today’s CFO needs to work with their HR specialists to:

  • Develop reward & recognition programs to align staff behaviour and expectations with the organisation’s strategy and objectives: the appeal and effect of for non-monetary recognition is often overlooked.
  • According to our CFO feedback, an honest thank you and an occasional day-off has boosted productivity more than an additional cheque;
  • Introduce training and development programs to ensure skill gaps are filled: up-skill training should not be seen as a substitute for hiring correctly in the first place. Your team is your foundation for good results, ensure that you have the right candidates by being a tough recruiter.
  • Implement structured performance review processes to provide timely and constructive feedback to staff: we all benefit greatly from timely and honest feedback, which is best administered within an “open and direct” environment. Strong CFO’s encourage upward feedback to be provided from below in order to better understand their own focus areas.
  • Identify opportunities to increase staff engagement: staff want to be part of the organisation – hence make a point of inviting them into the process and offer an open ear. You don’t have to agree or follow with all suggestions – but you should encourage participation.

The role of today’s CFO continues to grow and evolve. Responsible for much more than finance, the modern CFO has a greater focus on strategy and business leadership.

An effective and successful CFO:

  • needs a clear game-plan that is articulated and understood by everyone;
  • has an ERP system in line with their needs, which provides information on a timely basis;
  • has KPI measurements in line with cash flow targets;
  • embeds risk management as part of their culture; and
  • controls any messages of change.

Throughout our conversations, we’ve learnt that the greatest challenge for CFO’s is time.

Time needs to be “won” by critically self-assessing the daily routine and working with your staff, superiors and other stakeholders to identify areas of importance.

When overbearing control processes appear to take up most of your day – perhaps the reason is to revisit the underlying processes and identify if, for example, enhanced staff empowerment, improved up-skill training for support staff or delegation ahead of final review are better suited to address the initial reviews.

In addition, it is a process of small steps. You will not be able to change everything at once – but you have to start somewhere. Identifying the list of priorities can be a function undertaken within the finance team and should also include the buy-in from other members, such as:

  • commitment to prepare for meetings ahead of time, by having an agenda;
  • investing that little bit of extra time to clearly articulate the objective / task required, as this will often cut down on review and follow-up time later on;

Focusing on these six key areas and investing time to evaluate your strengths and weaknesses, as well as those of your team and systems, will make it a lot easier to wear the many hats of today’s CFO.

Domenic and Rainer recently presented their insights at the NSW CFO Symposium, to view their presentation click here.



Powered by Wild Apricot Membership Software