Chief Financial Officers (“CFOs”) are responsible for overseeing fiscal and fiduciary responsibilities for an organization, in conjunction with the Chief Executive Officer (“CEO”) and board of directors. Traditionally, the CFO has been primarily accountable for the administrative, financial and risk management operations of a company, including monitoring of control systems designed to preserve company assets and report accurate financial results in a timely manner.
In today’s competitive and ever-changing landscape, the role and importance of the CFO has grown. The CFO needs to be a core member of the executive team developing, executing and monitoring key strategic initiatives. Expanding the role of the CFO in this way helps organizations benefit from the data-driven insights a CFO is best positioned to provide. With this greater role comes the need for a broader skillset. Heartwood Partners supports the development of its CFOs by fostering idea sharing and networking amongst all CFOs across its portfolio and providing tools that have been successfully used by other CFOs.
In our experience, the modern CFO maximizes their value-add to the business by incorporating the following:
- Maintaining an effective financial team and processes
- Implementing key performance indicators and recommending actions
- Responding quickly to new opportunities
- Allocating resources to the best opportunities
- Serving as a strategic partner to the CEO
Maintain an Effective Financial Team and Processes – Accurate and timely reporting of financial results is commonly viewed as a minimum requirement of the modern CFO. Meeting local, state and federal reporting requirements also falls under the CFO’s purview. Providing timely, accurate financial reporting ensures the organization has the information needed to make quick adjustments to optimize performance. Strong data management, internal controls and efficient processes help ensure CFOs and their team meet these expectations. Ensuring that the financial team has the experience to deliver on these priorities and that monthly closing and reporting processes are as automated as possible helps enable the CFO to focus on other areas of the business.
Implement Key Performance Indicators and Make Recommendations – The CFO should view themselves as a key service provider to other business leaders within the organization. For example, working with operational and commercial leaders to develop and track key performance indicators (“KPIs”) relative to strategic priorities and making actionable recommendations to improve performance in these areas can be hugely beneficial. This also provides an opportunity for CFOs to develop partnerships with key business unit leaders by unlocking the power of data. Providing context beyond numbers can help data come to life for managers who are often less numbers focused. Creating automated dashboards and having brief weekly reviews of the KPI’s are some ways to enhance an organization’s use and understanding of data to facilitate decision making.
React Quickly to New Opportunities – In today’s changing environment, CFOs are pressed to react quickly to new challenges and opportunities. Data helps CFOs quickly identify and respond to these situations. For example, tracking raw material price trends can help CFOs provide recommendations to the sales and operations teams on pricing. In the case of rising costs, CFOs can help by encouraging sales teams to quickly develop plans to pass on price increases.
Allocate Resources to the Best Opportunities – All businesses have finite resources, including people, cash and time. CFOs can utilize their financial analysis skills to help allocate resources to the projects that can create the most value. One way to do this is by linking resource allocation to strategic priorities and minimum return thresholds. CFOs also can analyze project proposals and track results. Furthermore, CFOs can review projects approved in years past to evaluate how projected goals compared to actual results. This can help business leaders improve their abilities to project outcomes and measure returns on capital investment.
Serve as a Strategic Partners to the CEO – Partnering with the CEO provides increased focus and accountability for the CEO’s key initiatives. The CFO should develop, execute and monitor strategies. Serving as a sounding board for the CEO helps CFOs position themselves as true business partners. Challenging assumptions, asking good questions and helping to explore alternatives is an important role for the CFO. Having a strong understanding of the overall business, including customers and markets, is necessary to be a good strategic partner.
One of Heartwood Partners’ portfolio company’s CFO said it best – ‘Good CFOs don’t just report the score, they change the score.’ Partnering with a modern CFO with a broad, strategic skillset helps businesses prepare for their next stage of growth.