The changing role of the CFO

The Changing Role of the CFO 

In recent years, as technology has evolved, so too has the role and day-to-day activities of individuals working within the finance sector. Nowadays, financial processes within businesses are using automation technology. This is giving finance professionals real-time access to data from which they can gain valuable insights. Consequently, the role of the finance professional and the CFO in particular is changing.

Responding to an evolving role

Understandably, the introduction of technology has led some CFOs to question their job security. An Onguard survey on the impact of digital transformation found that over a quarter of CFOs believe their job will no longer exist in ten years. However, the more likely outcome of the continued evolution of technology is that our view of the role will change. With less time spent on manual activities such as chasing debts, CFOs can focus on the bigger picture issues. It gives them time to focus on those accounts that are in greater need of their attention. CFOs will, therefore, be driven towards more strategic, value-adding roles.

Across the business world, companies have been automating routine administrative tasks, thus reducing back-office work done by people.  Employees will take on more challenging roles as opposed to those easily automated by AI and robotics. So as jobs change accordingly, it will be essential for CFOs and financial managers to develop new skills. For instance, the automation of dunning processes requires CFOs to develop the skills to interpret and analyse the data collected within their credit management system. CFOs will need to harness their analytical, communication and programming skills as they move into more value-adding roles. 

CFOs can create new KPIs to ensure they are continuing to get the most of their operations. They can realign the focus more on managing financial processes, rather than carrying them out.  They can focus on customisation, ensuring each customer’s preferred communication channels and payment methods for their invoices are understood and delivered. This will allow the business to interact with customers in the way customers prefer, increasing the chance of invoices being paid on time. Furthermore, it help strengthen existing relationships.

The impact of big data

Big data is providing CFOs with key insights on a wide range of issues.  For example, looking at buying signals of customers, companies can drive better commercial decisions. It is also enabling organisations to implement cost-saving initiatives by finding patterns that can determine new cost-cutting strategies. UPS used the wealth of data at its disposal to determine that it could significantly reduce costs if drivers took fewer left turns. As a result of this finding, the courier saved 38 million litres of fuel and the price tag attached to that. 

Big data is of inestimable value to organisations, particularly thanks to its ability to used in predictive analytics. Through predictive analyses, finance teams can make connections which inform decision-making processes. It allows finance professionals to add strategic value by being proactive, rather than reactive. For example, in credit management, predictive analysis may show that a certain customer pays his invoices on average within 28 days for the past seven years. This means it is highly likely he will continue to do so when he receives the next invoice. Finance professionals can use this information to decide how they interact with this customer, chasing for payment only after that time period has elapsed. 

The introduction of real-time finance cycles as a result of big data could also change the way CFOs operate. It means they no longer have to base important business decisions on outdated figures that may no longer be accurate. With real-time finance cycles, CFOs can instead work with the most up-to-date information and be reassured that they are making business decisions with the latest available data. Take the order-to-cash process. If all the necessary information is always accessible, the process will be optimised and concerns as to whether the latest information in the systems is correct will disappear. Having real-time insight into this data allows CFOs to react immediately. It gives them immediate oversight to thus communicate the financial status of the organisation and to make the necessary adjustments.

What other changes should CFOs make?

Often, the siloed nature of large companies inhibits the efficiency of a CFO as they might lack visibility and are not always privy to important information. If each department works in isolation, it means that the finance department won’t be as effective. Organisations must address the disconnect between sales and finance, for example, and encourage the sharing of information between teams and help them understand what the other does. After all, a sale isn’t a sale until payment has been made. Collaboration is essential in ensuring that the sale really comes to fruition. 

With more time available, CFOs can collaborate with other departments to ensure the organisation optimises all of its financial operations. For instance, the CFO could increase the collaboration with business’ sales reps as businesses often see a real disconnect between the way sales and credit control teams work, despite their roles being very closely linked. Traditionally, sales team’s are involved only until the sale meeting is set. After it becomes the credit control team’s responsibility to ensure payment is made. However, a sale isn’t complete until payment has been received. With more time to align with colleagues, the CFO can help departments have a better understanding of what other departments are working on. Most importantly, he can communicate how this may impact them and the financial processes involved. This will stimulate greater openness and understanding between teams and could improve the business’ credit management processes. 

Ultimately, there’s no denying that the role of CFO has changed in recent years. It will only continue to do so as technology develops at pace. Yet, despite this, CFOs needn’t be alarmed. Instead, it’s vital they make the most of the technology available to them to automate the monotonous financial processes. It as an opportunity to improve their skill-sets and add value to their organisation in new ways. 

 

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