The Inexorable Rise of the CFO

“You need to be more strategic”.

It’s a phrase every CFO has heard. This idea of innovation, strategy and overcoming inertia has been on the boardroom table for decades, but it seems it may finally be becoming a reality. And this shift is not just impacting the CFO. The entire finance department, from bottom to top, is taking a more strategic role in the organisation.

The growing remit of the finance department

According to McKinsey, five different functions outside of finance, on average, now report to the CFO, underlining the increasing importance of the role in the wider business. By and large, this is due to the CFO’s burgeoning responsibilities, which now comprise anything from risk and regulatory compliance to M&A functions, and IT to digitalisation. What’s more, four in 10 CFOs (McKinsey) said most of their time and resource over the past year was spent on strategic leadership, performance management, and organisational management – re-enforcing their strategic value to the business.

Compliance issues aside, the increasing focus on adopting the right technologies (and lots of them), is also contributing towards the CFO taking a more strategic role. AI, automation, cloud technology, and reporting tools mean the finance team is taking on an even more critical role in the decision-making process. Two of the most infamously stressful processes in finance – reporting and financial close – are becoming increasingly automated. Traditionally, these tools may have fallen on the IT team’s shoulders, but as real-time reporting and faster, easier financial close become more common, we’re increasingly seeing them spearheaded by the finance department – who are infinitely better-placed to turn the resulting data into business intelligence.

Breaking down silos

This isn’t to say that, up until now, the finance department has been working in a dark room in the basement on its own. Finance teams have been working with other business functions to provide operational support and management performance analysis for years. But increasingly, research is indicating that companies who spend time on business partnering tend to outperform their competitors – regardless of industry, organisation size, or maturity.

The same PWC study also unearthed a favourable connection between top-performing financial teams and those more receptive to technological developments, such as the use of smart data analysis tools. Start-ups are probably the best use case for companies successfully using the CFO for increased insight and analysis. After all, finance’s understanding of strategic and operational decision-making is absolutely critical for the rapid and disruptive expansion of a business. Start-ups typically operate against an extremely fast-paced and stressful backdrop, and finance can often be a much-needed rational voice of reason in such a frenetic environment.

For example, while finance will invariably handle traditional jobs such as budgeting and forecasting, they can also use cloud-based reporting tools to promote a more agile way of working, including continuous forecasting models that can help companies react quicker to rapid market changes. As further proof, research from KPMG and ACCA revealed 77% of executives say budgeting, planning, and forecasting should be a collaborative approach, with both finance and the wider business behind the wheel.

This process has increasingly become more strategic in order to encompass not just the concerns of the finance department, but those of the entire business. What was once a box-ticking exercise suffered over the course of a few laborious days stuck in a stuffy boardroom has now evolved into an ongoing and collective process, which means every department involved has the opportunity to add strategic value.

Automation requires a new skillset for the finance team

With the traditional finance function becoming increasingly automated, the CFO and their team must also acquire a new set of skills to fully realise automation’s potential. Chief among them will be data analysis and performance management, while strong communication and commercial skills will remain pivotal.

Despite the positives, companies should still be wary of finance losing its objectivity by getting too close to the business. It’s important the CFO and their team continue to challenge the business and introduce rigour and analysis to decision making. To achieve this, they need to ensure that they’re involved in development processes and systems across the organisation from as early as makes sense.

As automation speeds up many of the time-consuming manual processes that previously constrained finance teams, the CFO must use that newly liberated resource to provide more comprehensive business insight to the wider organisation. And this advice, of course, needs to sit on a strong bedrock of timely and reliable data. This foundation was historically provided by complex legacy systems that yielded little in the way of strategic business intelligence. However, we’re now increasingly seeing modern, cloud-based finance and ERP (enterprise resource planning) systems – automated and supported in real time – begin to provide a much more stable, deep-rooted, and durable foundation.