I’ve noticed a spring in the step and a smile on the face of many CFOs I’ve met recently. This is a trend that began as businesses recovered from the crash of 2008, and it appears to be directly connected to CFOs gaining influence in their companies. The best CFOs are loving it and are using this new found power to help their companies grow and look to the future.
The business press also notes the trend. In October 2014 IndustryWeek wrote “Soothsayer. Transaction specialist. Business value architect. Technology maven. Ask a dozen people to define the role of the chief financial officer in today’s economy and you’ll likely get at least a dozen different answers.” (1) And business consultant PWC welcomed the trend in a 2015 paper that opened with “The chief financial officer (CFO) role is changing. It’s becoming more strategically-focused, more value-focused and more future-focused.” (2)
It’s no longer enough that the CFO oversees an accounting department producing an accurate monthly GAAP financial statement. Today’s CFO provides the CEO and the board answers to business-critical questions--often before those questions are even asked. Intacct, the leading provider of cloud financial applications, talked to several CFOs and produced this on-demand webinar, “5 questions every CFO should expect from the CEO.” The webinar discusses using a modern financial management solution to answer the following questions:
- How should we be measuring our business?
- Can our cash position support our growth?
- Where would we invest the next incremental dollar?
- What are the current dynamics of our sales funnel?
- Is there anything else the board should know about or be worrying about?
Knowing the questions, though, is only half the answer. You--the CFO that gives the CEO advice and guidance--must find, collate and interpret the relevant data. The Pareto principle, also known as the 80/20 rule, will make your most profitable customers stand out. You can concentrate on the 20% of your customers that bring 80% of your profits.
Each industry has its own business metrics. For example, in the healthcare industry you analyze the days-of-stay compared with the severity of a case. In retail you look at the mix of products sold to each customer at a time of day. In a faith based-organization you are interested in giving metrics, attendance and mission trip participation.
Often, relying on spreadsheets to produce this information is only a short-term solution. Updating an Excel spreadsheet each month with data from two or three different sources is cumbersome, time-consuming and prone to errors. You should be able to get all the information you need from your ERP or accounting system.