[vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][vc_column_text]How one CEO challenged Foresight CFO to gain insight about how CFO’s think.
Last week a peer CEO from our mastermind group asked, “Help me to understand, what is the CFO’s perspective and role in companies?”
In all honesty, he got me thinking. After all, if one CEO has this question I’m sure there are more. Many of which probably need our help, but unless they understand the role of a CFO, they most likely won’t make the call.
Many executives blur the lines between accounting and strategic financial management. Accounting is processing and reporting transactions through financial reporting. While strategic financial management moves the dial by providing clarity. Strategic financial management assess current performance and charts a path to objective achievement.
Irreplaceable Functions of a CFO
Brick and Mortar: Laying the Accounting Foundation
At the foundation, a CFO oversees accounting comprised of billing customers, collecting payments, processing payroll, vendor payments, reporting and compliance. It’s the most basic financial operation that lays the groundwork for strategic financial management and financial analysis. Accounting and a CFOs understanding of the number story is the backbone of strategic financial management, see this related article from CFO.com, “Why accounting will always matter for CFOs.”
Financial Clairvoyant: Engineer Profitability and Positive Cash Flow
Strategic financial management is a game changer. It’s about understanding the business marketplace and operations. It’s doing the heavy analytical work to understand prior year trends, the current sales funnel and cost structure, then teaming with P&L managers to build their Budget Profit Model. From that model, they can then do the “What If” critical thinking to figure out how to achieve business objectives in a way that maximizes financial results, and reduces uncertainty and risk. Then CFO’s inform thinking and challenge the status quo with peer benchmarks to determine what it takes to get your business into the top percentile of its industry. These insights are applied to objectives, operational game plans, and the current year budget profit model to engineer results.
Raise the Bar: Determine Growth Plans with Multi Year Visibility
The best CFO’s extend the budget profit model forecast beyond the current year to inform growth plans and identify structural challenges and opportunities ahead of need. For example determining affordable hiring plans and identifying a cash crunch eighteen months out allows the leadership team to take action as a leading indicator instead of reacting later or burning resources. This forward thinking that is grounded in the current year allows the team to evaluate options and put decisions in place ahead of need. Specialized strategic financial models allows the CFO to evaluate options all the way through customer/operations impact, profitability, cash liquidity, and the value of their business to inform decisions. The best models include peer benchmarks to identify the requirements to perform in the top percentile.
CFO’s lay out scenarios and remain objective when collaborating with the leadership team to choose the best path for the company. The CFO capitalizes on opportunity for the business, investments & acquisitions, and metrics, see related article here from Inc.com, “Top 3 Priorities of the Best CFOs.”
Not All CFO’s Are Created Equal
In the end, not all CFO’s are created equal. Some are accountants who are skilled at processing transactions and very literal with the numbers instead of having the ability to analyze financial information strategically or compensate for risky trends or potential mishaps inside the business.
At Foresight CFO, we find a balance between the number story and opportunities with those numbers by working with the leadership team. We pride ourselves in the fact we’ve built a system to implement strategic CFO services into many businesses, and most of the time can do so at a fraction of the cost to hire a full-time CFO.[/vc_column_text][/vc_column][/vc_row][vc_row type=”in_container” full_screen_row_position=”middle” scene_position=”center” text_color=”dark” text_align=”left” overlay_strength=”0.3″][vc_column column_padding=”no-extra-padding” column_padding_position=”all” background_color_opacity=”1″ background_hover_color_opacity=”1″ width=”1/1″ tablet_text_alignment=”default” phone_text_alignment=”default”][nectar_btn size=”large” button_style=”regular” button_color_2=”Accent-Color” color_override=”#007581″ icon_family=”none” url=”mailto:team@thehabitsofprofit.com” text=”Contact The Habits of Profitability™ Team” margin_top=”20″][/vc_column][/vc_row]