CFO in office

The Evolving Role of a Modern CFO: Adapting to Change

December 8, 2023 0 Comments

The contemporary responsibilities of a Chief Financial Officer (CFO) differ significantly from those of the past. Traditionally, a CFO primarily focused on managing and reporting a company’s financial position, ensuring statutory compliance, overseeing cash flow, maintaining updated financial records, and managing the finance team. While these aspects remain vital, the CFO role has evolved to encompass broader and more strategic dimensions.

Whether your business already has a CFO or Finance Director in place, or you’re considering recruitment or outsourcing for the role, this article explores key areas of responsibility for a Chief Financial Officer.

Traditional Aspects Still Relevant Today

  1. Running an Efficient Finance Function
    A robust finance team is crucial for business success, and as a CFO, you play a pivotal role in managing and supporting this function. Whether in-house or outsourced, creating an effective finance function involves structuring it to align with your business strategy. This includes considerations such as organisational structure, personnel, processes, technology, and relationships with other business functions.

Building an effective finance function is not only about historical reporting and identifying areas for improvement but also about actively managing the company’s finances. Subtle adjustments in areas like payment terms or funding streams can lead to improved cash flow and profits.

  1. Compliance
    Ensuring compliance with financial, accounting, and tax regulations is a complex and crucial part of the modern CFO role. Compliance responsibilities now extend to areas such as cyber and data risk management. Proactive communication and collaboration with internal experts affected by regulatory changes are essential. Adhering to and preparing for future regulatory changes are critical to avoid penalties and legal repercussions.
  2. Financial Reporting and Planning
    While financial reporting remains a key aspect, the modern CFO focuses not just on historical data but also on forward-looking planning, analysis, and forecasting. This includes working closely with the CEO on business planning, strategic planning, and board reporting. In businesses backed by private equity, CFOs often play a substantial role in reporting to external stakeholders, covering aspects like cost control, financial results, and cash flow.

Modern Dimensions of the CFO Role

  1. Technology and Innovation
    Keeping pace with evolving technologies is vital for CFOs. Implementing technologies that automate and streamline processes ensures accurate information and frees up time for the finance team and the wider business. A modern CFO champions technology, encourages investments, and aids implementation to support decision-making.
  2. Commercial Awareness and Guidance
    A modern CFO needs to be commercially aware, providing guidance, expertise, and support to the wider business in developing growth strategies, setting objectives, defining KPIs, and allocating resources.
  3. Fundraising
    Obtaining funding for growth or long-term investments is a key responsibility for CFOs, involving forecasting, engaging with lenders and investors, negotiating finance terms, and assessing funding options.
  4. CEO vs. CFO
    Today’s CFO acts as a strategic partner to both the CEO and senior management. The CFO’s forward-focused, cross-functional leadership makes them an essential partner to the CEO. In many businesses, CFOs often transition into CEO roles due to their cross-functional knowledge.
  5. Expanded Skillset
    While accuracy of accounting data, compliance, financial reporting, and risk management remain essential, a modern CFO requires additional competencies in leadership, strategy, commerciality, supply chain, and change management.
  6. Outsourced vs. In-House CFO
    The choice between an in-house CFO and outsourcing depends on the business’s growth stage, complexity, and financial considerations. Outsourced CFOs offer benefits such as cost savings, access to expertise, and flexibility.

In the face of technological advancements, regulatory changes, and expanding responsibilities, CFOs must adapt to continue being effective and adding value. Developing not only financial and technology skills but also leadership, strategic, communication, and influencing skills is crucial. As businesses grow, the CFO’s role becomes increasingly pivotal in shaping the corporate structure and contributing strategically to the management team. An experienced CFO, with the right skills and mindset, can significantly enhance a business’s success and position within the market.