insight magazine

The Evolving Role of Today’s CFO

Corporate finance leaders face a rapidly changing business landscape. By CAROLYN KMET | Winter 2019


Today’s chief financial officer is far more than a numbers cruncher. Transformed by technological innovations, massive data repositories, and challenging economic factors, today’s CFO is a critical, strategic leader who effects change throughout the entire organization. They are technological innovators, data wranglers, and true change leaders.

“In a world where they must learn to do more with less, CFOs and their finance teams are moving away from processing transactions to analyzing them in order to make more insightful recommendations to the business,” says Alok Ajmera, president and COO for Prophix, a financial data software solution company.

The explosion of data and analytics is one of the main factors propelling the CFO into a much more strategic role. Instead of focusing on traditional corporate finance responsibilities, they are devoting more bandwidth to non-finance functions.

“It has become the CFO’s responsibility to use the information gleaned from the data to direct and guide management and to hold key stakeholders accountable for the execution of their business decisions,” says Joe Lopykinski, CPA, director for The Overture Group, an executive search and compensation consulting firm. He explains that while CFOs still oversee tasks such as accounting, controls, budgeting, and financial planning and analysis, increased insight into data has expanded the CFO’s jurisdiction to include other, more strategic efforts.

With wider adoption and implementation of machine learning and automation, CFOs no longer have to devote time to fixing error-prone, manual data entry and reporting. Instead, today’s tech-enabled CFO is empowered to gather and analyze data from both internal and external sources, potentially in real-time, and can then derive insights and make decisions that drive greater corporate profitability. This emphasis on technology has altered the foundational knowledge required of today’s CFOs.

“I have seen a real shift from just the traditional skill set to a foundational understanding of available technologies, machine learning and, to a lesser extent, AI,” explains Jon Lee, CFO of Universal Synaptics. “At its root, CFOs and controllers alike are realizing that financial health monitoring and oversight reduces to cash and data availability.”

To illustrate how different technologies free the CFO from repetitive tasks, standard ERP systems are currently available to provide real-time insight into such metrics as inventory turnover and customer lifetime value. Machine learning takes this insight a step further, predicting the optimum time to re-order inventory and identifying when it’s cost effective to re-engage a customer.

Automation can also assist with global visibility as compliance gains in complexity, like when countries such as Mexico and Italy implement strict rules for how invoices are transported from sellers to buyers. “End-to-end automation that spans the full accounts payable function can offer granular insight into days payable outstanding on a month-by-month basis and per business unit, can capture discounts effectively, and can forecast cash flow impacts tied to a variety of functions,” explains Daniel Saraste, senior vice president of strategy and innovation at New York-based MediusFlow, an accounts payable automation platform.

Although technology has driven newfound efficiencies, the finance function continues to be challenged to do more with less. “Finance departments in many growing companies are becoming leaner instead of growing in tandem with customer bases and expense levels,” Lopykinski says, further observing that the decrease in human capital is often offset by increased investment in technology. “Technology has, and will continue to have, an important role in the success of finance departments.”

The shift away from human capital toward technology is often hard to navigate, but it will almost certainly have a long-term impact on the finance function. “While every evolution comes with challenges, the good news is that implementing automation doesn’t just save time and increase insight, it also reduces risks and costs,” Ajmera says. “We will see even more change happen as organizations adopt advanced artificial intelligence-powered performance management software, which is emerging as the next generation of automation.”

Ajmera predicts that this next evolution of finance will include the advent of virtual financial analysts and a new era of planning and analysis where financial professionals will have quick and easy access to real-time data through voice and text that will drive even greater efficiencies. Ajmera also believes that cloud computing has the potential to streamline processes and reduce costs, once again enabling the CFO and other finance leaders to focus on more strategic initiatives.

“Compared to traditional IT-managed, server-based software, the cloud offers many benefits in security, scalability, increased collaboration, affordability, and the ability to leverage AI. This is a game changer for CFOs, giving them the ability to make accurate predictions for faster and more insightful decision-making,” Ajmera explains.

Lee agrees, pointing out that the cloud has made technology options less expensive, readily available, and faster to implement. However, with that comes new challenges. Cloud-based applications tend to be disparate and loosely connected, making initial integration a significant effort, which is driving CFOs to work closely with their CIO and CTO counterparts.

“The need for loosely connected applications creates an information system ecosystem that creates value to the CFO and controllers only to the extent that the information can actually be quickly drawn down and consumed,” Lee emphasizes.

Furthermore, for CFOs to provide the data-driven explanations demanded of them by shareholders, analysts, and other stakeholders, they need to understand how various applications actually perform. “They have to concern themselves with how these applications perform quote-to-cash and procure-to-pay cycles—and then translate those processes into value creation or value destruction and understand why,” Lee says.

In line with the evolution of the CFO, the role of the controller is also changing. Controllers are no longer confined to being report generators. Controllers are stepping up and backfilling many traditional CFO responsibilities and are becoming more involved in data collection and analysis. According to a February 2019 survey conducted by Dimensional Research, controllers are often responsible for leading firms through specific technical changes, such as business intelligence and data mining functions, digitization of workflows, and integration of financial systems.

“Controllers are tasked with working with other business leaders to gather meaningful data and then facilitating the flow of data communication between these leaders,” Lopykinski says.

This evolution has also shifted the career path for many controllers as they find their roles expanding to executive management, often rising to chief accounting officers and executive peers to the CFO. “Controllers are still generally charged with the traditional financial package and historical data, but often act as interpreters to operations and finance. Thus, they need to be fluent in the language of accounting, operations, and finance,” Lee observes.

Interestingly, while technology has significantly impacted both CFOs and controllers, it has also added work in other areas. According to Dimensional Research, 78 percent of the finance professionals surveyed reported that the time and effort typically spent on IT management has increased over the past 10 years.

Technology is not the only factor driving change in the finance function. Economic shifts, such as the lowering of tax and interest rates, are also propelling finance leaders toward more strategic roles.

“Low interest rates mean that there are no risk-free returns,” Saraste explains. As a result, organizations are pushed to invest money in the stock market in order to generate reasonable returns, thus assuming considerable risk and driving historically high valuations.

To this end, CFOs and controllers are championing strategic initiatives to offset that risk. According to Dimensional Research’s survey, 69 percent of respondents consider themselves risk managers that oversee internal controls.

“With the onset of digital transformation, CFOs have begun to embrace the role of technology to improve the visibility and control of a company’s most valuable asset—cash,” Saraste says, explaining that in pursuit of risk-free returns, many CFOs and controllers are revisiting the concept of the early-pay discount. Through early-pay discounts, organizations can monetize their payables by paying invoices before the due date in exchange for a discount on the invoice amount. With cloud-based accounts payable automation, CFOs get the visibility, agility, and control needed to secure the early-pay benefit.

“Accounts payable automation provides a level of control that enables finance departments to pay invoices within a given number of days. This allows CFOs to focus on capturing different types of early-pay discounts, whether financed on a company’s balance sheet or through a third-party,” Saraste explains. “The end result is creating opportunities for turning accounts payable into a substantial revenue center for the company.”

This type of automation also elevates the accounts payable staff to a strategic level, creating increased synergies with the CFO. “No longer is AP backlogged with paper and inefficient processes; they have the tools and the time to take on more strategic roles, provide valuable data to CFOs, and work with new technologies to drive continued benefits for the entire business,” Saraste says.

All in all, the old way of doing things is incompatible with today’s accelerated pace of business. CFOs and controllers that efficiently leverage new technologies will be empowered to drive their organizations to be more agile, dynamic, and successful. “It is the combination of technology, automation, skills, vision, and relationship building across the business that will make a bright future for finance,” Ajmera says.

Of course, despite the substantial shifts occurring in the finance function, the core qualities needed in today’s CFOs and controllers are likely to remain, says Lee: “Uncompromising ethics, strategic vision, and corporate finance and accounting competence.”

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