The modern role of a Chief Financial Officer (CFO) is hugely different to years gone by. Traditionally a CFO’s job was mainly focused on managing and reporting on a company’s financial position, statutory compliance, cash flow management, keeping finance records up to date and managing the finance team. Today, these are still important areas of a CFO role, but increasingly the role has become far wider reaching and more strategic.

If you have a CFO or Finance Director in place or are looking to recruit one or outsource the role, then read on as below, we look at some of the key areas of responsibility of a Chief Financial Officer and whether to recruit or outsource the role.

Let’s start with the more traditional elements of the role that are changing but still important today:

Running an effective and efficient finance function

A finance team is one of the essential aspects of a successful business. Whether the finance function is built in-house or outsourced, as the Chief Financial Officer (CFO), you are expected to manage and support the finance function and recruit or work with external financial professionals that will understand the business and its goals.

Building a highly effective finance function is around structuring it to support your business strategy. This part of the CFO role includes elements, such as the organisational structure, people, processes and technology and the relationships with other functions in the business.

Any finance function has a role to play in reporting the past and in identifying areas for improvement but also has a huge role to play in managing the business finances. This is where subtle changes and tweaks to some of the finance function areas such as payment terms or funding streams can often deliver improved cash or profit.

Compliance

Failure to comply can have dire consequences both in terms of potential legal action but also in terms of financial cost to a business. Ensuring compliance with financial, accounting and tax regulations is an increasingly complex part of the CFO role. Often a CFO role today also includes extended responsibilities around cyber and data risk management.

Finance chiefs can’t afford to give compliance elements less time, or they run the real risk of penalties, legal action and serious damage to their corporate and personal reputations. Adhering to and preparing for future regulatory change is also crucial.

Building a culture of compliance should also be seen as part of the role of a modern CFO. CFOs need to be proactive, and communicate compliance needs and help the wider business understand why they are important. CFOs need to communicate and collaborate with internal experts who will be impacted by regulatory changes.

As today’s regulations become ever more complicated, the CFO’s responsibilities around compliance are still a vital element of their role.

Financial reporting and financial planning

CFOs are increasingly being tasked with responsibilities that go beyond financial reporting and providing basic financial information. However, financial reporting is still a key part of the role of a Chief Financial Officer, but the need for this is not only historical reporting to assess the organisations financial health, but future facing. Often, the CFO role is more forward-looking today, focusing on planning, analysing, and forecasting the company’s financial development, instead of just reporting historical data.

With today’s fast paced environment, there is a need to gather complex data from multiple sources, consider business conditions and communicate insights continuously. Rolling forecasts that give the company’s management team better opportunities to steer the company’s future long-term development are often needed. This often means the CFO works closely alongside the CEO in regard to business planning, strategic planning and board reporting.

Where a business is PE backed, the needs around reporting to external stakeholders is increased. Reporting can often be around cost control, financial results and cashflow. This requires the CFO being heavily involved with the external stakeholders as well as board members.

The wider areas of a CFO role today include the following:

Technology & innovation

Keeping up to speed with new technologies could be almost a full-time job. Successful CFOs understand that technology can be a game-changer for the finance function and wider business. Implementing new technologies that automate and streamline processes will ensure more accurate information and gives the finance team and wider business time and capacity to focus on other areas.

Sheer volumes of data in any business these days is often the barrier to using this data for useful management information. A modern CFO will not only need to be aware of financial data, but they also need to be involved in all areas of data including supply chain management, sales data, warehouse and inventory data. Having technology that gives a 360-degree view of the business, connects all areas of the business and unifies the data is key to getting the right management information.

This type of connected data means that management information and analysis will be accurate and up-to-date allowing everyone in the business to plan and undertake business critical decision making.

A CFO should be fundamental in championing technology and encourage technology investments and aid implementation to support decision making.

Commercial awareness and guidance

A CFO also needs to be commercially aware in order to be able to provide guidance, expertise and support to the wider business when developing growth strategies, identifying objectives, setting KPIs and determining resources and time needed to implement strategies.

Fundraising

With many businesses seeing acquisition or capital investment as their driver for growth, the process of obtaining funding for growth or long-term investments is key to the role of the CFO. This will include forecasting, introducing lenders, borrowers and investors; negotiating finance terms and assessing the funding options available.

CEO vs. CFO

Today’s CFO must be a strategic partner to both the CEO and other members of the senior management team. Working together, CFOs and CEOs can complement each other, by helping each other and the wider executive team achieve the objective of creating growth over the long term in the face of many short-term challenges.

A modern CFO should be a forward-focused, cross functional leader who is the CEO’s most essential strategic partner. In many businesses, it is often the CFO that steps into a CEO role, as they have cross functional knowledge and a wide understanding of the business. A good CFO will often make a natural successor and be a key part of the exit plan of a CEO.

An expanded skillset for a modern CFO

The CFO’s role in business is traditionally around accuracy of accounting data, compliance, financial reporting and risk management. However, a modern CFO requires additional competencies in areas such as leadership skills, strategy, commerciality, supply chain and change management.

Outsourced vs in-house CFO

As midsize businesses grow, they realise that expert top level financial management is needed in their business. A full-time in-house CFO can be a strong addition to a company if your business is growing rapidly, has high revenue levels, is mature and contains complexity or you have ambitious plans for growth and are looking at acquisitions etc.

However, not every business can afford a full time CFO, or they may want to dip their toe in the water with a part time outsourced CFO to manage projects or understand how the role can add value to the business.

Benefits of an outsourced CFO

Benefits of an outsourced CFO can be:

• Lower cost than an in-house CFO with savings on recruitment, onboarding, training and ongoing overheads etc.
• Access to expertise – an outsourced CFO may have a wide range of experience in other industries that can give you access to additional expertise and knowledge.
• Flexibility – an outsourced CFO can be used for the functions and times that the business needs them, this may be when you’ve hit a financial plateau, are planning to grow and scale or are considering exit and succession.

Summary

Faced with advances in new technology, changes in regulations and growing responsibilities, CFOs need to prepare themselves for more change ahead and understand how they must adapt as individuals to continue to be effective and add value.

CFOs need to not only continue to develop their financial and technology skills but also further develop their leadership and strategic skills. Communication and influencing skills are also key to the CFO role today. Many companies will require a CFO to also have or develop a global perspective through international exposure.

As a business grows, there is a need to build a corporate structure and the role of the CFO is a key player within that corporate structure.

In many businesses, the CFO wears several hats. Today’s CFOs need to prove value and break away from the number-cruncher stereotype to show the wider business that they are a strategic player in the management team.

It is wise for Chief Financial Officers to look to gain a wider breadth of experience both within a company across different divisions or outside of the business in other industries to gain more commercial experience.

An experienced CFO can add huge value to a business if the right person is recruited. They can work closely with the CEO, management team, external stakeholders and external advisors to run a finance function that fits your business needs today and in the future.

How can Barnes Roffe help?

Barnes Roffe provide a wide range of outsourced finance services including outsourced FD/CFO services to add value to SME and corporate businesses.

Contact us today if you want to find out more about our outsourced finance services.