It’s not been an easy ride for the Chief Financial Officer (CFO) over the past couple of years – economic uncertainty, increased regulation and an ever-pressing need to cut costs and grow revenue has taken its toll. And with innovation continuing to buffet the workplace, upending business models and increasing customer demand, it’s no surprise that CFO turnover is on the up.
But with challenge comes great opportunity for the CFO, whose role has begun to transform as a result of such change. Their responsibilities have evolved from simply number crunching, to getting and staying ahead of uncertainty and beginning to future gaze for the company. Risk, regulatory compliance, M&A, IT and digitalisation are all functions which are increasingly reporting to CFOs. In short, the modern CFO is quickly becoming the CEO’s right hand person, and of strategic importance to the board.
Deloitte’s recent framework, the ‘Four Faces of the CFO’, offers interesting insight into this change. A CFO’s traditional responsibilities continue to be fundamental – one of a steward, protecting the company’s assets, bookkeeping and minimising risk, and of an operator, ensuring the smooth running and effectiveness of finance operations. Two additional roles have emerged, however: the strategist, a key influencer on overall strategy and direction, and the catalyst, driving business change by investing in improvements and innovations which add value to the company.
The problem with this is that there simply isn’t enough time in the day for the CFO to excel in all four areas of their new role through traditional means. That’s why in order to be effective and embrace their many faces, the CFO must lean on technology to relieve them of more mundane tasks and allow them to focus on those of strategic importance.
Leaning on tech
Automation and cloud-based enterprise resource planning (ERP) solutions are crucial to enabling the CFO to fulfil their multi-faceted role. Over the past decade, we have seen this allow the CFO to emerge as the right-hand person to the CEO, paving the way for them to undertake a lot more responsibilities than previously. Despite this, there’s still a long way to go. The majority (89%) of finance leaders have yet to deploy AI in the finance function, despite it having a clear correlation with revenue growth.
By leveraging AI, transactional tasks that still occupy so much of a CFO’s time can be automated. This allows them to focus solely on innovating and predicting the needs of the business, generating more value than ever.
An example of this is AI and machine learning to create real-time analysis to alter or improve business functions. For example, the gathering of smart data based on publicly available information, which is able to track the business performance of a company, its turnover, its investments, and new contracts it has won.
Integrated with information held on the ERP system, new insights can be made, such as altering a payment plan or highlighting financial dependency which poses a significant risk. This type of technology will also be vital when dealing with suppliers and making business critical decisions, such as deciding to add a new supplier to the supply base or using analysis to decide whether they should renegotiate a supplier contract under more favourable terms. By analysing this data, AI can even monitor supplier risk, suggest alternative suppliers, and score suppliers influencing sourcing decisions. In turn, the CFO – and their finance team – will be freed up to scrutinise business decisions in greater detail and will also have more time to forge relationships with their supply chains.
AI technology is also key to ensuring effective stewardship by the CFO, future-proofing the finance team. By making the back-office ‘touchless’ by automating time-consuming manual tasks like data entry, the CFO is able to focus on essential risk management. Indeed, with additional compliance regulations and increases in fraudulent activities, the need for a stringent risk management process is more important than ever.
Further to this, automation can also be used to ensure issues with potential breaches are instantly flagged on the system, meaning CFOs and their teams are able to anticipate and react to change as quickly as possible. By detecting outliers and anomalies, and flagging these prior to payments being made, AI can enable the CFO to carry out their duty of stewardship promptly and effectively. Subsequently, the risk of financial leakage is mitigated significantly, as is the effort associated with recovering any funds.
Leveraging data through predictive analytics
With AI and machine learning, CFOs will also have more data at their fingertips than ever before. But for a CFO to be truly effective, they must be able to pull insights from this data in the best way possible. This means scrutinising any potential spend with greater strategic detail, using predictive analytics to generate greater insights into potential investments. This technology can also be used to measure the performance of their assets and turnover, and to identify where investment is necessary.
For example, through the use of IoT technology to gather data on machinery used by a manufacturer, the CFO can analyse the captured data to predict when maintenance should be scheduled, or when new equipment should be ordered.
With constant innovation and customer expectations comes a need for greater business agility.
Never has this been more important, not least for the CFO. As they undertake the role of the strategist, aligning business and financial objectives in order to expand the business, it’s crucial that the CFO can easily access important company, customer and supplier data across the organisation. Hinderance caused by complex communication issues will set the CFO back precious time which they can’t afford to lose.
That’s where cloud technology and hyper connectivity across the organisation comes in, allowing easy access to insights across the business. For example, if a CFO needs insight into employee productivity, the data can be accessed from HR in seconds. And for HR, looking for information on a new hire’s financial impact should be relatively straightforward to draw from finance. Ultimately, both the CFO and Chief Human Resources Officer saves on time and resources.
Further to this, M&A transactions can be made a lot less time consuming – new business units can be onboarded, and books signed and confirmed relatively quickly through cloud solutions.
Through cloud solutions as well as AI, the CFO really is freed up to influence the future direction of the company and ensure it evolves in line with market conditions.
CFO at the helm
The CFO’s change of role hasn’t happened by accident. Their position in a business is unique, being among an elite few with access pertaining to all of its parts. As regulations and compliance laws tighten, the number of people with true oversight over all data and processes becomes more limited, and the role of the CFO becomes even more important. Without the CFO at the helm of the organisation, this could have a severe impact in the data driven age.
That’s why connecting data and automating processes isn’t just transformative, it’s also a necessity. With the right technology, the CFO can survive as well as thrive in their new role, supported by a finance team that can anticipate and react to change. At the CEO’s side, the CFO can play a critical role in driving an organisation forward.