The CFO Role is Changing

What does a CFO do?

As a CFO (Chief Financial Officer) or Finance Director, you are responsible for the finance function and the staff of the finance department. More often than not, you also have a more overarching responsibility for many of the company's processes and staff functions.

You typically sit on the executive team and are responsible for the company's finances. This means that you lead the work of the finance department, are responsible for Financial Planning, manage risks, create financial governance documents, policies, control systems, and overarching planning processes. You usually also administer the work of the board.

A CFO is responsible for compiling and reporting the company's results, forecasts, assessing profitability, and being responsible for financing. But also responsibility for ensuring that the company's managers and decision-makers have the right conditions to take financial responsibility for their part of the operation.

What does the CFO role look like historically?

Historically, the finance director has been the one who has the facts about how the company has performed. So it has been a role that looks back and the role has mostly been associated with results, budgeting, and accounting.

The role is much broader today and a CFO now faces other trends and challenges, and a broader scope of responsibility. 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.

Today, a CFO also has a more overarching responsibility and often works closely with the CEO on issues related to Business Planning and board reporting.

What's New in the CFO Role?

The CFO role is becoming more digital, business-oriented and knowledge about the business is becoming more important. Managing this transformation without losing focus on the fundamental parts about financial planning and follow-up can be a challenge.

Part of the solution is to broaden the competence of both the CFO and the finance department, as well as in some cases expanding with more roles as the area of responsibility grows.

Often a CFO wants to streamline and transform the support for how they plan and lead their operations. Both in the finance department and company-wide. The increased global competition is driving this trend, as is the need to quickly redirect planning if the external environment changes.

Technology, new ways of working and new business models are seen as opportunities that contribute to working smarter. In the shadow of the pandemic, the importance of scenario management has become increasingly important, a deeper understanding is needed of how different scenarios affect the company's financial development.

The rapid pace of change in connection with unforeseen events increases the complexity of the planning work. Today, a CFO wants the company to be able to make and take fast decentralised decisions based on insights derived from quality-assured data.

As the reality we live in becomes faster and more complicated, it requires that the planning work can be replanned and updated when new information or new data leads to new insights.

This means that the goal images also need to be adjusted. New goals, KPIs and budgets may then need to be developed or updated. It also changes the analyses, and the follow-up work and measures linked to the analyses. There is a lot to keep up with in the CFO's new agile, Strategic, and Financial Planning.

Rolling Forecasts are something many CFOs are facing. The traditional forecasts normally extend to the end of the fiscal year, just like the annual budget. The rolling forecasts roll their time window forward, which is usually 12, 24 or 36 months.

Rolling forecasts give the company's management better opportunities to steer the company's development in the longer term than the current fiscal year, they will be able to "accelerate or brake" faster. This is becoming more and more sought after in many companies and places new demands on CFOs regarding support systems and input data, for example.

What Should a CFO Consider?

Plan and make decisions based on data

Your company will need to think more holistically about planning, monitoring, and analysis. You will need to gather data from multiple sources, proceed based on the business conditions and communicate insights continuously.

"Numbers don't lie" is an old truth that lends credibility to CFOs. Nowadays, a CFO should incorporate “data” into their daily work and in this saying.

Collecting data through integrations, transforming data into key figures and information, and providing the right decision-making basis to the right person becomes increasingly important. Effective visualisation then becomes a key factor for decision-makers to easily absorb the information.

Plan for the whole business

Business governance and financial governance are no longer limited to the finance department, but have rather been integrated throughout the organisation. The development will accelerate as more businesses realise that this is how they should work to increase the efficiency and accuracy of governance, planning, and reporting work.

For the finance department and the CFO, this means that the finance department and the business are drawing closer, the need for the right technology is increasing, and the finance department is becoming smaller, more efficient, and more strategic.

Build capability

Contributing to new capabilities and competences is a good example of how a CFO can act proactively beyond traditional areas of responsibility. This is to contribute to efficiency in the long term and to ensure that the business has the prerequisites to work towards its goals.

When there is a good basis for decision-making, a CFO should therefore act in consultation with others to build new capabilities in the company by identifying possible investments (for example, in staff competencies) that create value and manage Resource Planning related to which capabilities need to be developed.

The building of new capabilities should be seen as something that is constantly ongoing, where the CFO can also help to define success through measurability and objectives.

Fast, connected, and simple is right

Agile planning and decentralised decision-making become crucial to provide employees with the conditions to efficiently manage the business, especially in change work and turbulent times.

Ensure that economic concepts and the meaning of the most important goals and key figures mean the same thing across the company. When different languages are spoken, misunderstandings arise and communication falters. The consequence is diminished steering power in the business.

Both management teams and employees expect connected systems and processes with the purpose of increasing the degree of collaboration. Here, secure and usable systems where different data interact are the right choice for a CFO.

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