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Challenges Facing Modern CFOs and How to Tackle Them

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The role of a CFO has evolved from what it once used to be. With new businesses, channels of distribution and management strategies being developed, the responsibilities of a CFO have also grown wider than they ever were before.  In simpler times, a CFO’s primary responsibility was to ensure accuracy and compliance in all accounting practices. Today, however, the role of a CFO comes with more complex functions and with it, more significant challenges. The CFO of the modern era needs to be able to look beyond the scope of financial execution tasks and instead play a more substantial role in setting the broader strategic goals of an organisation.

How has the role of a CFO changed?

Many factors have shaped the role of a CFO today, widening their scope greater than it ever was. These can be largely attributed to changing outlooks of organisations and evolving technological advancements.

1. A paradigm shift from cost-control to growth

Future-oriented companies are placing less emphasis on cost-control measures and more on the growth of the company. To do this, organisations as a whole are focusing on transforming business processes and building enterprise value. A CFO’s role in this new environment will be, not so much to ensure efficiency of operations but to put in place processes that support this change in business goals. Given that all data finds its way to the CFO’s desk, the CFO will now be expected to accurately interpret this data to provide valuable insights and influence business direction.

2. Growing business complexities

With increased complexities in business processes and strategies, the role of the CFO is becoming more complex and far-reaching as well. One of the biggest and most immediate challenges facing CFOs is the complexity of legacy systems. CFOs are also now required to be proactive in identifying and mitigating risk areas when businesses expand into new markets or verticals. Additionally, improving flexibility in finance functions through standardisation and adoption of more modern technologies will become a key challenge for CFOs of today.

3. The dominance of digital technology in every sphere

Arguably, the biggest factor that is changing the game in the realm of finance is the digital revolution taking place. IoT, big data and advancements in technology are changing the traditional role of CFOs. While the usage of big data in India is still in its nascent stage, it is likely to grow to a large extent in the future. CFOs are in an excellent position to capitalise on this opportunity to make strategic decisions about the adoption of new technologies that can streamline and improve financial processes. How well-equipped they are to leverage digital technology will prove to be a key differentiator.

4. Improved control over external variables impacting performance

CFOs are now required to play an instrumental role in putting in place processes that, to a large extent, can insulate organisations, their people and technology, from the volatility of the external market. This can help reduce the impact that changes in regulation and other factors have on a company’s overall performance. As a result, they will be better equipped to convert the massive amounts of data acquired into actionable insights.

5. Increased involvement in strategic areas

Earlier, CFOs were expected to focus solely on accurate accounting and compliance with the law of the land. CFOs today, however, are expected to don many hats, track progress against business plans and also deliver plan numbers. They are spending more time on GRC (governance, risk and compliance), financial and business strategy and financial reporting and are vital in making investment decisions that add value to the company. However, spending increased time on these new tasks, a CFO might not be able to ensure timely execution of routine tasks which also have a big impact on a company. Timely invoicing and collections, for example, is critical to maintaining healthy cash flow. For a CFO, juggling these different aspects of their role can become very challenging.

Key tactics for CFOs to adapt

With the responsibilities of a CFO expanding and metamorphosing, their success will largely depend upon how well they adapt. These tactics can future-proof CFOs against the dynamics of today’s world.

1. Narrow the gap between finance and business strategies

A CFO’s financial strategy should be closely aligned with the organisation’s overall business goals. As the line between finance and strategy becomes more blurred, the two verticals cannot operate independently of each other. A modern-day CFO should focus on formulating financial policies that support the organisation’s larger objectives.

2. Adapt to the digital world

There’s no escaping the influence of digital technology in every aspect of finance today. CFOs should pay closer attention to advancements in technology that can support and improve financial processes.  High-performing companies of tomorrow will be those that can effectively exploit the digital landscape to add value to their organisation. CFOs in this regard must be instrumental in steering the direction for organisations to adopt and adapt to newer technologies which can have a massive impact on performance. Digitised dashboards, for example, can help CFOs make informed decisions driven by comprehensive data and save valuable time through better processes.

3. Analyse financial results in a holistic way

CFOs need to look beyond compliance and regulations when analysing the efficacy of their financial processes. Financial processes no longer operate in a vacuum, and therefore, their success or failure needs to be analysed from a broader perspective. CFOs need to take into account the impact of financial outcomes on the larger business goals of an organisation.

4. Outsource F&A back office functions

With finance departments of companies playing a greater role in strategic decisions, they are faced with less time for equally essential but routine tasks like payments, invoicing, collections and reporting. The best and brightest minds on a CFO’s team also often want to work in strategic roles, instead of focusing on purely transactional activities. Outsourcing F&A tasks can be crucial for a CFO to make the best use of their resources and allocate more time for tasks that bring them the highest returns. This can help them focus on their core business goals and play a more meaningful role in driving strategy.

Outsourcing F&A back-office activities can also improve the efficiency of existing processes. BPOs with process expertise have access to the best resources. This can assure a CFO of better controls, higher accuracy and even lower cycle times. In this way, BPOs can be one of the essential tools to facilitate and support the changing role of a CFO.

The new age of CFO faces more significant challenges than CFOs of the past did. However, these challenges also come with opportunities that CFOs can capitalise on to play a vital role in formulating the overall business goals of their organisation. CFOs who successfully adapt to this changing landscape and effectively utilise the right tools will be at a definite advantage to drive strategy.

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