Whether you would like to become a CFO or are one already, you should be aware that the role is evolving. Traditionally, CFOs are in charge of financial planning and risk management, but they are increasingly expected to take on a more strategic role. Today, a CFO needs to have a strong grasp of technology, work strategically across all departments, and be able to harness analytics to identify key insights that will keep his or her business ahead of its competition.
Not everyone is prepared for this change. A study conducted by Forbes and KPMG found that a third of CEOs say that their CFOs don’t understand the challenges CEOs face and lack the skills to support CEOs with strategic planning. The report urges heads of finance to become Renaissance CFOs—in other words, leaders who uses the wisdom of the past and the technology of the present to create the innovations of the future. But this doesn’t necessarily mean going back to school or investing in expensive courses.
Here’s what you need to know to become a CFO of the future.
Think Strategically About the Future
You might wonder: All this sound great, but where do I find the time to learn? Don’t think about your changing role as yet another item on your to-do list. Instead, see rules as opportunities, like Forbes recommends, rather than getting bogged down in the details of your day-to-day work.
How can you think strategically about your position? Networking is a good place to start. Although some CEOs believe that CFOs lack communication skills, now is the time to prove them wrong. By working with the right people within and beyond your business, you’ll learn what’s changing in the world of business and how you can be a part of it.
Rethink Your Team
To start, look around your own office. KPMG’s “The View From the Top” report recommends combating the “silo mentality” that often plagues businesses. When employees, or even entire departments, are reluctant to share their insights with the rest of the company, this can negatively affect corporate workflow and the overall performance of the business. Make sure to commit to knowledge sharing so you and your colleagues can learn from each other.
Technology is revolutionizing the finance profession. While it’s a good idea to familiarize yourself with the buzzwords, you should also become friends with the people already in charge. Dr. Ilya Strebulaev, a professor of finance at Stanford University, argues that CFOs should form close partnerships with Chief Information Officers (CIOs), if your company has one. CIOs have an in-depth knowledge of all-things tech and can teach you how to use technology effectively.
Finally, there’s the question of hiring. In an increasingly tech-driven world, you need people with the right skills to make the most of opportunities for innovation. Ernst & Young’s report on technology and people in business stresses that managers should hire people who can do the jobs of today as well as those of tomorrow. Look for millennials to fill your skill gaps. Although they may lack experience, they are digital natives and quickly adapt to new technological developments.
Work with Stakeholders
The CFO of the future will need to be equally adept communicating with both internal and external stakeholders. Apart from traditional financial reporting, you’ll also need to explain your company’s financial performance to non-experts. You may need to work on your communication skills to be able to do this effectively. The good news: Technology is your friend.
As a member of the C-suite, you’ll already have experience of working with your CEO. In the future, you’ll need to become his or her “perfect partner,” according to the ACCA’s “The Changing Role of the CFO” report. More than ever before, you’ll actively need to inform your CEO of strategic risks and advise him or her of which long-term decisions will benefit the business most. Don’t wait: Approach your CEO directly with strategic advice.
You also may not be used to brokering external relationships that matter for the business. Get used to the idea that you’ll increasingly become the face of the corporate brand and get on board with social media. Many business are already using platforms such as Twitter and LinkedIn to communicate with stakeholders. A strong knowledge of these platforms will set you apart from the competition.
Even if you’re working for a business that’s not active in other countries, it’s beneficial to adopt a global approach. With international trade relations and regulations constantly shifting, you need to be aware of what’s happening in the global economy. Knowing what happens today will help you to devise your strategy for tomorrow.
If your business is already active in multiple countries or thinking of expanding its operations abroad, knowledge of how foreign markets operate is vital. Business cultures vary across countries and a lack of awareness can cause costly failures. A notorious example is Uber, which saw its expansion into China fail due to insufficient understanding of the Chinese business environment. Smart CFOs can prevent mistakes by carefully researching new markets and informing CEOs of risks.
Rules and regulations are another minefield where the knowledge of the CFO is a useful navigation aid. When expanding abroad, proper finance infrastructures need to be set up as early as possible. Get a head start by establishing local banking relations, exploring outsourcing opportunities for payroll and accounting, and developing a cash repatriation plan. Use your experience as a finance professional to prevent errors and mistakes and you’ll play a significant part in the success of business expansion.
Use New Technology Effectively
It’s no secret that technology is changing the role of the CFO. Financial technology, or fintech, is here to stay. Rather than fearing that technology will leave you without a job, consider the possibilities: Fintech has the potential to make financial departments more efficient and less prone to human error. That’s not to say CFOs of the future will be robots: Your human ability to make informed decisions makes you invaluable.
This section reviews some of the most important tech developments and how you can benefit from them.
Cloud and SaaS
You’re probably used to investing in desktop software packages and shelling out a few years later for the next version. This system is lucrative for software companies, but not very convenient for the CFOs who rely on having the most up-to-date tools for the job. In addition to the upfront cost, software needs to be installed, kept up to date, and configured to work with the company’s existing systems. This all adds complexity to keeping the company’s IT infrastructure secure. Luckily, cloud-based software and Software as a Service (SaaS) now offer viable alternatives.
If you’re a Mac-user, you’re probably already familiar with iCloud, a central storage space which you access through your personal account. Cloud-based software uses the same principle. Software is not installed on desktops, but centrally hosted and employees can log into their account from any computer. This means you can easily access and process information when you’re working remotely.
SaaS is centrally hosted and licensed by businesses or individual users. Because SaaS is sold on a subscription basis you pay a monthly fee rather than an up-front sum, and can cancel your license if you no longer need the application. It’s an effective way to bring software costs down and saves maintenance costs, as software is updated automatically instead of manually.
Cloud-based software and SaaS have many benefits. They allow for flexibility, cost-efficiency, and can aid with data recovery. If your computer breaks down you can easily access your data through a different machine.
But security is an important concern. Employees should be familiar with IT security guidelines to avoid data leaks. To facilitate this, and to make sure that applications are used effectively, workers will need to be adequately trained. Set a good example by taking the lead yourself.
Robotic Process Automation
Don’t worry, it’s unlikely that your employees will soon be replaced by metal machines, but virtual robots are increasingly used to perform boring and repetitive tasks commonly undertaken by humans. Robots can work much faster than people, are less prone to errors, and could make a huge impact how businesses of the future are organized. This technology is still relatively new, but it’s worth keeping an eye on.
So how does it work? Tedious clerical tasks are currently done by humans. Think about jobs such as data entry, sending mailings, or transferring data from one system to another. Robotic process automation (RPA) uses virtual robots—not the type you’d find in Star Wars—to perform these tasks. This not only means that human workers have their hands free to do more interesting work, it also means that those tedious tasks get done faster and more efficiently.
If this sounds a bit too much like science fiction for you, consider how RPA could change costs. At the moment, many companies outsource clerical processes to offshore locations, but as prosperity in “cheap” countries grows, wages go up. RPA presents no significant overhead and, as a bonus, keeps a perfect audit trail. The office of the future will mix the talents of humans with the power of computers to provide a quick, cost-effective, and error-free service.
Blockchain is one of the biggest buzzwords in tech and the most likely candidate to send non-geeks into a panic. Don’t despair: As a finance professional, you’re more likely to understand the principle of blockchain than most. The best way to think about it is to see blockchain as the database technology that enables digital currencies like bitcoin to work.
Blockchain could be one of the biggest changes finance will face in the near future. Since its invention in 2010, programmers and financial institutions have adapted the technology to record transactions of any kind of asset, not just digital currencies. The World Economic Forum estimates that 10% of all assets will be stored and recorded on a blockchain by 2027.
For now, not many businesses are actively using blockchain technology, but many are exploring its potential. To prevent your business from falling behind, now’s the time to join the movement. If you’re not sure where to start, remember to maintain a strong relationship with your CIO; IT and finance need to work together to successfully incorporate fintech in the workplace.
Use Analytics to Provide Better Insights
With data becoming ever more important to business processes, information is now an asset. However, data streams don’t always match with business needs. This is where CFOs can be a big help. A good working knowledge of analytics will help you to provide your CEO with relevant information and insights, helping his or her decision-making process and improving business efficiency.
Big Data and Real-Time Data
The better your understanding of data, the more efficient your business will be, and the more likely you are to spot opportunities for growth and identify areas of risk. Sales figures, customer reviews, and client details are all data sets which hold value for your business. Big data, on the other hand, refers to much larger sets of information that are too complex to be processed by traditional software.
The advantage of big data is that it can be used to spot trends and patterns that traditional data sets will miss. With big data, you can perform complex types of analysis to gain insight in where your business is heading and what decisions would best facilitate its growth. You could use big data analysis to select the best new hires, manage the impact of the weather on your business, or minimize equipment and asset failures, to name just a few examples.
Of course there’s a catch. CFO warns that many businesses gather data without a clear plan or purpose. Processing this data is expensive and time-consuming, and won’t do much for your business. Instead, carefully consider what data you want to gather and what you need it for. Using a focused approach will make it much easier to use data effectively.
Analytics and Insights
Having data is only half the battle. To use it effectively and gain actionable insights, you need to analyze it somehow. Especially if you’re working with big data you can’t do this without specialized software. It helps to know what you’re looking for to prevent spending time, money, and effort on analytics that won’t help your business. For strategic CFOs, predictive analytics is a particularly useful tool because it identifies broader patterns and can forecast emerging trends, helping you and other stakeholders within your company to make the best long-term decisions.
Another useful branch of the analytics tree is web analytics. This technique allows you to track traffic on your website, which will give you important insights in the ways in which customers make purchases. Google Analytics is one of the best-known analytics tools, but it’s not the only one, and it’s worth asking your new friend the CIO for advice. At the same time, try to build a basic understanding of how analytics software works. You may not need it on a day-to-day basis, but awareness of the opportunities it offers will help your strategic thinking.
Finally, real-time analytics is becoming increasingly sophisticated. Previously, it was only possible to analyze data after it had been collected. For example, you could not monitor your sales figures for a specific month until that month had ended. Thanks to technology, you can now analyze data in real-time. This allows you to spot trends more quickly and change your strategy if the results aren’t what you were hoping for.
AI and Effective Reporting
Like RPA, artificial intelligence (AI) sounds like science fiction. Simply put, it allows machines to think like humans and learn to perform tasks better with practice. As is the case with RPA, some people are concerned that AI will negatively affect the job market and make traditional finance jobs obsolete. However, unlike fictional AI systems like HAL from 2001: A Space Odyssey, real computers aren’t able to think on the same level as humans yet. It’s more realistic to see AI as a useful tool which can help to make swift decisions that will benefit your company in the long run.
How can AI help you do your job better? Even though AI is still very much work in progress,its future impact on finance is heavily debated. According to the Harvard Business Review, both employees and the C-Suite struggle to trust machines to make decisions. But if you do decide to use AI, it could save you a lot of time. By doing boring jobs for you AI can help you to spend more time on the strategic part of your job description.
One task AI is particularly useful for is risk management. The Global Association of Risk Professionals claims that many businesses are currently using outdated algorithms and are unaware of the potential of AI. To avoid falling into the same trap, consider how AI’s ability to highlight patterns can help you to predict future risks and avoid them. As with RPA, AI is unlikely to fully replace humans anytime soon and could prove to be a useful tool for decision-making.
The Way Forward
Whether you’re ready or not, the role of the CFO is shifting. In order to stay relevant and fulfill the needs of your business, start thinking strategically, use technology effectively, and employ analytics to improve your risk-management. If this sounds like a huge task, don’t worry: If you’re aware that changes are coming and are taking steps to rethink your working practices, you already have a strategic advantage over many of your colleagues.
You don’t need to blow your savings on a college course to learn the skills required as a future-ready CFO. Formal training can be effective, but experience and mindset are equally important. If you do feel you would benefit from training, consider the many free options available online before considering paid training. As a CFO, you know more than you think you do, and chances are that you simply need to update your skills to be ready for the future.