From being a relatively straightforward job, the role of the Chief Finance Officer (CFO) has become increasingly complex with a huge increase in responsibilities. CFOs are becoming increasingly visible and are often seen as the second highest-ranking person in the company after the CEO, working directly with them on financial strategies and on improving financial performance.
According to a 2020 survey by ACCA and the Institute of Management Accountants, 72% felt that the role of the CFO will either ‘increase or increase significantly’ in importance over the next three to five years. The global COVID-19 pandemic and the economic recession have placed the CFO at the heart of the business. The need to ensure liquidity has become paramount. Yet this requires a balance of strategic objectives and day-to-day operations, all at a time when the situation can change rapidly. Reforecasting and adaptation, and the effective use of data and technology are essential.
So, what are some of the specific challenges of financial strategies keeping CFOs awake at night?
Disparate systems and processes
Many companies are running numerous software platforms, meaning that not all of their data is in one place. These disconnected systems often require manual data entry using Excel spreadsheets.
Data is the driver for growth and decision-making and without it, the CFO can’t accurately forecast, manage risk or understand the business. If it’s split into different systems and spreadsheets, any form of analysis is a time-consuming challenge. In fact, a Deloitte survey of 600 global finance leaders found that companies spent nearly half their time creating and updating reports, and just a fraction of that time on uncovering insights in the data – insights that could prove vital to the business.
An additional issue is that with workforces increasingly working remotely, it can be even harder to ensure the systems are accessible and that their use is being optimised.
A survey by Accenture found that 76% of CFOs believe that unifying disparate data is vital to achieving business objectives.
Inaccurate and inflexible data
A common problem faced by CFOs is the poor quality of data available and the inability to transform their business data into critical insights. Manual entry on spreadsheets is time-consuming and, when shared with different people and teams, can lead to different versions, making modelling difficult and unreliable.
Finance teams are likely to spend all their time collecting data and ensuring data quality when using spreadsheets and manual methods, leaving little time for analysis, reporting and strategic recommendations.
While inaccuracy is probably inevitable in the course of business, accurate and auditable financial information is critical to auditors. It’s also vital for accurate budgeting and forecasting, as well as for providing real-time information for business insights and strategic planning.
There is no doubt that almost every industry is changing. Traditional methods of working are taking on major transformations in every area of the business, requiring the CFO not just to respond but to become more agile, pivoting their organisation, processes and systems to stay ahead of the most demanding accounting challenges.
Many CFOs are now being forced to recognise they need new digital technologies, skilled talent and innovation, but change doesn’t always come easily. As well as needing executive buy-in, adoption of new technology can be hindered by change-averse staff. There’s also the challenge for the CFO of keeping up with IT as it evolves so rapidly, with many CFOs feeling they aren’t knowledgeable enough to fully optimise technology.
For finance teams still operating manually, the move to remote working has exposed a lack of control, but by moving to cloud computing, that could all change. In a Proviti annual finance trends survey, 72% of finance leaders ranked cloud-based applications as a top priority to address over the next 12 months.
Clearly CFOs are facing some significant challenges, including the need for responsiveness. This, in turn, is driving the need for exceptional financial analysis and modelling. Technology, and emerging technologies, are likely to transform the future of financial strategies, planning and analysis.
A key part of that is the transition to cloud-based reporting systems, with a single shared data source and a secure interface that provide a more agile and strategic reporting system. There are many advantages to a cloud-based solution: it costs less to implement; connects and aligns planning processes across the business; enables teams to share information and ideas via embedded social media; establishes a single source of truth by doing away with multiple documents in multiple locations; and ensures compliance and the best protection against fraud.
CFOs will also need to embrace ‘big data’, which moves beyond financial data and includes data from operations, markets, social media and marketing. Big data is so large, fast or complex that it’s hard or impossible to process using traditional methods – but with advances in technology enabling analysis of the data, it can be used to unlock significant business insights.
In addition, more forward-looking CFOs might now be looking at their financial strategies and emerging technologies, such as financial forecasting with machine learning. Using machine learning and artificial intelligence tools can vastly accelerate and improve the accuracy of financial forecasting, making the whole business more agile.