The Evolution of the CFO: How Digital has Changed the Finance Chief’s Role

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Your role as CFO has changed beyond all recognition in recent years.

As we discuss in “The CFO’s Guide to Agile Financial Modeling”, you’re no longer just a bean counter. The number of business functions reporting to the CFO increased by more than a third between 2016 and 2018, from 4.5 to 6.2, according to McKinsey. Rather than being the gatekeeper of the corporate budget, you’re now expected to identify when and where money should be invested.

Much of this change has been brought about through the advent of digitalization. In this article, we discuss how your role has evolved over the past decade, consider how digital has played its part in this process, and explore how technology can help you manage the many and varied challenges that now cross your desk on a daily basis.

Yesterday’s CFO: All eyes on the CEO role

Traditionally, your position was often viewed as little more than a stepping stone on the way to greater power.

Perhaps this was down to the limitations of the CFO role, with its focus on compliance, control, and cost. All important factors, of course, but not particularly sexy.

Things started to change a decade ago. A 2010 EY poll discovered that three-quarters of finance chiefs saw their role as a fully-fledged destination, rather than a path to becoming CEO.

While this shift in mindset may have been slow to come about, it’s very much here to stay. When it comes to influencing business strategy, your role is now seen as being just as important as the rest of the executive team – if not more so.

How digital has changed the game for CFOs

Digital technology in general has been a game-changer for CFOs, but automation has had a particularly profound impact.

Two-fifths of finance activities – from cash disbursement to revenue management – can now be fully automated, according to McKinsey. A further fifth can be mostly automated, with much more to come in the years ahead as the adoption of AI and machine learning continues to grow.

Whenever automation is discussed, the conversation soon shifts toward talk of redundancies, with employees being replaced by robots. But far from sounding a death knell for FP&A teams, automation has unshackled them. Freed from the tedious trudge of spreadsheet maintenance, they’re able to add far greater value, modeling creatively and producing timely what-if analyses to inform critical decisions across all parts of the business.

But this isn’t just about making FP&A jobs more interesting. Forging closer ties between finance and other business functions yields real results, as described by a joint survey from Oxford Economics and SAP. Among businesses failing to turn a profit, 46% blame an isolated finance function as a barrier to achieving their goals. This proportion drops to 28% for organizations enjoying revenue growth of 5.1-10% a year.

In other words, finance teams that sit at the center of their business, integrating seamlessly with other functions, play a major part in driving the business forward. And who’s at the wheel? The CFO.

No CFO is an island: Why finance chiefs need support

As we’ve already mentioned, the growing importance of the FP&A function has made your role more vital than ever. This is great for your job satisfaction, but potentially very bad for your work/life balance if you lack adequate support.

Staying on top of the vastly disparate priorities with which you’re now faced is no easy task. Automation helps, but it can only go so far. Someone still needs to take the data and use it to make big decisions; more often than not, that person is you. 

Not only do you need to make the big calls, but you also need to consider whether they’re the right thing to do. According to EY, 71% of finance leaders say they’re becoming increasingly responsible for the ethics of decision-making in support of their organization’s purpose.

All these new areas of concern are making prioritization a real challenge. Almost three in five CFOs told EY that they struggle to focus on strategic priorities because they still have to spend the majority of their time on the more traditional aspects of the role – compliance, control, and costs. 

No wonder then that many are feeling the strain. A 2017 global survey from Robert Half revealed that three-quarters of CFOs felt stress levels would increase in their department by 2020, due to a combination of four factors:

  • Increasing workloads
  • Growing business expectations
  • Shorter deadlines
  • A lack of skilled staff

Stress or no stress, the new demands of the job aren’t going away. You need data immediately – and rarely on the same thing twice. Your team is busy. So the last thing they need when running the numbers is to battle with an unwieldy toolkit that’s not up to the task.

That’s where Agile Financial Modeling comes in.

Do you have the right digital tools for the job?

Since time immemorial (well, the last 30 years or so), Excel has been the FP&A tool of choice. It has many pros and cons. On the one hand, it allows your team to model creatively; on the flip side, it doesn’t scale. For large and/or fast-growing businesses, it simply doesn’t work.

Dedicated CPM platforms from the likes of Adaptive Insights and Anaplan tackle the scalability issue by transporting users away from their desktop spreadsheets and into a web app environment. 

From a compliance perspective, this is fantastic – you get “one version of the truth”, with no more concerns about which one of dozens of similar spreadsheets is accurate. But by solving one problem, these solutions cause another. FP&A teams love Excel. It gives them complete freedom to model and analyze. This freedom is lacking in big vendor CPM tools. Sure, you get accuracy, but accuracy alone isn’t enough. It needs to be accompanied by creativity, speed, and versatility – what we call Agile Financial Modeling.

Our approach keeps your team within the Excel environment that they crave while using the power of the Cloud to eradicate the scalability problem. No more time-consuming spreadsheet maintenance; maximum scope for those all-important forecasts and what-if analyses. 

With the agile approach, you don’t just get the critical numbers you need, when you need them. You can also challenge your team to get creative, running analyses that you’d never have conceived of. That’s what it takes to differentiate the CFO of today from the CFO of tomorrow.

Ready to see what Agile Financial Modeling looks like? We’re happy to show you. Request your free custom demo today.

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