The role of a CFO and how it is evolving over time

The role of a CFO and how it is evolving over time

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Here at Itas solutions, since we started in 1995, we have seen how the role of the Chief Financial Officer (CFO) has changed and evolved over the years. In the past, the CFO was primarily responsible for financial reporting, budgeting, and compliance. 

However, the changing business landscape has led to a shift in the CFO’s role. Today, CFOs are expected to be strategic partners who can provide insights into emerging trends and help drive new initiatives. They are also expected to be change agents who can lead their organisations through periods of transformation and crisis management 

Here are some of the role we have seen over the years:  

The Technocrat 

Not so long ago, the CFO was mocked as a mere “bean counter” since they were solely technocrats. 

Therefore, people who passed the tests to become chartered accountants anticipated a profession that was “narrow and deep.” They had very precise questions to answer in the era of certainty, and they did so flawlessly. 

They contributed crucial technical know-how and controlled the organisation’s operations and procedures. 

Although they were not in the popularity business, they seemed to have the most influence and power at the top of the organisation, aside from the Chief Executive Officer (CEO).   

The Financial Geeks 

The field seemed to draw those with a stronger scientific bent and an head for stats, with maybe little interest in the “softer” abilities. They were the original “geeks” in many ways. These capable and intelligent technocrats also had possibilities in the audit, compliance, and risk areas. 

IT had not yet become strategically important to the company during the 1980s and 1990s, despite the exponential growth in computing capacity, but it was a significant and rising expense. As a result, newly established IT departments were forced to uncomfortably report to the CFO. 

This was a time when the majority of the organisation’s possibilities and challenges could be handled in an orderly manner. It might be a problem with marketing, human resources, or even finances, but these might mostly be resolved by that function.   

Cross-Functional Interaction 

As company-wide IT solutions were introduced across organisations, it quickly became rare for any challenge or opportunity to be neat and tidy in the sole remit of finance. Instead, almost every opportunity or problem crosses organisational boundaries directly. Nowadays, the majority of new projects call for cross-functional activity and teams, and almost all of them demand the focus and contribution of the corporate finance function. 

This necessitates crucial internal organisation-wide cooperation. This has led to increasing demands being placed on the CFO’s abilities and actions. In the past, the data would always have the full answer, but in today’s volatile markets, when uncertainty is the norm, only around 70% of the information needed to make an informed choice is provided by the data. We can no longer wait for the data to make decisions; instead, we must use our expertise, gut feelings, and environment to make snap decisions. This is what we refer to as leadership.   

The Modern CFO 

This, combined with the requirement for cooperation, has begun to create a new and fascinating profile for the modern CFO. 

There are typically two different types of candidates for CEO when a business experiences challenging times in recent memory. If it is anticipated that the business outlook will be challenging, a senior executive from one of the control functions, almost always finance, is the preferred choice. 

We tend to see the CEO coming from one of the revenue-generating business units when the business picture is more optimistic or demands transformation. 

Simply put, businesses tend to hire the most entrepreneurial CEO during times of change or growth, and they are much more likely to hire a practising CFO during difficult or constrained times.   

The Backfire 

The appointment of several new banking CEOs in recent years, as well as the hiring of several former investment bankers after the global financial crisis, seemed counterintuitive, and some banks have already paid a steep price for their audacity. 

However, due to Deutsche Bank’s unfavourable media coverage, what first seemed to be a safety-first appointment of their CFO to the CEO’s office appears to have spectacularly backfired. 

The CFO will always be a crucial member of the Executive Team and the Board of Directors, but being a technocrat alone is no longer sufficient in today’s business world. A little less management and a lot more leadership are what are required.  

How To Move From A Technocrat To A Motivated Leader 

Consider the following to transition from technocrat to inspired leader: 

  • Increase your visibility inside the company 
  • Be more open to hearing fresh ideas and listening more. 
  • Accept change as a necessary shift. 
  • Instead than only seeing everything as a cost, consider investments more. 
  • Develop a stronger sense of teamwork and less “policing” authority 
  • Obtain a balance between immediate and long-term needs. 
  • Permit others to challenge you in a public setting 

The Modern CFO 

The modern CFO must be a strong team player, an effective communicator, and have the capacity to influence others rather than relying solely on the crude methods of command and control. A more well-rounded business leader is needed because of their growing power and ownership for the company’s strategy. 

The new requirements for the CFO shouldn’t deter anyone from considering studying accounting with the goal of becoming one, as these requirements are now the prerequisite for anyone who wants to join the top executive teams. 

As Warren Buffet, aka the Oracle of Omaha, puts out, “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” 

Oh, and you still need to be a good technocrat, but these days, leadership and influencing skills come first.  

About us 

This article was written by Itas Solutions. We’re a UK –based accounting firm specialising in Sage Intacct.  If you would like to know more about Intacct and how it can help you and your CFO, we would be more than happy to demonstrate the advantages of using powerful cloud accounting software like Intacct. 

Itas Solutions started off serving one client in 1995 and now services over 200 businesses across the UK. We are always available to assist our clients.   

Itas is a business that our customers have trusted for more than 20 years, and we have expanded thanks to recommendations from them and IT professionals who value our educated but personalised service.   

To discover more about how Itas can help your business with finance automation, Sage implementation, and increased purchasing management, contact us at [email protected], phone us at +44 (0) 1824 780 000, or send an email. 

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