Thought Leadership presented by Foresight CFO Consulting, Inc.
Last week while lunching with the CEO of one of our client companies, he asked frankly, “Help me to understand. What is the CFO’s perspective? What role do you play in most companies?”
In all honesty, he got me thinking. After all, if one CEO has this question I’m sure there are 10 more who probably need our help. But, unless they understand the role of a CFO, they most likely won’t make the right hiring decision.
Many executives blur the lines between accounting and strategic financial management. Then throw in an extra title of controller, and it’s blurred with financial analysis and systems management.
Brick and mortar: Laying the accounting foundation
At the foundation, a CFO oversees accounting comprised of billing customers, collecting payments, processing payroll, vendor payments, reporting and compliance. It’s the most basic financial operation that lays the groundwork for strategic financial management or financial analysis. Accounting and a CFOs understanding of the function is the backbone of the arms and legs they need to build out from there. See this related article from CFO.com, Why accounting will always matter for CFOs.
Financial clairvoyant: Forecasting and predicting revenue, loss and risk
Strategic financial management is a game changer. It’s about understanding the business marketplace and operations. It’s doing the heavy analytical work to understand prior year trends, the current sales funnel and cost structure, then teaming with P&L managers to build their budget profit model. From that model, they can then do the “What If” critical thinking to figure out how to achieve business objectives in a way that maximizes financial results, and reduces uncertainty and risk. It’s about building peer benchmarks to determine what it takes to get your business into the top percentile of its industry.
Raise the bar: Build a valuable asset
The best CFO’s take it a step further by showing how to use the budget profit model to engineer your profitability over the next several years. They spot cash crunches and profitability challenges before they happen, and create a guide for how the business can steer clear of those pitfalls. They show how a set of decisions and expectations impact profit, cash flow, and the overall value of the business for management use and for stakeholders and investors. By laying out various scenarios, they are able to remain objective in collaborating with the leadership team to choose the right path for the company. The CFO capitalizes on opportunity for the business, investments & acquisitions, and metrics. See related article here from Inc.com: Top 3 Priorities of the Best CFOs.
Not all CFO’s are created equal
In the end, not all CFO’s are created equal. Some are accountants who are skilled at processing transactions and very literal with the numbers, instead of having the ability to look at things strategically or compensate for risky trends or potential mishaps inside the business.
At Foresight CFO, we find a balance between the number story and what could happen in the future with those numbers, as well as build the systems to check the authenticity of the overall operation. We pride ourselves in the fact we’ve built a model to implement strategic CFO services into many business, and most of the time can do so at a fraction of the cost to hire a full-time CFO.
Nationwide Outsourced CFO and Accounting Services
Owners of the Strategic Financial Management System™