The job of Chief Financial Officer (CFO) has never been an easy one, though it was a bit simpler in times gone by. In the old days, the CFO’s job was to ride shotgun on the company’s cash, smoke a pipe filled with Dunhill mixture #33 and exclaim, “Good God, man, what will it cost?” whenever he was presented with a plan for a new business operation.
Today’s CFO, however, faces a range of challenges that would likely have stunned an earlier generation of financial managers. Let’s look at some of the considerations for the modern CFO and try to understand how advances in technology are making this increasingly difficult job manageable at the same time.
Accelerating business cycles
It’s become a bit of a cliché to talk about how much faster business moves than in previous generations. It happens to be true, though, cliché or not. The lifecycle of a product line was once measured in years or even decades. Now, it might be measured in quarters. For the CFO, this is a serious obstacle to effective financial planning decision-making.
For example, if a business unit requests funds to build manufacturing plant with a projected five year pay back period, how confident can the CFO be that the market for its product will even exist in five years? Flip phones, anyone? The modern CFO has to be able make decisions based on moving targets and shifting markets.
Unforgiving, rapidly changing operations
Operations are also changing rapidly today. This goes with the accelerated product lifecycle, to some extent. For example, the tooling needed to create a product may become obsolete much faster than anyone expects due to shifts in consumer tastes or changes in the supply chain. Lease versus buy decisions may be critical to maintaining a healthy financial outlook in this context.
Doing business across multiple entities, geographies, currencies…
Even the most mundane businesses today are starting to engage with partners across the world. Supply chains and distribution partners, for example, now span the globe. With this comes a host of tricky legal agreements, currency risks, banking relationships and so forth. The CFO is tasked with ensuring that financial health prevails no matter how complicated or uncertain things might get.
Security, compliance and audit
On top of everything else, the CFO is now responsible for an array of information systems and data—all of which he or she is expected to keep secure. Auditors and regulators get involved, too, expecting the company to follow accounting principles and applicable regulations. The CFO may not be alone in bearing this burden, but he or she is part of the senior team that’s responsible for security, privacy and risk management.
Analysis and reporting
The CFO has always been responsible for presenting reports on financial performance and financial status to senior leadership and the board. The difference today is that information is expected to be extremely timely, maybe even instantaneous. And, the expectation is that the CFO will conduct sophisticated analysis on financial and operational data in order to support business decision making. For this, the CFO luckily now has a new set of digital tools at his or her disposal. These include business intelligence and analytics solutions.
As the CFO’s job has gotten arguably more difficult, a new generation of systems has arisen to compensate for this bigger, more complex workload. New accounting, financial management and Enterprise Resource Planning (ERP) solutions give the CFO a wide selection of tools for getting on top of operations, reporting and more.
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