Armanino Blog

Become a Strategic Leader: Six Focus Areas for CFOs

by Matt Armanino
May 06, 2017

While CFOs typically spend the bulk of their time in the accountant role, most would rather be more involved in business leadership. To achieve this goal, they must streamline the accounting function to free up more time to partner with other business executives.  Armanino’s 2016 CFO Evolution Survey, which is based on feedback from hundreds of CFOs and our experience with clients, looks at what finance professionals need to do to make this transition.

The survey categorizes finance leaders into three groups. The “best-in-class” CFOs drive organizational improvement and spend most of their time on strategy and growth. The “average” CFOs are the middle range of respondents, who are making some progress toward a strategic role but still struggle to rise above everyday accounting demands. The “laggards” are trying to catch up and are stuck in the back office. Based on the findings, we identified six main areas that CFOs should focus on to become strategists in their organizations.

1) Standardize and Improve Business Processes
By standardizing and streamlining business processes, you can eliminate activities that do not add value internally or externally. This is considered critical by best-in-class CFOs, 90% of whom have standardized and improved their processes to lower costs, become faster, and provide more accurate results. Even average (57%) and laggard (46%) CFOs, in aggregate, gave more importance to this key area of finance administration than to any other area of the survey.

A full 75% of the CFOs ranked standardization of processes as the most crucial element of post-transaction success for mergers and acquisitions (M&A).  However, only 34% of respondents said that common technology systems are crucial to post-M&A success―a very incongruent finding. Technology drives efficiency in an organization, so it’s hard to imagine the modern CFO seeking to achieve standardization and process improvements without analyzing the merged company’s platforms and systems for consolidation.  

How do you make gains in this crucial area? You need to create a culture for continuous improvement among all the process owners and get rid of any “that’s how we’ve always done it” mentality. Focus on communicating the value of technology, both upward to the CEO and board, and downward to your controller and finance team.

2) Drive Improvement With Technology
Technology is a critical part of process improvements that support organizational change.  It improves collaboration and drives organizational productivity in ways that manual systems simply cannot. Among best-in-class CFOs, 70% use technology as a key change enabler, compared with only 15% of laggards.  

The majority of survey respondents agreed that efficiencies such as simplifying software management and reducing capital and operating costs are top benefits of technology. Most also admitted that they personally have a knowledge gap. When judging their own technology expertise, 94% of CFOs said they need improvement, and 64% said they are working on upgrading their skills.

The CFO’s role as a technologist is made even more complex by the proliferation of cloud-based solutions and the ever-growing risk of cyberattacks. So it is more important than ever to deploy the right technology when streamlining processes. To succeed, CFOs must advocate for the financial organization, get help to create an enterprise architecture strategy, and ensure that the strategy encompasses cybersecurity.

3) Provide Effective KPIs
There is a tremendous amount of data available, so CFOs need to understand best practices for extracting the most useful information. Best-in-class CFOs have moved away from historical reporting methods; instead, they enable self-service reporting and focus on predictive data. Among top CFOs, 75% provide effective KPIs to the right stakeholders, versus 36% of laggards, who are still doling out information on a publish/subscribe basis.

KPIs provide a tangible way to increase your influence as a strategic business leader. For example, the survey showed that customer service is one area that often has ineffective metrics. This gives the CFO an opportunity to provide critical client satisfaction KPIs to help front-line employees get more engaged with improving customer service and client retention.

The loudest clamoring for metrics is still coming from the executive team. But, this year’s survey also revealed an increasing demand from board members, who are asking for more reports and insight from the finance department. By providing timely, accurate and predictive KPIs, best-in-class finance organizations can build consensus around growth expectations and accountability.

4) Integrate Technology
Many organizations now have dozens of cloud solutions, but in most cases, they are all working independently. This is a missed opportunity, because without a fully integrated system, you aren’t getting full value from your technology.

Best-in-class CFOs have 75% of their systems integrated. Laggards have integrated less than 25%, which means their staff is wasting a lot of time re-entering the same data manually in multiple places. Software architecture issues were cited as the biggest barrier to integration, but this is no longer a valid excuse. The open APIs in today’s cloud solutions make integration very easy and quick to deploy.

You can start to integrate your systems by rationalizing a plan and going after the low-hanging fruit. For example, connect the general ledger to your customer relationship management (CRM) system to get rid of inefficient revenue management workarounds, and integrate your enterprise resource planning (ERP) system with your budgeting and planning solution to enable reporting and predictive analytics.

5) Provide Accurate Forecasting
Companies seeking growth need a collaborative, dynamic system for budgeting and forecasting, but many still rely on traditional tools like Excel. Not surprisingly, this has a big impact on budgeting accuracy. Best-in-class CFOs who use dynamic systems have a budget-to-actuals accuracy rate of +/- 3%, while technology laggards have an accuracy rate of +/- 20%. If your forecast is regularly off by more than 20%, this makes it a lot harder to prove your effectiveness as a CFO to your CEO or board.

Business leaders’ tendency to rely on their own gut feelings for forecasts is a common barrier to accurate forecasting, as are data and technology limitations. Traditional spreadsheet budgets only allow specific objectives, which often leads managers to “manage to the budget” instead of adjusting to changing market conditions. In contrast, rolling forecast systems allow you to make decisions on a real-time basis and perceive what is ahead, so you stay in front of your competition.

To ensure accurate forecasting for growth improvement, you must move away from spreadsheets and engage the executive team as an advocate for process and system changes. Drive a conversation with your business leaders around the metrics and analytics that really matter, and focus your energy on creating rolling forecasts in those areas.

6) Support Growth and Expansion
The majority of best-in-class CFOs are actively and directly participating in the growth strategy of their organizations, aligning their focus with market expansion and other top priorities of their companies. As businesses continue to move away from IPOs and toward M&A, CFOs need to be ready to support this strategy.

You can start by actively engaging the executive team as a thought partner. Advocate for the integration of technology and systems that will streamline accounting and lead you toward dynamic positioning as a business leader.

The demands on the CFO have never been greater or more complex. By investing in these six key areas, you can shift your focus from accounting to business leadership, and spend more time influencing strategy and promoting growth across your organization.

You can download the full 2016 CFO Evolution survey here.

May 06, 2017

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Matt Armanino - COO & Partner, Consulting - San Ramon CA | Armanino
Chief Executive Officer (CEO)
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