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Posts Tagged ‘CFO’

3 Financial Management Objectives for CFOs

Saturday, October 8th, 2011 by Troy Schrock

3 Financial Management Objectives for CFOs

3 objectives for the CFOs of entrepreneurial and mid-market companies:

  1. Integrity in Financial Reporting: Implement the proper personnel and processes for reliable financial data.  Financial reporting is historical; it tells “what happened.” 
  2. Sound Financial Analysis and Synthesis: With solid financial reporting disciplines in place, CFOs can focus on what it means.  But they must not stop there.  CFOs also need to synthesize the information and help the organization’s decision-makers think about the future.  How do the financial results affect strategic and operating decisions, and vice versa.
  3. Tight Financial Management (Budget and Cost Control):  The budget (or the financial forecast, which is more flexible and preferred by some) paints the future financial picture for the organization’s leaders.  First, it connects current decisions to expected results.  Then, actual results can be measured and compared to expectations.  This calibrates the assumptions of the decision makers.  Because it requires an understanding of the key value drivers of the business, this discipline also enables CFOs to identify specific areas of cost control that need addressed (which can be anything from a line item to an entire process).

The CFO must ensure that the first objective is achieved, but second and third objectives are where CFOs add the greatest value to a business.  Therefore, those are the objectives on which he should focus his time.

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Growing from Controller to CFO

Monday, September 12th, 2011 by Troy Schrock

The following was developed to help a specific person, but in our experience as ActionCFO advisors, we have found it to have wide application.  A controller who would like to grow into a CFO should focus on the following: 

  1. Build leadership and management skills.  Controllers tend to be great technicians, but they are rarely good managers.  A CFO, however, must be skilled in managing staff and nurturing their professional development.  Of course, this is not a “finance thing;” it’s a management thing.  Effectively delegating, dealing with performance issues, setting staff goals, and identifying specific areas of development for career growth are basic skills requied for any manager to be successful.
  2. Connect business strategy to financial strategy.  Which activities generate the best value?  How do they connect with the business’s value proposition? It is the CFO’s job to provide the financial perspective to strategic discussions with the CEO and executive team.
  3. Shift focus from data to information.  Transactions, recording, compliance – all primary tasks of the controller – are all about data.  But this data is meaningless if it is not converted to information – insights that can be used to make decisions.  A CFO must be able to discern meaningful information from the data. 
  4. Increase time spent presenting relevant information to decision makers within the business.  It is incumbent upon the CFO to talk with leaders and understand what information will help them do their work more effectively.

These skills will move a controller form a rear-looking mindset (recording what has happened) to a more strategic forward-looking mindset (anticipating what will happen).  In determining what the data means and persuasively communicating how it should affect business decisions, it may be helpful to ask these three questions: 

  1. What happened?
  2. What does it mean?
  3. Now what?

The “what happened” should really be handled by the financial staff.  Once that basic analysis has been done, the CFO can focus on “what does it mean?” and “now what?” in helping the executive team make good decisions.