It used to be that a chief financial officer’s primary focus was on the traditional functions of the job: monitoring cash flow and financial activities; serving as a controller and accounting expert; limiting unnecessary spending; and ensuring that financial decisions conformed to standard operating procedures.
These duties are still critical, of course, but they’re increasingly becoming secondary to the strategic roles CFOs are being asked to play. As the pace of business accelerates and technology advances, the modern CFO must take a broader, more forward-thinking and growth-oriented approach to the job.
The consulting firm Accenture captured this transformation in a 2022 survey, finding that typical finance chiefs now spend most of their time spearheading companywide efforts to transform and optimize business operations, with an emphasis on accelerating revenue and profit growth.
It’s a new reality that I’ve seen play out among fast-growing small and medium-size healthcare firms where I’ve held a number of leadership positions. These companies not only expect you to be a functional CFO, delivering on basic accounting responsibilities, they also expect you to be a strategic CFO, working with the leadership team to explore growth opportunities and maximize profitability.
So how do you develop this strategic expertise? Through trial and error, I have learned that the most effective way is to focus on your existing finance capabilities and responsibilities—those functions that are already within your purview as a CFO—and elevate them to deliver the strategic insight your company needs.
In this article, I share six areas where I recommend you focus. The development of the skills I discuss can be applied broadly to growth companies and employed across a wide spectrum—by fractional CFOs working with later-stage startups, by interim CFOs in distressed situations, or even by finance chiefs employed by public companies.
When it comes to expanding and bolstering your existing capabilities, I discuss the easiest areas first. The later ones, especially corporate vision, will probably consume more of your time, but I expect you’ll find that mastering them is well worth it to you and your company. I include examples to show you how I put each of these concepts into action.
1. Reporting and Forecasting
Reporting and forecasting are table stakes for a finance chief. The proliferation of software as a service (SaaS) and cloud services has made it easier and cheaper to integrate powerful accounting systems across an organization. A functional CFO must ensure that everyone who needs access to these systems has been fully onboarded and is using them, while a strategic leader looks for opportunities to delve deeper into the information to surface actionable insights for the organization.
I can best explain how to develop this area by sharing how I demonstrated to one company that fully onboarding a team is an essential step—even for leadership. I worked for an early-stage healthcare services company where the CEO tracked corporate financials on an Excel worksheet he saved on his desktop and updated at night and on weekends. This practice created obvious problems. First, his shadow financials were often incomplete. Second, his practice caused a disconnect that prevented the finance team from developing a routine of updating information and producing useful and timely insights for the CEO. Without this routine, the CEO was flying blind when it came to sales and profitability decision-making.
When I joined, I helped the company standardize all the accounting, operational, and financial reporting templates, and the chart of accounts. The company and I then agreed on a reporting calendar for when the finance team would give the CEO and board the latest income statement, balance sheet, cash flow statement, and customer- and product-level segmentation. That report also regularly provided information on the performance of individual departments, comparing the figures for each with that department’s budget, forecast, and prior-year numbers.
We didn’t stop with standardizing companywide reporting, however. We leveraged the information to recommend operational changes that would improve areas of financial underperformance. This not only freed up the CEO’s nights and weekends, but also gave us strategic insight into the company’s operations while reducing the management team’s anxiety and stress under the previous fragmented reporting system.
2. Financial Planning and Analysis
The next logical step for a strategic CFO is to look for ways to apply standardized databases and quantitative skills in financial planning and analysis. FP&A is typically used to produce data-driven answers to financial and operational performance questions facing any aspect of the company. Some are routine analyses, such as comparing the current period’s performance to the prior one’s, while others are ad hoc analyses such as calculating the return on investment for a new sales enablement technology platform. A strategic CFO uses the same processes and may address some of the same questions as a functional CFO but takes a more proactive approach.When I joined a pharmaceutical manufacturer as CFO, I found that few of the company’s senior leaders knew which customer, product, or geography generated the highest growth or revenue. This became a problem when the company had to quickly increase profitability. After implementing basic reporting improvements, I conducted a comprehensive profitability analysis of the company’s multiple business and customer segments to begin to answer broader strategic questions.
Using FP&A business intelligence tools like Microsoft Power BI, we pinpointed the sources of the highest growth and the greatest profits and losses. We then broke them down by product category, product SKU, customer, business unit, and geography. But we didn’t just produce a report that sat in colleagues’ inboxes. We looped in cross-functional teams to help us design, develop, and glean insights from the reports, and hosted in-depth conversations with executive leaders of each functional area about commercial and operational changes that would maximize financial performance.
Within a short time, the company had a holistic understanding of which segments contributed profits. Just as important, we had complete alignment among senior leaders that we should focus on the most profitable segments. This strategy allowed us to nearly double the company’s profitability in less than a year.
3. Risk Management and Mitigation
If finance leaders thought risk management was just an administrative footnote to financial oversight, then the COVID-19 pandemic and breakdowns in global supply chains upended that misconception. Today, CFOs must take a role in pushing teams across the organization to make risk assessments and regularly address questions of mitigation. At the same time, they need to see risk management through the prism of opportunity, looking for where it creates potential commercial openings.
