Traditional finance skills of analysis, reporting and control are in demand outside of the finance function and the role of the CFO is broadening far beyond its technical heartland into a role that is much more “strategic” — in the broadest sense of the word. Leading CFOs are overturning outmoded perceptions of finance as “business prevention units” and repositioning the function as an enabling partner to the business. For many CFOs, the acid test is the extent to which business managers consult them for advice on key aspects of strategy. For leading CFOs, this goes beyond being an “information provider” or “aggregator presenter.” Their business understanding and analytical skills mean that this proactive, yet supporting, role is a vital part of understanding how different decisions will lead to certain outcomes.
While the overall trend is for CFOs to expand their activities across both strategy and operations, this does not mean that the fundamental responsibilities of a finance department have become less of a concern for them. If anything, the recent financial crisis has reinforced the need for CFOs to pay close attention to cash, cost management and working capital.
The cornerstone for CFOs to build trust with owners, investors and the management team is excellent financial reporting – clean, clear, consistent and comprehensive information. Investors and management expect more than statutory or compliant reporting. Indeed, this alone is a sign of a lack of transparency. They demand metrics which are broader than just the financials and a forward, realistic view of company performance. In short, investors expect a joined-up story – linking company strategy, financial performance, risk management and operational effectiveness. Effective CFOs are able to provide to the following:
- Keep it simple: numbers should be clean and clear, without error. They should be consistent year to year, preferably adopting conservative accounting policies.
- Demonstrate how capital is managed.
- Go beyond the statutory reporting and provide a comprehensive and well-presented description of the business.
- Join up the different aspects of reporting to create a wide view of the business.
- Provide the non-financial KPIs that support past and future performance delivery.
- Focus on the future: short-term returns are important but not at the expense of delivering on the longer-term plan.
- Detail how the business manages risk.
- Demonstrate an awareness of wider stakeholders – employees and customers.
- Be proactive, timely and front experienced people, such as the CFO, who can explain as well as disclose.
- Build trust in the quality of the finance team – give them the opportunity to demonstrate understanding, experience and capability.
- Ensure leadership demonstrates integrity at all times.
Harvest CFOs provide growth and middle market companies with the right mix of financial and operational skills to add immediate and long-term value. Harvest CFOs partner with management, owners and investors to provide a solid financial foundation to enable a company to navigate successfully through business cycles of growth as well as stagnation and decline.