While strategic financial planning is a massive concern for the overall business, especially the chief executive officer (CEO), it often incorporates a deep knowledge of the finances and financial activities. Chief financial officers (CFO) help businesses by monitoring all the finances and financial processes – living in the present and anticipating the future through constant scenario-driven planning.
CFOs take a frontward role by managing projections, budgeting, tax strategy, vendor relationships, succession planning, and compliance issues. Leaning on data and industry experience, CFOs provide critical insights to advise the CEO throughout all the business’s growth stages.
How Do CFOs Add Value?
Improve Cash Flow
CFOs control the business’s cash flow to optimize its existing resources and cut down on non-vital expenses. This consists of creating a cash flow projection that’ll guide the businesses where and when to expect the cash to come or go. Also, it’ll help CFOs assess where the capital resources are being spent and make adjustments to curb unnecessary spending.
Drive Financial Strategy
The most significant value CFOs offer is escalating an organization’s financial strategy.
Finances are the life force of a business, but too often, they are a subliminal reflex (like breathing) in a business compared to a consciously harnessed resource. Some organizations without CFOs also commit the mistake of looking at finances in a binary way. For instance, “Need more cash? Sell more widgets.”
CFOs take critical, conscientious control of a business’s finances to turn them into a more beneficial asset. Given their operational and financial know-how, CFOs provide subtle strategies that curb COGS, boost profit margins, optimize lending/funding opportunities and programs, fine-tune cash flow, and so on.
Create Financial Projection
Forecasting is among the most effective tools in a CFO’s repository and, perhaps, brings the most value to any business. A financial projection is a comprehensive short- or long-haul blueprint of the industry trends and educated historical performance that helps businesses make monthly financial decisions that’ll steer them from where it’s now to where it wishes to go.
Having a financial projection is like having a plan to build an apartment rather than aiming to build it with a thought of how you’d like it to look eventually but no specific directions about how to achieve it. A financial projection helps avoid squandering cash, speeds up progress, and improves the odds of success.
Increase Profit Margin
Another way CFOs add value to a business is by expanding profit margins wherever possible. This implies trimming expenses, evaluating inventory strategy, renegotiating agreements with suppliers, revising the pricing structure, and offering informed decision-making about special offers or sales. These tools, coupled with the competitive assessment and industry knowledge, offer CFOs the opportunity to help boost profits without necessarily selling more.
Establish Financial Transparency
CFOs will also help businesses create better financial transparency. This incorporates enhancing processes for better and more precise record keeping. Financial transparency lets businesses have thorough and more attractive books for capital transactions or raises requiring due diligence, a more streamlined course for meeting the goals, and a clear-cut view of the financial performance to critically sounder strategic decisions.
In a Nutshell
Today, more than ever, businesses need to move past the conventional or textbook approaches to staying ahead of the curve, and a CFO strategic partner can be the biggest ally in achieving the goal. Strategic planning, decision-making, and goal alignment are all integral to creating a success story, and a CFO presents scope for innovation.
The value CFOs provide a business eventually depends on their background and experience. Having a CFO partner with noteworthy operational/c-suite is conducive to the industry, growth stage, and business goals can capitalize on the value they get from their CFOs.
Miles Education’s Executive Program in Strategic Finance for CFOs and FP&A Leaders will help you have a firm grip on operational finance, accountability, and corporate finance. In collaboration with Wiley and IIM Lucknow, the tutors have curated ideas to help finance experts switch from the cubicle to the corner office as early as possible. Furthermore, you’ll learn to move past accounting to think tactically, act as a catalyst leader, and shape the decisions of any business for the better.
So, what’re you waiting for? Enroll today to get started!