A Forward-Looking CFO Can Shape the Outcome of the Business
I have had the opportunity to meet hundreds of entrepreneurial-run middle market companies over the years. In my conversations, I can’t recall a time when a CEO has told me that their CFO or controller contributes to enterprise value by increasing it. The truth is, historically the office of the CFO is trained to contribute to a company’s enterprise value not by growing it, but by protecting it. While not surprising, it’s shortsighted to think that a CFO shouldn’t play an important role in optimizing and strengthening market value.
The budget process in the middle market often relies on collecting information from various departments and using it to develop a static budget. The finished product is inherently wrong the minute it is completed. This is exactly why the office the CFO should take on a greater role in the business - be deeply involved in shaping the future, to have a say, and a stake in it.
To start, the CFO should actively participate in the company’s strategic planning process. By understanding market trends, competitive landscape, and growth opportunities, the CFO can provide financial insights that support the organization’s goals. Sophisticated financial models illustrate distinct scenarios and projections to help stakeholders visualize and understand the potential outcomes of various objectives. These models guide decision-making and resource allocation by projecting debt and equity requirements, working capital allocations, investment requirements and ROIs. Ultimately, the CFO can use forward-thinking tools to identify opportunities to streamline operations and reduce unnecessary costs without compromising the quality of products or services. This allows them to deliver beyond the present, with a stake in shaping what the future holds for the enterprise.
Another valuable opportunity for CFOs to support enterprise value growth is through the adoption of financial technology and automation. There are an increasing number of solutions that streamline financial processes, reduce costs and improve accuracy. Operating and financial information can be available in real-time and should be used to build forward-looking dashboards and analytics that allow executives to see, interpret and affect the near-term and long-term results of the company without having to rely on financial statements that often take two to four weeks to finalize. The financial statements shouldn’t go away; instead, when they are ready, they should be used to validate what is seen in the daily and weekly dashboards and analytics.
When a company takes the step to start building out visual analytics, it is not uncommon to discover data coding, tracking or even data integrity issues. The office of CFO can help with data cleansing and drive the vision for which data is most pertinent and relevant to report. Formatting and transforming the data is often the most expensive and time-consuming aspect of setting up dashboards, but once done, the data can be used to build connections and correlations between different sources. Meaningful data visualization can begin and be used not only to measure what happened but also to determine what it means for the future.
CFOs and controllers must play a crucial role in driving continuous improvement within an organization. This means identifying and implementing incremental changes to enhance processes, systems, and practices that increase efficiency, effectiveness, and value delivery. Ultimately, a forward-thinking CFO combines financial expertise with strategic vision to contribute to the company's growth, profitability, and sustainability. By collaborating closely with the CEO and the executive team, the CFO not only protects, but also helps shape a future that maximizes enterprise value, a benefit for all stakeholders.
