The Modern CFO 2.0

This article was written by Josh Starr, a Senior FP&A Consultant at Datarails.

The role of the CFO is shifting. 

Historically, the CFO has been a super accountant who analyzes the company’s financial standing through the lens of accounting. The modern CFO takes a more strategic and operational role. So much so that in many cases, the CFO will also serve as the COO. 

This shift in CFO management style can be summarized by a vertical/horizontal distinction. The “old school” CFO was a vertical leader, while the “modern” CFO is a horizontal leader. The old school CFO masters the world of accounting and finance, and often his circle of influence stops there. On the flipside, the modern CFO has a much broader influence, but lacks depth in any particular area. The old school CFO had depth, but lacked breadth. The modern CFO has breadth, but is lacking depth.

How does the modern CFO make up for the lack of depth in the area of accounting/finance? One approach is to add manpower to fill in the gaps. Perhaps the CFO can hire a controller to run the accounting department. This might be in addition to the company’s FP&A manager and a team of bookkeepers. The CFO will then have his team of advisors who can answer potential questions and will serve as his trusted advisors. 

Another approach is to return to the role of old school CFO. As the CFO, he/she can manage the finance and accounting, and hire a COO to oversee the operations and strategy of the company. 

Both approaches are adding resources to bridge the gaps. This can be costly and not ideal. Both approaches recognize there is an inherent  trade-off in the role of a CFO. 

How can we best empower CFOs?

Can we challenge the aforementioned assumption and empower the modern CFO to be both a horizontal and a vertical leader? Or, enable the modern CFO to be a horizontal leader, yet have the benefits and access to the vertical?

Companies have a lot of data and reports. Source data comes from many different places. There can be accounting, operational, sales and headcount data. With all the data sources,companies create reports to present and analyze the data. Management wants to understand what drives their business. Collecting, organizing and reporting data is exceedingly timely.  All of this leaves little room for analysis. The reports themselves are limited in that they lack the ability to answer the biggest question- “WHY”. In other words, there is an inherent lack of access to depth.

The modern CFO wants to be able to ask the why, but can’t afford to invest in the answer. The answer doesn’t need to come from more manpower, rather the CFO needs to institute processes and systems. The ideal would be a system/software that can collect/automate the data collection process and automate the creation of all sorts of different financial reports including the P&L, cash flow, and balance sheet. 

Technology has advanced, and Datarails is part of the modern CFO’s toolbox by creating processes and providing depth to all the company’s data. The modern CFO can remain the horizontal leader focusing on strategy and management while giving him/her the ability to answer the most difficult financial question – why.