Strategic Financial Leadership: Essential CFO Skills

Previously, the main objective of a CFO was the traditional functions of the position: monitoring cash flows and financial activities; acting as a controller and accountant; limiting unnecessary expenses; and ensuring that financial decisions were in accordance with standard operating procedures.

Of course, these tasks are still critical, but they are becoming more and more secondary to the strategic roles that CFOs are supposed to play. As the pace of business accelerates and technology advances, the modern CFO must adopt a broader, more forward-looking and growth-oriented approach to work.

The consulting firm Accenture captured this change in a 2022 survey and found that typical CFOs today spend most of their time driving company-wide efforts to transform and optimize business operations, with a focus on accelerating revenue and profit growth.

This is a new reality that I have seen in small and medium-sized fast-growing healthcare companies, where I have held a number of management positions. These companies not only expect you to be a functional CFO performing basic accounting tasks, but also to be a strategic CFO working with the management team to explore growth opportunities and maximize profitability.

1. Reports and forecasts

Reporting and forecasting are important tasks for a financial director. The proliferation of software as a service (SaaS) and cloud services has made it easier and affordable to integrate powerful accounting systems company-wide. A functional CFO must ensure that everyone who needs access to these systems is fully integrated and uses them, while a strategic manager looks for ways to deepen the information in order to obtain actionable insights for the company.

I can better explain how to develop this area by telling how I showed a company that the complete integration of a team is an essential step, including for leadership. I worked for an early-stage healthcare services company where the CEO kept track of the company’s finances on an Excel spreadsheet that he saved on his desk and updated at night and on weekends. This practice has caused obvious problems. First, his shadow financial data was often incomplete. Secondly, his practice caused an interruption that prevented the finance team from developing a Routine for updating information and obtaining useful and timely information for the CEO. Without this Routine, the CEO was blindsided when it came to making sales and profitability decisions.

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 to financial planning and analysis. FP&A is typically used to create data-driven answers to financial and operational performance questions that address all aspects of the business. Some are routine analyzes, such as comparing the performance of the current period with the previous one, while others are Ad hoc analyzes, such as calculating the return on investment for a new technological platform to help sales. A strategic CFO uses the same processes and can answer some of the same questions as a functional CFO, but takes a more proactive approach..

When I joined a pharmaceutical manufacturer as a CFO, I found that few of the company’s executives knew which customer, product or region was generating the highest growth or revenue. This became a problem when the company had to quickly increase its profitability. After implementing fundamental improvements in the reports, I carried out a complete analysis of the profitability of the company’s various business and customer segments to answer broader strategic questions.

3. Risk management and mitigation

If financial executives thought that risk management was just an administrative footnote on financial supervision, then the recent times and the collapses in global supply chains have upended this misconception. Today, CFOs must play a role in pushing teams throughout the organization to conduct risk assessments and regularly review risk mitigation issues. At the same time, you need to look at risk management through the prism of opportunities and look for where it creates potential business opportunities.