The chief financial officer (CFO) is often thought of as a behind-the-scenes figure who locks themself in an office with a bunch of financial data and comes out when they are done. But this image is woefully outdated, and the role of the modern CFO is transforming with effective CFO habits and strategic planning by CFOs. The CFO is still a financial expert and a strategic visionary who is directly involved in all business operations with great management habits and leadership qualities. Let’s delve into the 5 management habits of CFOs.
Forward-Thinking Financial Strategy
Compliance is important to operate legally to avoid avoidable tax penalties and keep the business running. However, compliance should not be the CFO's top priority, and the most successful CFOs leave regulatory compliance to the accounting professionals who do it best: the controllers. The CFO's primary responsibility is to develop and implement financial management strategies to optimize operations, maximize profits, and help the business achieve its short-term and long-term goals.
In addition, CFOs need to keep a close watch on the industry and developing technologies as well as changes in the economic and political climate that may affect business operations. By keeping a close eye on what is happening ‘now,’ CFOs can better predict what will happen in the future. By anticipating industry and economic changes, CFOs can be better prepared to take advantage of new opportunities and weather the coming storm.
Establishing Sound Values and Following Them
Every successful CFO has sound morals and chooses to follow them. Establishing the highest ethical standards in the back office of the business is essential to building and maintaining trust and a professional reputation, and as a leader in the C-suite, the CFO Code of Ethics establishes the ethics of the company. It is up to them to lead the Controller and establish sound policies and procedures to protect the integrity of the business, employees, and back office. As CFO, it is essential that they not only follow compliance and the law, but also uphold a respectable code of ethics regarding how they present the company's financial health and prospects to the CEO, board of directors, potential investors, employees, and others.
While it may be tempting to fudge results or manipulate graphs to make the company's numbers look more attractive, as a CFO must be honest and transparent about the numbers. Honesty and transparency are the only ways to create and maintain the highest ethical standards.
In an interaction with CEO Insights Ankur Verma, CFO, Mindtickle says, “A CFO’s role is very crucial as we today operate in a highly global but extremely turbulent macro environment wherein multiple countries are at war, there is global risk of inflation, Volatile currency and interest rate issues and risk of losing customers and vendors. Managing predictable and favorable financial outcomes, besides managing these challenges, has become one of my primary responsibilities. One fundamental aspect of the job is to avoid any surprises for any stakeholder, including investors, founders, board members, employees, customers, and vendors, by staying ahead of the curve and planning for outcomes that you can't control or influence. Additionally, I help other executive team members make judicious decisions by considering the long-term and short-term financial impacts of their daily business choices.”
Get Out of the Back Office
CFO stands for charge of finance. However, finance affects and is affected by all aspects of the business. They need to expand their horizons beyond the back office. They should take time to talk with other members of the C-suite as well as department heads. One can be a truly great CFO if they ‘step into the trenches of every part of the business. Only by being in the business CFO can one understand exactly how they generate the revenues and profits analyzed every day, what expenses are necessary and justified, and what financial decisions impact operations and the business's most valuable asset.
Building Relationships and Cultivate a Team of Trust
First, a successful CFO must assemble a team that he or she can trust. This means intentionally surrounding themself with talented people who share their values and those of the company. Once the team is in place, be their champion and align them toward a common goal by being a leader who listens, provides clear direction, and communicates freely. Provide people with the tools and training they need to do their jobs well.
A good leader needs to ensure that they not only develop an exceptional team but also maintain strong relationships with their peers in the C-suite. They should also see each other frequently, understand each other, and have clear lines of communication so that the entire organization is on the same page and moving in the same direction toward a unified vision of the future.
Establishing and maintaining close relationships throughout the company will ensure that goals are met by having people on the CFO’s side who are willing to help with the necessary tasks. They can also gain valuable insight from all levels of operations from each department that can help them improve their financial strategies.
CFOs should also work on building relationships with outside parties. External networks are critical to the company's success. These relationships can help identify and recruit top talent, select board members, cultivate investors and donors for the next round of fundraising, and plant the seeds for lucrative partnerships. External relationships can also help in other important ways, such as selecting banks and lenders to partner with, finding the best insurance provider, and scouting for the next office space.
CFO Looks for Growth Opportunities
Being a good CFO requires financial discipline and back-office smarts, but the job is more than just mitigating financial risk. To be a great CFO, they must also keep an eye on business opportunities and ensure that they are doing what they need to do now, every day, to ensure that the business is blessed with opportunities.
Successful CFOs understand what business opportunities are and how they change depending on where the business is in its current growth cycle. For example, opportunities for the company today may include identifying and driving sales and profit drivers, researching and developing new products and services, and pursuing mergers and acquisitions.
As CFO, they should work closely with the company's CEO to ensure that the financial strategy supports the business strategy and vice versa. CFOs should make sure that both strategies are in harmony so that the entire company can align and achieve the same goals.