Last updated on April 5th, 2024 at 11:32 am
Gone are the days where CFOs were mere onlookers to the company’s decisions. The Chief Financial Officer’s (CFO) role has expanded beyond accounting and financial reports to incorporate them into decision-making and strategy.
The financial expertise of CFOs gives them a unique insight and allows them to formulate data-driven strategies. Their knowledge of the economy and financial market can make or break a company.
So, how do CFOs impact strategy and business decisions? Find out below.
The role of CFOs: An overview
The Chief Financial Officer is responsible for managing the accounting and finance departments of the company. The success of companies in rapidly evolving economies depends on how much importance they give to financial data. As a result, the role of the CFO has evolved beyond accounting responsibilities.
The modern CFO is a financial expert, strategist, analyst and driver of change. They guide stakeholders through the effects of business decisions on the company’s financial health.
The tasks of a CFO include:
- Creating financial reports and balance sheets
- Maintaining and analysing transactional data such as sales and expenditure
- Accounting and formulating budgets
- Tracking and reviewing company stocks and assets
- Being part of decision-making and strategic planning
- Estimating profits and risks of business ventures
- Complying with finance guidelines and tax policies
- Incorporating state-of-the-art technologies to aid in the accounting and analytics process
6 ways CFOs influence strategic planning and decision-making
The various ways in which CFOs impact the decision-making and strategic planning process of the company are as follows:
1. They align financial targets with company goals
As financial leaders, the CFO’s contribution to achieving company targets is invaluable. CFOs consider the company’s goals while formulating economic policies and targets.
They fine-tune strategies to improve their chances of success. It provides a concrete path for the company to achieve its objectives and minimises unnecessary risk.
2. They convert numerical data into meaningful insights
Using accounting data to draw notable inferences is one of the key strengths of a CFO. They turn numbers from transactional data, cash statements and balance sheets into reports providing insights into the company’s financial health.
These insights can help formulate strategic plans for the sales and operations process. They can catch faults in the financial side of the business and propose ideas to amend them.
3. They analyse the financial aspects of business proposals
Traditionally, the directors and shareholders of the company would inspect business proposals before their implementation. Emerging CFOs, with their expertise in accounts and finance, now adopt a more dominant role in the decision-making process.
CFOs don’t only think about reducing costs and saving money - they also prioritise increasing company revenue. They examine proposals from a financial standpoint, identifying possible potholes and risks.
4. They use intuition and experience to make realistic decisions
Ideas are the engines that power innovation in business. It is easy to get carried away and set unrealistic expectations while brainstorming ideas for new business ventures.
This is where CFOs play a pivotal role.
Since their inputs are strictly based on data and accounts, CFOs can make suggestions from an unbiased perspective. They also use their experience to choose the most appropriate metrics while planning and strategising. The CFO is a voice of reason and helps the company make realistic and fool-proof strategies.
5. They know where to allocate resources to get optimum results
Resource allocation is one of the main areas where CFOs can help. CFOs use analytical and accounting skills to determine the best way to utilise financial and human resources. This enables the company to maximise profits and minimise expenses while maintaining a healthy profit margin.
6. They use technology to plan strategies for the future of the company
Technological advancements in data analytics and management allow CFOs to foretell the company’s future. CFOs use reports generated by forecasting tools like ERP, financial modelling and big data analytics to plan business expansions.
Forecasting also helps them mitigate risk and anticipate future hurdles the company might face. It enables them to add value to the team and helps companies achieve their financial goals.
Conclusion
CFOs are no longer the cynics of the company. Their financial expertise and leadership skills make them key players in the decision-making process. They can use advanced technological tools to make insightful reports and help create sustainable plans for the future.
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