By Neil Robertson, CEO, Compleat Software
The CFO controls the purse-strings across the entire company. Inevitably, their financial influence extends to areas of the business they are comfortable with – as well as aspects they don’t fully understand. This inconsistency can have far-reaching implications, particularly when a lack of transparency limits the amount of information available to fellow stakeholders.
If other business decision-makers feel side-lined or blocked from critical information, they can’t do their jobs effectively. It also puts undue strain on senior working relationships, which impacts all employees – and can lead to poor financial and business decisions. To avoid politics and keep the business from stagnating, CFOs need to do all they can to build better interdepartmental relationships between stakeholders and the finance team.
Here are three ways for a CFO to improve their position in the business – and make better financial decisions that allow the organisation to grow.
- Avoid making isolated decisions
Business plans are primarily based on projected revenues and cashflow. This means that financial parameters can change frequently to accommodate unexpected ebbs and flows. In crunch times, CFOs have to prioritise finite resources which often involves making hard decisions – and potentially disappointing one department while appearing to favour another. Of course, the final call is made in the company’s best interests but CFOs tend to make these tough choices on their own, unable to easily share or explain their thinking.
Typically, CFOs will react prudently to a reduction in revenue and build greater cash reserves to safeguard the business. Consequently, projects that don’t add immediate value are shelved indefinitely and recruitment efforts are frozen – much to the consternation of the stakeholders involved. Their indignation is often compounded by the CFO’s inability (or unwillingness) to provide accurate, timely and relevant financial information on suppliers, budgets and projects to the rest of the board. This makes it difficult for the department heads to budget appropriately, and delegate responsibility and accountability for how the budget is spent.
Team input is critical to making the best decisions for the company’s future. Without clearly communicated budget parameters, stakeholders will struggle to make the most of the available funds. The health of a growing business depends on a CFO that shares important financial information in good time, gathers input from other department heads, and encourages all board members to work together.
- Use technology for greater transparency
Many businesses still rely on archaic accounting processes. Manually approved paper invoice trails and outdated management reports are all too common and quite frankly, about 75 percent of these old-fashioned processes add no real value to the business at all. All that is being achieved is to capture, approve and post a purchase invoice and then hide it away in a filing cabinet. And, how can a CFO keep their finger on the pulse and respond to unforeseen issues quickly when they receive a report that is already 15 days old?
These old-fashioned, manual processes also lock information in silos. This means that teams can’t easily access the information they need to make informed business decisions. Contrary to popular opinion, automated financial management software that delivers real-time insights is very affordable. The right technology can enable company-wide transparency and liberate information for all employees to do a better job.
In today’s increasingly competitive world, business leaders need to be agile. Imagine if all board members could see every aspect of their suppliers spend, review every request to buy, every order commitment and know exactly where they stand on both corporate and project related budgets, 24×7, from any device?
Automated financial technology makes all that possible. Approved stakeholders can see every invoice from the moment it’s captured, and track it throughout the approval process right up to payment. It’s easy to check every penny that is spent with each supplier, access invoices in an instant and know the exact status of their corporate budgets without delay.
This means that the board can immediately make smarter, faster decisions that benefit the business, control any ‘maverick spending’ and take responsibility for how their budgets are spent. Where manual accounting processes are slow and frustrating, automated accounting technology helps colleagues work together quickly and efficiently and – ultimately makes the CFO’s life easier.
- Trust more
The CFO is the corporate financial gatekeeper – managing the long term strategic planning for growth, whilst delivering the short term financial results within the confines of tight cashflow management. It’s a challenging role but the best CFOs understand that ‘good financial management’ takes place before the commitment to spend.
Unfortunately, many CFOs have been burnt by rogue colleagues who don’t stay within their set financial parameters. As a result, CFOs are often unwilling to handover full budget responsibility and accountability to their co-workers. Unfortunately, this lack of confidence just adds more weight to the CFO’s workload – and the heavier the burden, the easier it is for mistakes to happen.
Instead, CFOs need to encourage all board members and their teams to become better financial managers. Technology can assist here too. Access to real-time accounting information will
improve interdepartmental awareness and understanding of budgetary considerations. It can also help foster greater trust between CFOs and their c-suite colleagues.
Information is easily hidden or lost in the day-to-day chaos of manual, administrative processes.
To become an efficient and successful business led by a board of knowledgeable, collaborative leaders, real-time financial information needs to be transparent and accessible. That will not happen until CFO’s recognise that their current manual accounting processes are holding the business back and limiting the strength of their relationship with their board colleagues. The world of work is changing and CFOs need to grasp the opportunities that automated technologies offer.