CFOs forge a more strategic role as a true business partner

The role of the finance department and the CFO in a business is still often seen as backward-facing and compliance-focused. This traditional view of finance is all about spreadsheets, auditing, transactions, tax and payroll. And that back office mentality can lead to finance being isolated and disconnected from the rest of the business.

However, that narrow and outdated view of the finance department and CFO is changing as finance increasingly touches every part of the business. According to McKinsey, on average, five functions other than finance now report to the CFO. These include risk, regulatory compliance and M&A functions, as well as IT and digitisation. And almost four in ten CFOs said they spent the majority of their time over the past year on strategic leadership, organisational transformation and performance management.

New tools

This trend is also being accelerated by digital technologies such as automation, AI, and cloud-based planning and reporting tools that enable the finance team to be at the very heart of business decision-making. They provide the platform for finance to be a true business partner and for the CFO to take on a more strategic leadership role.

The notion of business partnering in finance isn’t new. For decades accountants have been allocated to work with business units to provide support and analysis to improve operational and management performance.

But the business case for finance to assume even more of a commercial and strategic role is backed by research. According to a PwC study, organisations that outperform others spend considerably more time (23 per cent) on business partnering. And that applies across all sectors, maturity and organisation size.

Being open to change

Not only that, but the study found a link between the best performing financial teams and those open to new and changing technological developments, such as the use of smart data analysis tools.

And this kind of commercial insight from the CFO is particularly critical for startups and high-growth organisations, where a clear understanding of the financial implications of strategic and operational decisions is vital to the success and continued expansion of the company. Finance can often act as a ‘level head’ in a highly dynamic and stressful environment.

Take traditional finance tasks such as planning, budgeting and forecasting, for example. Real-time data and cloud-based reporting tools enable a much more sophisticated approach that helps organisations stay agile and embrace a continuous forecasting model that can react to volatile and fast-changing market conditions. And, according to a KPMG and ACCA survey, more than three-quarters (77 per cent) of executives believe the planning, budgeting and forecasting process must be a partnership-based approach driven jointly by the business and finance and that takes into account enterprise-wide risks.

In an interview with Financial Director, Wayne Close, general manager, UK health services of BUPA, said: “I believe finance is a commercial function as well as transactional. Finance has the key to good data and information and as such has a responsibility to provide insight, direction and options. A strong commercially-led finance team is an incredible asset to a business and its CEO. Some of the important characteristics we seek are a high quality of data and the ability of the team to analyse that data to gain powerful insights.”

Technology is a key factor in enabling this change and elevating the CFO and their team to a more strategic role. Many finance processes can now be automated and the verification of data reduced to checking exceptions. This can free up the finance team to provide deeper advisory services throughout the rest of the business.

Underpinning this building of relationships across the business, there also needs to be a strong foundation of reliable, timely and appropriate data – which modern cloud-based finance and ERP systems can now provide.

Learning new skills

This evolution to become a true business partner also has implications for the future skills of the CFO and the finance department. With many traditional accounting tasks becoming automated there will be increasing emphasis on areas such as data analysis and performance management. And it will be crucial for the finance team to develop strong communication and commercial skills.

The ICAEW says decentralised approaches to finance business partnering better enable business support but cautions against the increased risk that poses of finance losing its objectivity. The ICAEW also argues that as a business partner, finance needs to be actively involved in developing systems and processes across the organisation.

Great rewards

But it is an exciting prospect that offers great rewards. By turning finance from a backwards-facing compliance-oriented function to a strategic advisor and true business partner, organisations can gain vital insight and advice on business performance and quickly identify new opportunities or areas of concern.

As former Alstom CFO Nicolas Tissot argued at a McKinsey CFO Forum event in London: “Among the members of executive committees, CFOs are probably best positioned to challenge the businesses. They are independent from operations. And they are the only ones, apart from the CEO, who have a comprehensive vision of the company. The role of a CFO who goes beyond being a bean counter is clearly not only to be a business partner but also to be a business challenger. This is not the easiest part of the job, but it is definitely a part of the modern CFO role.”