There was a time when Chief Financial Officers were viewed as back-office numbers-focused gatekeepers of corporate finances. But over the last two decades, their role has significantly expanded to encompass supervision of their company’s digital platforms, stewardship of the firm’s long-term performance, and architects of an enterprise’s ESG goals. In short, while at one time, CFOs were viewed as little more than chief accountants, they are now valued members of the C-suite team and are expected to weigh in on strategic decisions far removed from the balance sheet.
If we had to sum up how the role of CFO has changed in the last two decades, say that in broad terms, the job has expanded from being concerned about a company’s present financial situation to being equally, if not more, worried about the firm’s future. These future-focused concerns include matters well outside the world of numbers.
Though at first glance Environmental, Social, and Governance (ESG) issues may seem far removed from the purview of a CFO, they are increasingly finding their way to forward-thinking CFOs’ in-boxes. Future-focused CFOs are uniquely positioned to differentiate their business from competitors concerning ESG criteria.
Governance matters include the financial controls that safeguard the accuracy of financial information, the accountability of all levels of employees, and fraud prevention. Governance also encompasses issues of executive pay and shareholder rights. This job goes well beyond accounting. Farsighted CFOs work to ensure that the law is complied with and to see that the company enjoys an enviable reputation among its investors, customers, and employees.
Environmental concerns are sometimes viewed merely as matters of compliance with a host of regulations and certification requirements. But smart CFOs understand that environmental compliance can be an opportunity to reap the benefits and savings that sustainable practices stimulate. Sustainability also dramatically affects a company’s ability to raise capital and increase its brand equity.
The “S” in ESG may present challenges that will tax even the most astute CFOs. Social issues such as fair labor and living wage standards, corporate-community relations, gender and racial equality, animal welfare, and the potential for a product or service’s misuse by bad actors are not as easily dealt with as environmental and governance issues.
Canny CFOs have to walk a narrow path to not alienate potential customers by adopting policies that are perceived as overtly political. And apparently, most companies concur that their Chief Financial Officers are best situated to address ESG issues. One recent study showed that 68% of CFOs say their department has administrative authority to meet their company’s ESG performance goals.
Perhaps because CFOs were traditionally charged with staying on top of mounds of financial data, it’s not surprising that CFOs today have a significant voice in overall data collection, management, monetization, and interpretation. In some companies, the CFO has absorbed the functions and duties of a Chief Digital Officer. Other C-suite executives are increasingly turning to their CFOs for input on creating new sources of revenue and implementing new decision-making processes. CFOs who embrace these new functions will be in an excellent position to push the company into using AI and other advanced analytic tools.
As if CFOs don’t have enough to do in contemporary corporations, many are now exercising de facto control over corporate growth strategy. Like many other aspects of their position, this trend is driven by technology and data analysis.
Unlike CFOs of old who focused on the present and the recent past, today’s CFOs are using insights powered by predictive data applications to make decisions about their company’s future. They can more confidently show how adopting new business models and product lines may affect the company’s bottom line. Their ability to predict how changes in the company’s strategic plan will affect cash flow, sales, and profits makes them critical partners in the quest for growth.
While many of the changes in the purview and duties of today’s CFO have been made possible by technology, one unexpected byproduct of the CFO’s expanded remit has been increased engagement with other personnel. Studies show that while CFOs were once islanded by their focus on managing the company’s finances, today’s CFOs are much more likely to collaborate with senior executives from other areas.
Why has today’s CFO taken on so many new responsibilities? Not to be too flippant about it, but it may be because they probably have a lot more time on their hands. Many of the functions of yesterday’s CFOs have been automated. Managing expense accounts and vendor payments, accounting for costs and income from all over the company, and calculating how decisions may affect the P&L statement used to take nearly all of a CFO’s time. Indeed, that was what they were hired to do. But as more of these processes became automated, CFOs discovered that they were now able to step back from calculating the company’s numbers and to consider instead how new strategic directions could change those numbers. It helped that data once entered by a bevy of bookkeepers is now collected automatically by payment management systems.
Another reason that CFOs have become much more important in modern corporations is because they have emerged as corporate technology leaders. One recent study showed that 72% of CFOs today are the final decision-makers when it comes to the acquisition of new technology. This makes sense since nearly all of a company’s data flows through the CFO’s office; naturally, then, they are in the best position to decide what new technologies to adopt.
If there’s one takeaway from the above review of how the contemporary CFO’s role has changed, it’s this: automating data collection and acquiring more powerful tools to analyze that data are critical parts of the CFO’s job. One way that CFOs can meet these new responsibilities is by having a powerful payment management system in place.
PayEm has reconceived the role of payment management applications. While older payment applications focused only on how the company’s money was spent, PayEm looks at past, present, and future expenditures. Operating 24/7 in real-time, it reports on and controls corporate spend. By incorporating the reconciliation process into its reporting, PayEm provides more precise analyses of where the company’s money is going and gives CFOs the tools they need to shape the corporate future.
PayEm can do all this because it can integrate with Netsuite and other ERP software options, including Quickbooks Online and SAP Business One. For more information, click here to schedule a free, no-commitment demo.