Many CFOs spend more than half of their time on basic accounting tasks.
While this may be warranted when a company is new, for a growing company we think there are more valuable strategic responsibilities that the prime talent of a good CFO should focus on.
Instead of spending so much time on accounting duties, valuable CFOs should be freed to spend the majority of their time as a business leader. Many of the most successful companies we work with rely on their CFOs as strategic partners. With both strong financial and analytical skillsets, CFOs are critical to strategic planning, and ultimately their companies’ success.
“If you have a successful company, most likely the owner and the CFO meet to talk about strategy,” Concannon Miller Shareholder Andy Kahn says. “I think when business owners don’t look at the CFO as part of the strategic planning group, the overall success of the company suffers.”
Some business owners view their accounting department as simply overhead. While we think that’s incorrect, taking an active role in the company’s strategic planning is a key way to justify your worth.
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Also, some CFOs have or may end up with ownership interests. That’s another big reason to make sure you’re involved in your company’s strategic planning.
The chief way for CFOs to get involved in strategic planning is through multi-year budget projections. While it can be challenging to predict too far into the financial future, it’s a worthwhile effort to undertake.
“To get business right, finance chiefs need to be good forecasters,” a recent Wall Street Journal special section on CFOs advised.
But being a good forecaster doesn’t mean you can’t change your predictions. In fact, the best CFOs use multiple-scenario planning, enabling their companies to quickly react to change and correct course as necessary.
“A key defining feature of the best forecasters is that they update often, and they typically update by relatively small increments,” Philip Tetlock, a professor at the University of Philadelphia’s Wharton School and the co-author of “Superforecasting: The Art And Science of Prediction” said to The Wall Street Journal.
Tetlock warns, however, that those who know their business best – like owners and CFOs – sometimes have a hard time recognizing changing circumstances. He advises not just reading one set of sources or listening to one set of advisors.
“Selective exposure is a problem – we tend to read the things that we agree with. We tend to hang out with people we agree with and they can become echo chambers and that can produce unwarranted extremity in forecasts,” Tetlock said to the Journal.
While no budget projection can be certain, the best forecasts are based on data – your company’s financial statements and other financial KPIs. Data-driven decisions allow companies to best scale their businesses and boost performance.
“The art of making data-driven decisions lives at the intersection of intuition, hard facts and strategy,” according to Adaptive Insights, a financial planning software company that conducts semi-annual CFO surveys. “The need to analyze business information to drive strategy in finance has never been greater.”
Since the 1920s, Concannon Miller has been working with CFOs to help their businesses grow and is the proud sponsor of the Lehigh Valley Business CFO of the Year Awards. Seeking more advice on how to improve your company’s finances? Contact us here.
