Under the Spotlight – The CFO as a Strategist

The Roles of a CFO

Our CFOs have all walked the walk, playing leadership roles in fast growth businesses in every sector. The Strategist role of your CFO is to help you define what you really want from your business and work with you to devise the strategy to make it happen. This includes attention, in the current climate, on future-proofing your business to adjust to market conditions. There has never been a greater opportunity to grow through acquisitions and purchase competitive businesses at below market value. Financing terms are also incredibly competitive. A CFO can help you navigate the options and set yourself up for recovery and success.

What is The Strategist?

So, what does ‘strategy’ or ‘being strategic’ mean for Business Owners, Directors of Boards and Management? Often this concept is confusing as the roles relating to strategy are not clearly defined. In in the case of SMEs, the owner is often the Director and Manager of all things. This can be stressful for the owner as there are many elements to juggle. So, how does the owner cope with these increasing demands made upon them?

In general, Directors ‘set’ the strategy and ‘monitor’ its implementation whilst Management execute or implement the strategic plan usually with the development of a tactical or business plan within the strategic intent of the organisation. The CFO traditionally is responsible for the overall high level financial resourcing of the plan. This may include (and not be limited to) modelling high level scenarios, ensuring adequate cash flow for the life of the plan, developing appropriate financial risk management controls, investigation of strategic funding options and developing three way financial forecasting models for at least five years. This not a function that can be effectively carried out by a financial controller or bookkeeper. They will be managing the day to day resources and accounting for these resources via many reporting methods.

Align with your purpose

Strategy is an essential growth mechanism for an organisation to create value for its shareholders (FP) or service to communities (NFP). The perception of what ‘value’ is needs to be efficiently communicated to all stakeholders as this may vary or be interpreted differently by the varying sectors within the organisation’s business community. The development and execution of strategy is not without risk. A proper (fit for purpose) and robust risk management process must be in place for the plan to yield successful outcomes.
The part-time CFO in conjunction with the CEO and Board (or owner/s in SMEs) can assist in the above imperative process to create value and must be aligned with the purpose (why the organisation exists) statement. Often a review of the previous strategic plan needs to be undertaken to assess its success and limitations. This informs the future planning element, and to ensure that the valuable aspects are retained. Moreover, other less successful outcomes are redesigned or eliminated.

The following diagram illustrates the strategic process with which CFOs as ‘Strategists’ are engaged:

Directors of large entities and owners of SMEs must be ‘strategically intentional’. In addition, senior management must be ‘strategically managed’ by the CEO or equivalent. The Board or Owner ultimately holds all responsibility for the strategic success of the organisation. They employ the CEO to execute the set strategy. If the owner is the CEO and wears all the hats, then there is considerable demand placed on the owner to execute the strategy. The first item on any Board agenda should be the reporting of strategic progress against the set objectives by the CEO. It is not uncommon for the CFO to present the Finance report at Risk and Audit (or Finance) Sub-committees of the Board. The CFO would work closely with the Chair of the Risk & Audit Committee and CEO and ‘own the magic numbers’ of the organisation. In an SME, the Financial Controller (or external accountant/similar) would carry out this function and liaise closely with the Owner on a more regular basis.

Get your numbers in order
Informed and insightful decision making can only be made if the magic finance numbers are accurate and informative. Reporting should thus be tailored and customised for the type of organisation (large, medium, and small enterprises). This is where the CFO can truly add immense value. A ‘one size fits all’ approach just does not work in today’s challenging, diverse and financially demanding business environment.

Written by Dr. Andre Van Zyl, Regional Director (QLD) – The CFO Centre