A recent survey of CFO’s by Robert Half indicates that 27% state their roles are expanding into operations. Chief Financial Officers state they are being asked to work directly with operations managers to optimize efficiency and lead cost-cutting projects. Generally, the skill-set of the CFO is ideal to help operations managers analyze changes in processes that can achieve cost efficiencies. Even small companies can benefit from the leadership a trusted financial advisor can offer.
The prolonged economic downturn makes the role of the CFO more important; unfortunately, many accountants do not fill the role well. The ability to accurately foresee what “might happen” and “can happen” is a key skill for CFO’s. In uncertain times, organizations should precisely know their expected results during a month or quarter–not just at the end. Executives should be able to rely on their CFO’s to provide information in time to implement quick initiatives to improve results before they become history. Below are four areas where CFO’s can help executives manage effectively.
Mapping a financial route to success has always been important for the CFO; however, the current climate requires more precision in short-term and long-term profit planning than ever. An effective profit forecasting system should provide a weekly forecast update to other executives and provide scenario-based forecasts of monthly or quarterly results.
Managing cash flow is critical. Organizations with weak cash forecasting systems are in grave danger. Twelve to sixteen week forecasts will generally identify issues far enough in advance for organizations with consistent operations and sales to make needed adjustments. Strong cash management is also a critical element of balance sheet management.
In the face of rapidly changing federal tax laws, a sound tax strategy is necessary. Key provisions for businesses are set to expire in 2011 while other provisions are being debated. A strong CFO can develop scenario-based alternatives. In addition, businesses should focus on their total tax burden. State income taxes, real property taxes, personal property taxes and other miscellaneous taxes are substantial for most businesses. Often, tax-reduction initiatives in these areas provide benefits that extend for several years.
Creating an environment for growth is a tricky proposition for CFO’s. As the prospects for future inflation pressure increase, pricing policy is more important than ever. Knowing your product costs and the value your product brings to customers are the basis of an optimal pricing policy. The CFO, working with astute sales and marketing experts can help organizations develop a pricing policy that maximizes revenue and profit.