The days of CFOs as archaeologists who relied on historical data for business decisions are over.

Real-time analysis and predictive modelling help businesses to see the future, instead of looking backwards.

As the world continues to change so rapidly, it is up to the finance leaders to set an example and to keep their finger firmly on what’s happening globally.

It’s been proven time and time again, especially during the pandemic, that those who have access to the best digital tools – and the ability to extract valuable insights from the data – are not only successful but also the most resilient.

The finance sector is undergoing its own digital transformation. Companies need to ensure they have the talent and the technology necessary to support and drive their teams and the wider business.

How can CFOs continue to influence company strategy and build resilience?

This article will take a closer look at four trends that we identified in our report, The modern finance report.

What the blog article covers:

  • 1. Sustainability is a strategic concern for CFOs
  • 2. CFOs invest in cryptocurrency
  • 3. CFOs are entering the metaverse
  • 4. CFOs develop a clear ESG strategy and purpose
  • What’s next?

Download your free copy The Modern Finance Report here.

1. Sustainability is a strategic concern for CFOs

Today’s CFO must have a balance between traditional and nontraditional skills (mostly digital).

A CFO who is future-focused will be able to make decisions on an ESG programme, or a strategy for adopting cryptocurrency, the same day.

You need to be flexible and prepared to engage in ESG initiatives as well as champion them within your organisation.

Nearly a third of you (30%) say that you would like to have a greater role in the supervision and reporting on existing sustainability programmes.

It is important to be aware of the most recent sustainability issues and to know where your business stands in relation to these.

Talk to key stakeholders in your company about putting together a financial viable plan that will take your ESG initiative to the next stage.

2. CFOs invest in cryptocurrency

Nearly half of UK finance leaders (44%) believe decentralised currencies are “extremely viable” as a payment solution for the long term.

Just 2% of you said you had no interest in using or investing in cryptocurrencies.

According to our report, there are some CFOs who have concerns about using crypto.

Openness to non-traditional roles will provide you with the fuel to drive crypto adoption within your organisation.

Only 13% of UK financial leaders said their companies accepted cryptocurrency as payment at the moment, but a third (33%) have plans to do this in the coming year. This is important for staying competitive on the global market.

This suggests that crypto adoption will be increasing in the near future.

Bitcoin’s low environmental credentials will also be a point of contention when it comes time to enforce ESG policies in business.

It is due to the way Bitcoin is mined. The energy-intensive verification process involves computers, and the average transaction consumes more than 1,700kWh.

This concern can be put to rest in the future if cryptocurrency mining companies commit to using lower-carbon energy or if organisations decide to accept only less-energy-intensive crypto, such as Ethereum.

Download a free copy of the The Modern finance report and learn how to prepare for the future.

3. CFOs are entering the metaverse

Finance leaders are examining the potential of the convergence of digital and physical life.

Metaverse is a digital network that connects people via virtual environments.

Although it is still in its infancy stage, it can be a goldmine for organisations, allowing them to release human resources when possible.

This emerging technology, for example, could provide finance teams with more accurate and frictionless methods of working.

UK-based organisations are tiptoeing into virtual environments–caution is the key theme here.

More than half of finance leaders (58%) claim to have made moderate progress in the metaverse but have still a long way to go.

What’s the best approach to the metaverse?

It is important to ensure that your team has the non-traditional skills needed to enter the metaverse.

In order to achieve this, 54% UK finance leaders have said they are preparing professional development courses around the metaverse.

A company must take a number of steps to prepare for the metaverse.

As part of their preparation, UK finance leaders say that they are preparing to meet new financial regulations (49%) by exploring new accounting or finance processes (47%) or purchasing virtual real estate using NFTs ( Non-Fungible Tokens).

4. CFOs develop a clear ESG strategy and purpose

ESG is the focus of today’s finance futureist. 80% of UK’s CFOs increased their involvement with these initiatives over the last year. However, some are looking to go even further.

Around a third CFOs are interested in committing a certain amount of their budget or resources to sustainability programs.

The UK CFOs are committed to ensuring that their ESG programmes are effective and employees are engaged.

Nine out of 10 (93%) UK finance leaders are in agreement that their ESG program is running efficiently and getting the most for the budget allocated. The UK finance leaders can build on this foundation to make their ESG programmes even more effective in the future.

Finance leaders working for UK non profit organisations are, unsurprisingly, the ones most concerned about societal issues.

Interesting, however, is that fewer non-profit leaders in finance say they are ready to use digital tools to improve their sustainability as compared to those from other industries. Less than a third of them (31%) claim to be prepared.

What’s next?

Here are some of the key insights that we have uncovered in our latest report The Modern Finance Report.

Download the report to find out more about the state of the industry and how you can prepare for the next phase.

SOURCE: Sage.com

With the latest announcement, businesses need to be able to adapt quickly to enable remote working and keep their businesses functioning smoothly, even if you’re not all in the same office. Most employees have had to adjust to a work-from-home environment again, and many of them are having to do so with their spouses and children in tow.

For finance, this remote work environment, combined with a troubled economy is even trickier. Finance departments are doing some of the most critical and challenging remote work in order to keep the business operations running smoothly. But their unique issues are often overlooked by how to make the business at large more productive and collaborative.

Although thought of as a backend function, Finance teams are on the front lines of the business now more than ever before. Along with customer service teams, they hear the financial distress of their customers firsthand. The effect that this alone can have on team morale can be significant.

As finance leaders continue to embrace their new normal, they not only need to lead a high-performing, remote finance function but also find ways to boost team morale.

Working remotely brings it own challenges so here are five areas worth focusing on.

Empower your employees to be confident decision-makers

Giving your employees more authority, trust, and flexibility in their remote working environments can pay dividends. Start by evaluating key finance processes for common bottlenecks and find ways to streamline.

Payment extensions are a good example of this since they often go through an upstream approval process. In a situation like this, consider whether you can empower employees to become decision-makers during the negotiation process up until a designated threshold.

Not only will this remove unnecessary bottlenecks and save time, but it can also contribute to higher productivity, greater confidence, and professional growth for your team.

Look for creative ways to scale your team

For smaller, two-to-three person finance teams, bandwidth can feel challenging in traditional environments. In a remote environment, it can feel overwhelming.

As Chief Financial Officer, helping your team become more scalable is critical. Here are some ways you can build a more scalable remote team.

  • Automate your dunning and reporting as much as possible. On average, one collector can handle over 300 accounts with a manual dunning process. If the process is automated, they can handle over 1,000.
  • Develop more meaningful training resources. Look for ways you can build out more resources and training processes for your team. Video recordings and finance playbooks are great assets to make readily available to your team.
  • Consider utilising contractors for short-term goals. If budget allows, outsource smaller, more time-consuming projects. You’ll free up your team’s capacity to focus on higher-value, more rewarding work.

Be a beacon of light in a dark time

During challenging times, finance teams have to have challenging conversations. You’re going to have to guide your team through some really tough situations. Avoiding surprises is generally a good thing, so give your team frequent updates about your bad debt expectations, DSO changes, and collections forecasts.

Spend more of your 1:1 time debriefing your employees and preparing them for what’s ahead and how to handle different scenarios. Consider building out a playbook for how to engage with customers and successfully navigate through different situations.

Feeling connected and rapid learning is important, so be sure to hold regular, virtual group meetings for the team to share experiences, insights, and best practices with each other.

Above all, make team morale your top priority. Now more than ever, CFOs need to be the finance team’s champion. Keep an eye on your team’s big wins, and find ways to call out individuals for their great work while celebrating the team as a whole.

Use data to gauge performance and morale

Take a closer look at the metrics you use to track the team’s performance, individual team members, and their productivity. Do they still make sense in the current environment, or do you need to make appropriate adjustments?

For example, right now many customers are struggling to pay their bills. This not only affects the performance of your company but also the performance of your finance team. Look at your portfolio as a whole, and then look at 30-plus days past due as a percentage of the portfolio. What number can you live with as a past-due percentage? Some folks even target the overall portfolio’s percentage of invoices past 60 or 90 days.

Then, update your team’s performance targets based on these adjusted percentages to better track individual performance against the new portfolio-wide target.

It’s also important to remember that during tougher times, regular 1:1’s and weekly meetings should remain your primary focus. These ongoing touchpoints and communication methods will allow finance leaders to gather the most reasonable data around their team’s performance and morale.

Remember that empathy matters most

Lastly and above all, empathy matters. Not only is your own business likely struggling right now, but so is your customer’s customer and their customer.  As a CFO, your top priority is keeping attuned to the feelings, challenges, and circumstances that your team and customers are going through, and then looking for ways to guide them through the uncertainty.

As humans, we’re biologically wired for connection, which can make the remote life even more challenging. Make it a priority to look for ways to celebrate small wins or personal achievements with your team. Encourage them to take mental escape days or establish a weekly meeting-free afternoon to help them catch their breath.

One of the positive outcomes of this pandemic has been the great lengths that individuals and organisations have gone to in order to connect with one another. As a CFO, keep looking for ways you can help your employees and customers in the spirit of generosity—and not worry solely about ROI.

If you’re a CFO preparing to lead your company into digitisation, no transformation is more important than making customers’ experience with your organisation better.

Nearly half (46%) of CFOs are facing increased demand to provide overall business counsel. Additional factors driving the changing CFO role include the availability of real-time data and increased compliance and regulation requirements, as well as the expansion of the role beyond financial management to include functions like IT and cybersecurity.

The enthusiasm behind introducing new innovations is, in part, being driven by the benefits finance leaders are already seeing. Approximately three-quarters (76%) of financial decision-makers currently drive digital transformation in their business. In addition, more than nine in 10 (94%) agree that financial management solutions are helping their teams optimise operations, while 92% believe these efforts can help automate and streamline the compliance process.

Here are four steps CFOs can take to ensure the digital transformation they lead creates value rather than simply cuts costs:

Examine the business model to understand what you’re providing to the customer

Any transformation that doesn’t keep the customer at the centre is a wasted exercise. Ultimately, you will digitise your processes, but be clear on intent. It must be about transforming your customer experience, the way the customer does business with you, and consumes your product or services with the latest tech.

Finance transformation on its own won’t produce impact, results or value if you’re not fundamentally changing your customer experience. You might automate, and you might make back office processes better, but if it doesn’t involve customers quickly getting information at their fingertips and finding your company easier to deal with, then it’s cost reduction, not value creating.

Examine finance, accounting and legacy processes

Upon examination, re-engineer them to fit the business model. Don’t adapt technology to your processes, which does not add value. Rather, change your legacy processes so you can leverage the power of new tech. The modern CFO is evolving from being a backwards-looking number collector to a trailblazing strategic leader who uses data and emerging technologies, like artificial intelligence and predictive analytics, to create a vision for the future of their business. The digitalisation of business is changing the way finance leaders work and embracing technological evolution will separate the leaders from the laggards in this new era. However, a lack of cultural readiness in the office of finance may slow adoption of new technology and hinder achieving optimal results with any digital transformation.

The enthusiasm behind introducing new innovations is, in part, being driven by the benefits finance leaders are already seeing. Approximately three-quarters (76%) of financial decision-makers currently drive digital transformation in their business. In addition, more than nine in 10 (94%) agree that financial management solutions are helping their teams optimize operations, while 92% believe these efforts can help automate and streamline the compliance process.

Right people, right skills

Use the right people, with the right skills, to understand tech and data, so they can analyse it and provide insights. A CFO must have all of these skills. You don’t need to make your finance people data engineers or scientists, but they need to understand and leverage data science within your function so you’re taking the maximum advantage and leveraging the new capabilities. What finance needs to know is the art of the possible. If you don’t understand the breadth of the available new tech, you can’t leverage the power new tech can provide.

Collaborate across teams

Build your capabilities around human skills by creating a function that’s able to collaborate with the rest of business, operate cross-functionally, and understand the needs of other parts of the business. Be able to influence, impact and change behavior based on clearly communicated insights.

The CFO and the office of the CFO are both positioned to look across the business from the front seat. They know, because of their involvement in numbers and reporting, that they understand the cross-functional impact. They should be driving that enterprise-wide transformation from that vantage point.

To do that, you need people with those human skill sets around collaboration, being able to problem solve, and think critically. These skills, widely talked about in the finance profession, are critical in today’s environment.

These are the four essential building blocks to successfully transform your enterprise, and how finance can play a pivotal role in driving that transformation.

DOWNLOAD OUR DIGITAL TRANSFORMATION GUIDE HERE.

SOURCE: Sage

During these challenging times what can finance leaders do to promote a healthy psychological and emotional perspective on the current crisis?

Managing the impact of the current pandemic has caused high levels of stress and has hit all leaders and functions hard, the hardest hit may be chief financial officers and the departments they are leading through these highly dynamic times. With the strain falling on the finance function and a majority of companies predicting a loss of revenue and profits, how can the finance function minimise the financial damage caused by the crisis.

There’s no doubt that the pace at which finance leaders are running is impossible to sustain. On top of that, many of the strategies CFOs are recommending integrate restructuring plans that have real human impact. Needless to say, stress is at an all-time high.

The chief financial officer is there to guide the organisation from the enterprise level. Even in the most average of business environments, it is a sizable, demanding, and highly complex responsibility. In volatile times such as these, that responsibility becomes enormously heavy.

From a leadership standpoint, the CFO not only has to manage and lead themselves through this crisis, but also their teams, and more broadly, their companies. What can finance leaders do to cultivate a sustainable environment and promote a healthy psychological and emotional perspective on the current crisis?

The following four activities may well lie outside their comfort zones, but by embracing them, CFOs will drive positive outcomes in their organisations:

  • Understand self-awareness. Understand that the crisis is going to have a personal impact on you. Working 16-hour days and making decisions that potentially result in your co-workers losing their jobs is going to take a personal toll.

 

  • Think differently. Commit yourself to learning and thinking differently about things; don’t have the crisis force you to do so. Great organisations will innovate through these times rather than simply work harder. These organisations will then be poised to pivot quickly as things shift in the future.

 

  • Actively listen. Especially to your team. Being receptive to their ideas and understanding their challenges creates connection at a time when you need it the most. Standing firm in your own position versus being open to another’s is counterproductive. Keeping an open mind and encouraging diversity of thought is imperative.

 

  • Look to the future. Your organisation is going to come out on the other side of this crisis. How, depends on the actions you take today, because what you do and say now will be remembered for years to come. Given this far-reaching impact, talent needs should always be part of the decision-making criteria on any restructuring or downsizing event.

 

CFOs must be cognizant that their people are looking to them for signals on how to react and respond during this crisis. If as a leader, you are closed to new ideas, your direct reports will model that same behaviour. As leaders of leaders, CFOs’ direct reports can cascade unfavourable, pervasive behaviours ubiquitously into the organisation. The aftermath of ineffective leadership at this level can echo and reverberate through every area of the business and have a negative impact on morale, encouraging an environment where innovation and collaboration are stifled when needed most.

On the other hand, leaders who can recognise the emotional aspects of what’s going on inside themselves and others will be better poised to nurture empathy, create calm and balance, and enhance critical connection among team members throughout the organisation, thereby accelerating productivity and effectiveness. As companies face increasingly challenging barriers, an atmosphere such as this promotes constant, transparent communication, which is required to make stalwart, forward-thinking decisions.

CFOs are routinely tasked with making data-driven decisions. But, in order to be effective in the current environment, good CFOs and their teams will need to exercise their qualitative analytical skills as well as their quantitative. Quantitative data, such as a fall in revenue, may indicate the need for a reduction in the workforce. Those types of decisions need to be made and, frankly, are fairly simple.

What’s more difficult is to predict the implications of that revenue drop over the longer term. Will that revenue come back or is it gone forever? What can we learn from recent changes in our customers’ buying patterns and behaviours that will impact our business model and cost structure moving forward?

These are more involved questions that require a finance leader to create a more collaborative and inquisitive decision-making process.

At an enterprise level, a leader’s ability to practice self-awareness, remain open and curious, listen, and focus on the future amid these extraordinary obstacles will serve to strengthen the foundation they’ve built. This gives them the leverage they need to pull their organisation and teams out of their immediate and natural fight or flight responses and stand them solidly in a position to create the stability and routine needed to unlock their capacity for long-term perseverance.

However, this only happens when the leader owns the transition on a personal level.

SOURCE: www.CFO.com