With so many unknowns, it’s impossible to say what the economy will look like in a year. However, that does not mean CFOs can't prepare their teams and companies for what comes next.
- Today, CFOs are far from the head accountants at their companies. Instead, they are responsible for developing corporate strategy as it pertains to accounting, finance and beyond.
- The current economic climate only emphasizes this shift. Right now, savvy CFOs must find ways to empower remote teams to keep business running as usual. Likewise, they must reevaluate their financial plans for the future: What might have seemed feasible a few months ago could be completely out the window today.
- Learn four ways how CFOs can reevaluate their financial plans and processes.
In a time of unprecedented economic turmoil, companies are asking a simple question: What is next? With stock prices fluctuating, offices shuttered and the coronavirus pandemic still in progress, they are desperate for a sense of normalcy – or at the very least predictability. Everyone has something to contribute toward this effort, but the chief financial officer (CFO) should logically take the lead.
The CFO's role has evolved significantly in recent decades. These executives are no longer seen as a head accountant or bean counter. Instead, they are responsible for developing corporate strategy as it pertains to accounting, finance and beyond. They're still drivers of the company's financials, but now, they are even more valuable to the bottom line — helping the rest of the C-suite plan and forecast for the future.
Before the pandemic hit, CFOs were already taking a proactive role within companies. According to a 2018 survey of CFOs by Accenture, more than 80% of financial executives consider one of their core responsibilities to be identifying opportunities for value creation. Likewise, the same Accenture survey showed that a little over three-quarters (77% to be exact) consider it their duty to lead operational transformation across the business (and not just within finance and accounting). CFOs must continue to play an active role, arguably even more so now.
First, CFOs need to explore ways to empower their teams with tools and technologies to maintain business as usual, even while working remotely. With all the turbulence in the broader economy, the last thing a company needs is for its internal finance function to become compromised. That's especially true if the company is pursuing government loans or still trying to complete its 2019 taxes.
Second, CFOs must reevaluate their financial plans for 2020 and 2021. We are in the midst of a history-altering event that no economic forecast could have anticipated. Making matters worse, the nature and scope of the economic fallout might be so unusual that the playbook from past recessions may no longer work.
CFOs can't assume anything while they rewrite everything. Luckily, there are still a few steadfast pointers to keep in mind.
Paving the way forward
Making it through this moment requires a combination of responses: maintaining the status quo as much as possible while also managing tasks in a more optimized way. This will look different at every company, but there are steps every CFO can (and should) take in the short term.
Cutting costs must be a top priority. The key is to distinguish superfluous costs from critical ones. On the payments side, many companies can save on wire and check costs by switching to U.S. and global automated clearing houses (ACH) or generating rebates by paying early.
There is also ample opportunity to save money within the finance department by introducing automation for things such as dynamic discounting or by relying on more remote workers. In fact, almost 75% of finance leaders plan to keep at least 5% of their workforce remote instead of bringing those employees back into the office post-COVID-19, according to a Gartner survey conducted in March 2020. Clearly, measures that might have appeared unthinkable six months ago are now on the table if they can produce significant results.
Similarly, CFOs also need to insulate their companies from unnecessary errors and expenses. For example, compliance protocols might have gone out of the window now that people are working from home and scrambling to adapt. That's understandable, but it could also lead to an expensive tax penalty or a General Data Protection Regulation – or GDPR – breach. That's the last thing any company needs right now.
Fraud could also be a problem as opportunistic scammers take advantage of the present panic. Technology can help, but companies will need clear leadership and messaging from the CFO that emphasizes the increased importance of data hygiene.
In addition, CFOs must keep employees motivated and engaged on many fronts – your team remains the best resource the finance department has. With hiring frozen and people continuing to work remotely (in whole or in part), CFOs need to optimize the tech stack to pick up the slack. In many cases, automation can handle time- and labor-intensive workloads to free up bandwidth for more strategic initiatives.
When the goal is to do more with less, CFOs need to get a little creative, but it is worth the effort if it leads to a more effective and sustainable remote workforce.
4 ways to reassess your financials
With so many unknowns, it's impossible to say what the economy will look like in a year. However, that does not mean CFOs can't prepare their teams and companies for what comes next. Whatever you do, mind these four best practices:
- Choose digital. Teams need to work remotely and efficiently from now into the foreseeable future. Digital technologies (particularly cloud-based) fulfill both objectives: They allow teams to collaborate effectively from anywhere at any time, and they also eliminate manual workflows along with common sources of data errors. Something such as accounts payable, for instance, will not be able to continue using paper for invoices or checks. Digitizing data and workflows wherever possible won't resolve every issue, but it's an important foundation for an efficient finance team. If you are looking for a way to measure up, start with cloud-based enterprise resource planning and commissions systems, accounts payable automation, cap table management systems and business intelligence tools.
Document everything. Moving forward, finance teams might have to shift into new roles. CFOs should ask people to document workflows and responsibilities to enable a fluid trade-off and put the infrastructure in place to make that possible. Along the same lines, they should make the effort to digitally document anything that's currently trapped on paper (think supplier invoices). Robust documentation matters for keeping things running smoothly internally and for preserving supplier relationships externally.
- Govern carefully. Strong governance surrounding areas such as fiscal responsibility and regulatory compliance helps companies avoid unnecessary (and potentially disastrous) setbacks. That means putting visibility and approval protocols and controls in place, assessing risks, and holding people accountable. These are tasks that are difficult in the best of times – and much harder now that people are working remotely. Technology can help, but CFOs must strike a balance between necessity and practicality. In other words, they will need to focus on the risks that are most likely to happen or appear most disruptive.
- Unearth value. It is tempting to tie up purse strings right now, but investments are still worthwhile (and even essential) if they add meaningful value to your organization. For example, consider robotic process automation: By streamlining administrative processes surrounding taxes, reporting, or closing the books, companies can save dozens of hours of work they can redeploy elsewhere for a huge boost in productivity.
The point is to enable your current workforce so that your business can not only survive through this moment but also emerge from it a better and healthier company.
Once you start exploring your existing financial plans, you can discover a clear path forward. You might need to revise and update for the current climate, but your team can adapt along with your plans. With the right leadership, businesses can rise to this occasion and exceed everyone's expectations – even their own.