Tom Hood on challenges CFOs face post-COVID-19

This episode of the Sage Advice podcast features Tom Hood. Tom has been executive director and CEO of the Maryland Association of CPAs since January 1997. Armed with a passion for the profession and the drive to move it forward, he manages a staff of more than 30, works closely with the Executive Committee and Board of Directors, and oversees the work of numerous committees to promote and protect the CPA brand in Maryland.

Below is an edited transcript of our interview.

What do you think are the biggest challenges facing CFO’s today?

Tom Hood: In this current environment, it is really managing their balance sheet, and trying to figure out how they are going to manage receivables, payables, etc. The other challenge is how they are going to manage remote work. For example, how they are going to have to get their audit done remotely?

They are going to have to manage remote teams that they haven’t [previously] and I’m hearing from members who are CFOs that are saying it’s a little bit challenging. They were not all geared up and ready the way public accounting firms were.

Another challenge is managing the dramatic issues of this COVID-era… revenue, cash flow, etc., and that varies based on which industry they are in. [It is also joining] this whole movement to be more of a strategic advisor, which was already in play.

Managing cash flow is CFO 1.0 or 2.0 – so CFOs that did not have that in place were scurrying to get it done. Those that had it in place are probably in a much better position to handle what went on in the last few weeks.

Tom Hood: You’re right, CFO 1.0 is what I call making sure all the trains run on time and the all the books are tied right. CFO 2.0 would be that next level up. It would be projection, right? So, understanding cash flow, financing, managing your balance sheet, income statement, and advising the business a bit. CFO 3.0 is really getting into that strategic, longer-term advising.

You said managing remote work, not managing remote people. Can you expand on that a little bit?

Tom Hood: Let me start with one thing that I believe about this. Well, all the trends that were at play before we went down this road are being accelerated. The move to the cloud, managing remote work. All those things have just been blown up because now you have to do it–it’s urgent. So, people are scrambling and starting to figure it out… some better than others.

Like you said, if you were already in that CFO 2.0 moving toward 3.0, you are in a lot better position. So, this idea of managing remote work – it is about the work and the work can be done anywhere today. I’m living proof of that. We went to the cloud about four years ago.

So many companies, people, managers, believe if you don’t see people, they’re not doing work. But the point–this whole notion–that I have to be watching them… that’s not what professionals do, especially in accounting and finance. You have all these tools now that help with workflow and manage handoffs between departments or functions. There is no reason that you can’t be doing that in a more effective way.

Before COVID hit, we were talking about automation, machine learning—those things are still going to be around. But because we suddenly accelerated remote workforce, I’m wondering if, once we emerge out of this, those will catch on quicker?

Tom Hood: Yeah, I think so. We are doing our own survey with CFOs now to see what happens. I read something like three quarters of CFOs were betting that they would not back off remote work for their teams on some level.

I do miss getting to see my team and there is no question that in-person is critical. But it is not necessary every day. It might not even be necessary every week. I’m amazed on the public accounting side–how much weren’t really going into that room, but [businesses gave] a flexible Friday. That’s not remote work.

But it is the same thing in the CFO office. Many of them said, we’ll wear jeans Friday and you can have one day a week off to work from home. I think that’s gone. I think now maybe we only have to be in the office two days a week. We cut off our office space in half. Right? Think about the things that you could do that we’re probably going to need to do in this post-COVID startup of the economy again.

This is certainly going to have an impact on commercial real estate. I think this is also going to have an impact on home real estate.

Tom Hood: There is no doubt about that. If you look at the whole workforce, flexibility is the number one thing people want. So, if you can give them that remote work from home part of the time, it is a much better quality. And, if people have their personal lives taken care of, they are going to give everything to you.

In fact, what we’re finding is it’s harder for people to cut off work when you’re working from home.

Can you share some of the highlights from the town hall you recently had with CFOs?

We talked about the top three concerns CFOs had with respect to this COVID crisis:

1. 72% said potential recession
2. 59% said financial impact on their company, revenue collections, and profitability
3. 45% said the effect on their workforce and a reduction in productivity

Now that we have been shoved into work from home, they are questioning whether or not they’ll be as productive now. This could be informed by their tech stack. If they don’t have the tools and they’re stuck on enterprise on-prem set systems, that could be an issue. And of course, that’s the whole point of what you guys are doing there at Sage.

What would you say to someone aspiring to be a CFO in the post-COVID world?

Tom Hood: COVID has really emphasized the importance and role of accounting in business. If you just take a minute and look at all the relief packages…COVID one, two, and three, and now they’re talking about four. Everything that’s happening to get this economy moving, is running through accounting, payroll and tax systems. Everything other than the healthcare issue.

What that is telling me is that this gets back to that strategic role, because if all you’re doing is compliance as a CFO or controller, then you’re not helping to add that value that’s needed in this economy.

The notion of going to cash flow forecasting, strategic understanding the outside world, trends and watching what’s coming… if you are that strategic CFO watching what is happening, you’re in the best position there is because everything that’s happening is coming through the accounting system. Everything from taking more money out of your 401k, helping advise your employees about what this means to them, the layoff structures going through the unemployment system—they are all things that are in the wheelhouse of the CFO and the accounting finance office.

So this is their time to shine, both for their company but I think even bigger for the community, because if they can help keep their business and make it thrive through this, help their employees stay employed by taking advantage of these financing programs. I mean, that’s huge and that’s never been to this degree, as important as it is now, and in the next, I think few years.

Are you hearing more conversations about subscription-based models?

Tom Hood: Oh, I’m hearing it a lot. Every business is talking about it…what’s it mean? What can I do? How do I structure it? You and I go back a long way. At our association, we did [subscription-based model] four years ago and it’s the best decision we ever made. We used to mail paper and now it goes into your credit card. You can always call up cancel but the point is, it’s an automatic renewal, automatic cash, we don’t have to wait for checks.

Every business, if you’re a strategic if your CFO 3.0, you should be saying: What could we make a subscription relative to our business model? Yeah, we are hearing about it. We’re going to try to start running some things to educate folks on how they can think about that differently.

There is one example in my local community that just want to share with you because I think this was extraordinarily innovative. It is a tapas restaurant that in addition to doing takeout, had wine lockers that they sold to people on a subscription basis.

And this is what’s going to be able to keep them afloat because not only did [they] sell out of those wine lockers, they had a waiting list, so even if people cancel they will still fill those [spots] up. So, there’s a great example of somebody figuring out a way to create a subscription around something in their organization to make it work.

Tom Hood: Yeah. Talk about predictable cash flow, like all the things that you want to be doing, that’s exactly where you want to be positioning from that standpoint.

Any final thoughts as we wrap this up, Tom?

The key right now is for CFOs is to start to think about themselves. Put your oxygen mask on in this environment where we are being flooded with negativity 24/7. Get up every day and take a mental shower and think, “What have I done in the past that helps me go through this?” Get yourself pumped. Then you can pump up your team and take care of your organization.

Start with yourself, make sure you are maximizing your strengths, get yourself in a positive attitude, and then start spreading it, because God knows in this economy, we need it more than ever from this community.