Business growing pains – top CFO challenges and how to solve them

It is an exciting time to be a CFO. Your role has evolved in response to changes in technology and business culture. However, as you gain experience and new responsibilities, you will face inevitable challenges.

To truly understand the transition from CFO 1.0 to CFO 3.0, we commissioned a study of 500 US-based CFOs in order to understand what your future job description looks like, and to get a feel for the impact technology is having on your business.

To complement this research, we invited a select audience of financial professionals from the Institute of Management Accountants (IMA), to share their biggest challenges and advice for advancing in this new climate.

Time management is a challenge, but do not adopt technology too fast

CFOs in the US–especially those in medium-sized companies–are taking it upon themselves to drive digital transformation throughout the business proactively.

As a result, CFOs not only have a seat at the table but many seats at many different tables; the demands placed on your time increasing exponentially in correlation with the complexity of the business and needs of stakeholders.

Technology is a potential solution, automating time-consuming tasks and ensuring visibility of multiple moving parts. However, digital tools designed to overcome data silos, very easily create new silos of their own if poorly integrated or untested for compatibility by those skilled to do so. Security is another risk which must be considered.

Organizations throughout the US are experiencing such growing pains, according to our research, due to speed of implementation but lack of infrastructure to adopt them. Very few businesses, especially those more mature and complex, consider themselves to be digitally native.

Understand that digitization and digitalization are not the same

There is a big difference between digitization and digitalization. The words sound similar, but the subtle difference is crucial for ensuring business success. Digitization is simply the conversion from analogue to digital, such as switching a manual ledger to Excel.

Digitalization, on the other hand, is how digital technologies and digitized data impacts upon how work gets done, transforms how customers and companies engage and interact, and creates new digital revenue streams.

It is the process of creating an environment for digital businesses, whereby digital information freely flows at the core. Digitalization involves how digitized information is made use of once a company has it at their disposal.

To develop as a CFO, you must embrace a move towards the digitization of every business process. It is not a replacement for traditional systems but an integration of technology across all areas of the business in order to evolve your operation and deliver value to customers, whether internally or externally.

Digitization is now a realistic goal for finance functions due to a range of technological advances. These include the widespread availability of business data, improved processing of large data sets, freely available algorithms, and analytical methods and improvements such as connectivity to cloud computing.

CFOs must take responsibility as the gatekeepers of critical data to generate forecasts and support the CEO’s strategic plan and decisions. You need to understand, in detail, the customer demand, order fulfilment, supply chain and cash flow, as well as real-time industry and market statistics.

Understand that customer expectations are changing

The fourth industrial revolution, or Industry 4.0, is a direct result of the application of artificial intelligence to big data sets. This is changing customer expectations as web tools allow customers to personalize their experience and receive real-time recommendations. This means that they may expect the same level of sophistication from your business.

Fortunately, you now have the opportunity to enhance products directly through software updates, as opposed to having to rewire or reconfigure static tools.

Collecting and leveraging substantial amounts of customer data allows you to communicate more effectively with customers and as a knock-on effect, expedite product innovation to market. In unpredictable circumstances and a global market, technology that keeps up with ever-granular modes of interaction with customers is crucial.

Take advantage of automation, artificial intelligence and machine learning

We are entering a period in which technology such as robotic process automation, artificial intelligence and machine learning is easily accessed. Nowadays, it is wholly realistic to reimagine your leadership and business vision as led by data and emerging technology as long as new techniques such as predictive analytics are learned and utilized.

But, starting with the basics, it is the tedious and repetitive financial tasks that are most easily automated. According to our research, 89% of financial leaders agree that the amount of time they spend on financial admin not only negatively affects individual productivity, but team productivity as a whole.

This unnecessary manual administrative work also has direct impact on team morale and employee retention; nobody enjoys digging holes only to fill them back up again. It’s not very efficient, and it’s prone to error.

Employees thrive on challenges that require high-level thinking abilities,  and so investing in automation allows teams to concentrate on critical, more creative, work.

Prepare to persuade your team of the benefits

Although automation technologies allow teams to focus on higher-level thinking strategies, many employees worry about their potential replacement as a result.

It is important to remember that people don’t usually fear change; they fear loss. If there is resistance to the adoption of automation technologies, then it is because people fear what it represents. It means that there needs to be a strong adoption strategy in place, and it needs to go beyond simply implementing the technology itself.

The most effective CFO will go beyond rudimentary training for employees. Workers need to trust in the broader strategy and understand what it means for their career development and their job security.

It is a mistake to understate the effect of new technology on people: it can have a significant impact on organizational culture. It is when CFOs think about their people in tandem with technology adoption, that the business will thrive.

Ensure that you rely on data, and not just intuition

CFOs and financial leaders have traditionally relied on intuition to guide business decisions. This was largely based on an individual’s hard-won experience and a dollop of luck.

CFOs, focused on day-to-day tasks and decision-making,  did not have the luxury of time to look at the bigger picture. Partly, this was habitual, but it was mostly due to lack of available, real-time data.

The most effective CFOs today have all the data they need at their fingertips to make instant decisions about the company. Increasingly CFOs are strategists who base their outcomes on empirical data, where there’s no room left for guesswork or chance. There are reliable, data-led reasons behind every business decision.

However, it can be a monumental task to digest, interpret and visualize substantial data sets. Increasingly, CFOs must develop expertise in data analysis, with the ability and agility to synthesize large amounts of data from disparate sources to define an innovative path forward.

It is the arrival of new technology solutions such as artificial intelligence, machine learning, and data modelling that will empower your finance team to create data-led strategies for the business.