4 guiding principles for overwhelmed CFOs of high-growth businesses

Here are some principles to live by for overwhelmed CFOs in high-growth businesses.

The business world is changing more rapidly than ever before and CFOs need all the help they can get to maintain order and keep their focus on strategic stewardship. The wealth of data that companies collect helps you project business needs and determine the most promising new initiatives.

However, if your team’s analyses are going to continue to deliver strategic value over time, they need to be scalable, backed by lean processes.

With this in mind, despite the pace with which business challenges are emerging these days, some principles remain evergreen. Here are four tips that will help CFOs at fast-growing companies to maintain order and optimise processes.

Never compromise on transparency

Examine the results of the most successful companies these days and a pattern of transparency will emerge. Whether it’s communication or progress towards goals, successful companies create transparent processes that everyone in the organisation – from the mailroom to the boardroom – can track and offer inputs towards.

You can build transparency by highlighting your assumptions in financial reports and validating them in your projections. Exposing your thought process to the wider organisation will help you avoid echo chambers and build projections with real-world relevance.

For instance, Amazon’s famous six-page memo forces high-level executives to think about and convince readers regarding the directions their projects must take. The exercise forces executives to consider possible objections and reason their arguments, instead of ignoring the details and throwing everything in a PowerPoint presentation that your board of directors will never sit through.

As corporate FP&A solutions provider DataRails notes in their guide to improved board reporting for CFOs, “The role of the CFO is expanding to not only report the numbers but to truly become a trusted business advisor to their management and board.” To this end, by enabling ad hoc analyses of connected data, DataRails’s solution allows CFOs to adjust projections mid-presentation, answering board members’ questions as they come up, based on real models and data.

Stay focused on only the metrics that matter

Tracking key business performance metrics over time is the logical method of quantifying results and measuring progress. However, when created without context, these metrics can lead you astray. For instance, measuring revenue growth per product line is standard. However, an intelligent CFO will dig much deeper into data and uncover trends in product sales.

Which regions are driving growth, and how do those trends correlate to seasonality and demographic incomes? How are sales distributed within regions? For instance, if a single urban area is contributing the majority of sales, you must investigate the reasons why other locales in the same regions are lagging.

Kevin Carmody, a senior partner at McKinsey and Company, writes that “CFOs have access to data, a cross-functional perspective, and an expanding role as value manager and strategy partner.” Data access is great, but it can become a curse if used improperly.

Vanity metrics offer advantages when measuring general product awareness, but they aren’t of much use to you. For example, decreasing cost per click (CPC) numbers in digital campaigns may point to great ad copy and engagement. However, if these greater CPCs don’t translate to sales, these campaigns aren’t working.

In this situation, you must rethink your marketing budgets and create better metrics to measure effectiveness. Working in tandem with the CMO, you could uncover reasons for marketing failures and push the company towards a better product-to-market fit.

Ask the tough questions

Curiosity might have killed the cat, but it empowers CFOs endlessly. M&A expert and fractional CFO at Tivoli Brewing Company, Eric W. Neumann points out the advantages of being curious. “When you’re curious about something, you’ll step into that field and learn,” he says of the CFO’s mandate. “This learning process changes everything. It expands your outlook and improves your chances to make the right decisions.”

CFOs who prioritise questioning and learning will always seek better ways of measuring company performance and decoding sector trends. A curious CFO is a proactive one, constantly questioning assumptions and checking their numbers.

For instance, if discrepancies arise between projections and actual numbers, a curious CFO will jump in and examine the causes. While most CFOs will build a tolerance for deviation in actuals versus projections, a curious CFO will attempt to minimise those deviations and examine root causes.

The companies they work for automatically benefit. Curious CFOs will always anticipate possible headwinds and ensure balance sheets are strong. This posture will help your company navigate crises and rebound strongly when the tide turns.

Be willing to scrap your own forecasts

Forecasting is inherent to a CFO’s job, and unfortunately, human beings are notoriously poor at predicting the future. However, you must rethink what it means to create a forecast. Instead of looking at them as a blueprint of the future, you must look at them as frameworks that need additional details.

For instance, consider situations where financial analysts find that a new product has high potential to boost company revenues, and the product team starts developing it, only to run into friction as the plans start to take shape. A CFO who considers projections as set in stone will ignore any warning signs such as poor feedback from pilot groups, etc.

This narrowing of vision happens because the CFO becomes wedded to the numbers and forgets that these were always nothing more than educated guesses.

A forecast is a high-level guide, not a detailed plan, and you must always leave room in them, in case conditions do not conform to expectations. By placing projections in this frame, companies will create better projections and respond to the future in more flexible ways.

The flexible and data-driven CFO

The modern CFO is far from a number cruncher. You are a central part of your organisation and a growth contributor. Follow the tips in this article and you’ll increase your ability push your organisation to greater heights.

Read more

Why a good CFO is mission-critical in private equity-backed businesses

Partner Content

Partner Content

Related Topics