Overcoming the Challenges CFOs are Facing Today

Lynne Sampson , caught my attention in an article she published earlier this year, Top Challenges for CFOs in 2024*.? In the article she lists the top 10 challenges currently facing CFOs. ?

It’s a good list.? There is also an excellent chance you are tackling one or more of these challenges head on today.

With that in mind, below are resources to help you overcome any of the 10 challenges you are facing today. Share this liberally with your team to get over these hurdles faster and grow their capabilities. A Win-Win!

1.????? Cutting The Right Costs:

Areas that CFOs are eyeing for cost savings include headcount, travel, consulting fees, product line rationalization, and technology investments. - Lynne Sampson

Cost cutting is easy.? Cutting the right costs is hard.?

Time and time again I have seen CFOs take the lead in cost cutting by reducing their staff and budget.? Their intentions are good, lead by example.? The results are bad.?? A depleted CFO suite that loses ground in nearly all areas executives and boards find valuable – speed, accuracy, responsiveness and insights.?? Cost cutting is a team sport.?? The CFO can be the quarterback of the cost improvement effort, but beware, when cutting your offensive linemen…expect to get sacked.?

?In 5 Reasons Why Many Cost Reduction Initiatives Fail , Peter Chisambara CPA, ACMA writes,

“Companies need to be aware that cost cutting programs are not exercises where you randomly streamline services or headcount. If these cost reduction programs are not carried out properly, organizations risk damaging various stakeholder relationships.”

Peter highlights 5 reasons cost reduction initiatives fail to help you from falling into these traps.

Here is more from Peter on cutting the right costs,? Achieving True Cost Transformation

2.????? Attracting And Keeping The Right Talent:

The equation for attracting and keeping talent has three parts.?? ?

Hire for the Future + Treat fairly? + Train Diligently? = ?Retain the Right Talent

Our roles ?are changing and many employees fear they are not being taught the competencies required to get ahead in their organization.?

In this piece, Instilling A “Just Skill Me” Mindset at Your Company , Julie Winkle Giulioni outlines 3 steps leaders can take to create a talent development mindset at our companies.?Not only does this result in better work, it improves retention and grows the bottom line.

Here is more on growing our talent base. At the most recent Finance Innovation and Excellence Summit? Dr. Solange Charas , Glenn Hopper and Vineet Jain provide lessons on how to?Build a World Class CFO Operation

3.????? Identifying The Right Investments To Drive Growth:

While M&A activity is likely to slow due to the high cost of borrowing, other investments—such as expanding into a new region or product line—will need thorough evaluation to balance the risk with the potential reward. - Lynne Sampson

As the gatekeeper of resource allocation CFOs have a critical responsibility for investments made by the business.? ??A deep understanding of corporate strategy is the starting point. ?Questions like, ?What ?does the path to growth look like and how will it be funded? ???How is risk evaluated and what criteria are used for making new investments??? What parts of the current business are consuming more resources than they are providing???

For significant long term capital outlays (facilities, new equipment, technology, etc.) the?Capital Investment Analysis ? is a great guide for you.??

For a better understanding of the impact from short term operational changes use the Cash Velocity Calculator

4.????? Cash And Liquidity Planning:

With the pace of business continuing to accelerate having guardrails in place to prevent cash and liquidity shortfalls is no longer a luxury for most companies.?? If you aren’t forecasting cash and monitoring liquidity monthly you are asking for a crisis to hit you business.??? The added benefit to using these tools is a better understanding of how the business really operates, which is often different than you think it is operating (think budget).?

Get started here.?

Use the 13 Week Cash Forecast to better understand how and when cash is being generated and consumed in your business.? ??

For working capital analysis use the previously mentioned, Cash Velocity Calculator

5.????? More Frequent, More Accurate Forecasting:

...finance leaders are looking at financial planning applications with AI, machine learning, and predictive analytics to improve both the speed and accuracy of their forecasts. - Lynne Sampson

In an age where budgets are outdated before the ink is dry, forecasts have become the key tool for managing?business activity?

In Building a Dynamic Financial Forecast for Your Business ,

Dave Bookbinder writes,

“ The ability to predict, prepare and plan for the company’s future is a critical skill set. I understand that predicting the future seems impossible, and forecasts may not be met, but the exercise of constructing a forecast is always worthwhile.”??

I agree.?

Ehab Sobhy makes a distinction between budgets and forecasts in his article, The Importance of Budgeting and Forecasting: How Combining Both Can Drive Business Success , and shares his thoughts on why both processes are critical for driving business success.

Share our course, Financial Forecasting I: Introduction to Forecasting , with your finance team to level up your forecasting capabilities.

6.????? Profitability:

Even with the magic of accrual accounting, at some point a company has to be profitable to be sustainable.??Effectively monitoring profitability for deviations from expectations or shortfalls is key priority and a top challenge for many finance departments. Profitability has a lot of moving parts for most businesses, so. it’s best to start by breaking it down into its key components: Price,? Margin (Price-COGS), Volume and Overhead.?? If you start ?the process anywhere else there is a good chance you will end up analyzing capillaries and miss the elephant in the room, the arteries.??

Get a good handle on your gross profit by using this tool.

Simple Price, Gross Margin and Unit Variance Analysis .?? See point 1 above to hone in on your Overheads.??

7.????? Making The Most of Technology Investments:

AI is the hottest topic and the most frequently asked question in financial operation today, ??"How do I make AI work for my finance team and how much is going to cost?" ?

In their role as curator of critical information for their company, Chief Financial Officers must create processes and develop systems that filter out noise and focus only on the most important, actionable information. The plethora of data being created is growing at astronomical rates making this role much more crucial and much more difficult.

In this article For Chief Financial Officers: A Practical Approach to Using Artificial Intelligence Peter and I explore how CFOs can take a practical approach to integrating artificial intelligence (AI) into their operations.

For Chief Financial Officers: A Practical Approach to Using Artificial Intelligence

In their co-authored article, Embracing AI in Finance and Accounting: Balancing Risk and Innovation, Glenn and Rachel Cappell, CPA ?share how to use AI in Finance and Accounting in their article.

We have plenty of other tech related topics on the CFO.University development platform.? Just type in ‘Technology’ into our Keywords Bar and hit submit.?

8.????? Supply Chain Disruptions:

Supply chain disruptions continue amid geopolitical uncertainties, catastrophic events and labor shortages.?- Lynne Sampson

In many companies the supply chain is the most complex and expensive part of the business. It's a natural fit for sound financial stewardship. A solid relationship and robust collaboration between the supply chain and finance teams can shift the fortunes of companies. In fact we think this is so important we dedicated the week of February 18th to whole series on the topic.

Below is the link to the series recap with access to each days CFO-centric teaching on the CFO and the Supply Chain.

Maximize Your Potential: The CFO and Their Supply Chain Week Sparks Innovation and Collaboration!

9.????? ESG Planning, Reporting, And Compliance:

ESG planning and reporting solutions must be able to pull together accurate data from across the company?- Lynne Sampson

Including effective sustainability concepts into the financial strategy of companies is a major challenge CFOs face today.

The implementation of sustainable business models presents several aspects to consider. Among them, new skills that must be acquired to meet the requirements, complying with reporting obligations, complications arising from using non-financial indicators and compliance with the different global and local regulations stand out.

A four part series by Gustavo Porporato Daher (Ph.D.) , covers each of the aspects above. Here is Part I, The CFO and Sustainable Finance

10.? Capital Costs:

This challenge is directed related to points 3 and 4 above. ??If you are challenged in one of those areas, ?this section will also be of aid to you.? ?

Recent increases in interest rates, which now appear to have a longer tail than we thought just 6 weeks ago, is making capital dearer; boosting investment hurdle rates and dragging down the earnings of levered companies.? ???Creating the optimum funding mix is always in vogue, but more so today than at any time since the Great Recession, ?when cheap money made many assets and investments look good.?

To aid in your capital planning efforts and help you hit your optimum capital cost read CFO.University ’s 3-part series starting here,?CFO Success Series: Treasury Part 1 – Capital Planning

?? Good luck overcoming these challenges.?? If we can help you tackle any 1, ?or all 10, let me know.??

* Top Challenges for CFOs in 2024 ? - Oracle

Thank you for subscribing to the Future of Finance Leadership. The objective of the newsletter is to help you grow professionally by making you, your team & your business better. To the extent it is doing that, please share it liberally. To the extent it is not, please let me know. ????????

All the Best,

Steve Rosvold

Chief Learning Officer, CFO.University

CFO.University is a convenient, practical and performance enhancing development platform for CFO's, FDs, accounting, finance and treasury leaders.

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