CFOs have faced unique challenges over the past year.

However, the successful ones have used the pandemic and lockdown as an opportunity to develop their skills, especially when it comes to using data and introducing digital transformation to stay on the top of the numbers.

In this episode of Agility Unleashed, the podcast brought to you by Sage that helps Britain’s businesses mobilise out of the pandemic, a group of business leaders from a range of companies share their thoughts and insights on how CFOs can rebuild their businesses as we emerge out of the pandemic.

Here’s what they talk about:

CFOs need to respond to events rather than simply react

Using cash in the right way

Too many CFOs still lack data and visibility

Talent – still a vital ingredient for success

CFOs need to respond to events rather than simply react

The temptation during these uncertain times might be to run around and take action as quickly as possible but, based on his experience as CFO for a startup, John Miller argues against that. He works as chief operating officer of Addition alongside its founder and chief executive, Graham Davies.

Addition is an accountancy firm that offers plans that are tailored to the needs of its clients.

Graham worked as an upper-tier financial consultant for companies of all sizes across the UK and then founded Addition to give that same level of quality financial input to smaller businesses.

Graham and John still serve personally as CFO to a portfolio of around 15 companies.

The team had crisis meetings with directors and investors but taking time to make careful decisions that would have a long-term impact was essential.

“It was incredibly eye-opening for what it’s like to work within a small business where you are the owner-manager of that business and you’ve also got equity investors that are demanding returns,” says John.

“My key takeaway from that period, now 15 or 16 months ago, was just to slow down and remember that you do have time to try and put in process something that’s going to work.”

Ken Lavoie agrees with John.

Ken is chief revenue officer at a Sage Partner, Prophix. He has spent more than 20 years working with finance professionals and pioneers in finance automation software.

Data rather than some self-imposed deadlines or emotions should drive decisions, he says, so they’re “responding” rather than simple “reacting” to events.

This resonates with John’s experience.

“The main thing we looked at was our fixed and variable costs – how do we hunker down and what can we stop paying?” says John.

“And that gives people a lot of confidence that, OK, we’ve got a cash runway that’s going to last 12 months now rather than just two months, so we can get through this, and we can hopefully weather this storm.

“We rely completely on data to make all of our decisions.”

Using cash in the right way

But is cash still king, Graham is asked.

“We always advised our clients to hold three to six months of cash in the business to weather a storm like this because you don’t know how big the storm is going to be, and I think this pandemic has really highlighted that,” he says.

Having cash in the bank during difficult times is important but Graham’s advice goes beyond that, especially when day-to-day business might be paused because of something such as the pandemic.

He says: “I was really happy to see lots of our clients during the time using that cash they had in reserves – the ones that were lucky enough to have it – using that cash to be opportunistic and thinking about things differently and saying, ‘Do you know what? The world’s changed but let’s think about how we can use this cash we’ve got in reserve and change the business and pivot and try this new product – now’s a great opportunity to do so’.”

Darren Heffernan is president, mid-market for Sage partner Trintech. An ACCA fellow, he was Trintech‘s CFO for more seven years.

For Darren even before coronavirus, the role of the CFO was changing.

“It’s become more strategic, more operational, more as a really strong number two to the CEO of the business,” he says.

“What was interesting to me when this crisis hit was everybody defaulted to ‘Let’s go to the CFO, let’s check our cash balance, let’s check our costs’ – all the things that Graham talked about there.

“You were looking for the leadership for the CFO as opposed to even the CEO.”

In addition to this, technology has become increasingly important – and its role has changed.

Automation is becoming standard practice and boards are beginning to realise that, used properly, technology can even help to minimise or even avert a crisis.

Darren says: “We’ve done a lot of surveys and the surveys will tell you that people who have adopted technology have been able to go through this crisis a lot easier than people who have not.

“So, this has definitely shone a massive light on processes and procedures in the office of the CFO that can easily be fixed.”

Too many CFOs still lack data and visibility

For Ken, the pandemic and its effects highlighted for many of his colleagues areas in which they lacked the necessary data and visibility.

However, on the positive side, technology is freeing them up from day-to-day, repetitive tasks based on spreadsheets and adding up numbers to allow them to add greater value to the business and to become more involved in strategy.

John says: “As a portfolio CFO now, that’s the only way I can do my job – if we use technology and leverage the team to be able to do things much quicker and much more accurately than they were doing previously.

“Otherwise, Graham and I wouldn’t be able to offer our services the way we currently do.”

Heads of finance are working more closely than ever with their IT and business intelligence teams to manage all kinds of data, according to Graham.

This has been driven, to a large extent by software as a service (SaaS) but, more generally, a new generation of CFO that has grown up with technology is naturally more comfortable with it and thinks digital-first, Darren suggests.

The group agrees that the finance team leaders are increasingly driving the adoption of technology across the business and taking ownership of key data.

They’ll need to do the same with artificial intelligence (AI) argues Graham: “I’m guessing [that in] three to five years – AI is going to develop to such an extent that CFOs are going to have to manage this AI to make sure that they’re not made redundant.”

One key challenge for any CFO is to balance sometimes conflicting information that is coming into them and trying to develop a single version of the truth.

Could the increase in technology talent being recruited by finance departments help to solve this problem?

John argues that those in charge of finance will have to become aware of how to engineer AI and other technology so that it delivers the kind of information that they need to make informed decisions.

To keep up to date with the technology, those leading finance functions are going to have to hire the right talent, John believes.

He adds: “[In] the same way, Darren, I think you mentioned that the CFO is usually the right-hand person to the CEO – maybe they need a data scientist or chief engineer that has got a line into them because over the next five, 10 years, they’re not going to be able to acquire that knowledge like someone who’s been doing it for 20 or 25 years.”

The effective use of AI and data will enable those leading finance departments to support every aspect of the business rather than just handling the figures, Darren believes.

This is obviously useful in scenario planning, something that, during these uncertain times, Graham’s clients are increasingly interested in.

Talent – still a vital ingredient for success

Technology aside, talent recruitment and retention is still a vital ingredient for success, according to Darren.

He says: “The Y Generation, the Z Generation – they’re not 20-year veterans [who are] going to stay in any company.

“You know, there’s always been that one person in your finance team that’s been there for 10 years, 15 years and knows where all the bodies are buried, et cetera, and knows when everything should be done – those days are gone and the CFOs that we speak to are very conscious of that.”

Retaining that information is important but retaining talent is even more so.

He adds: “You’ve got to make sure you make the job as exciting as possible for them to want to stay with you.”

Ken’s son is studying accountancy.

“He doesn’t want to be in a basement doing data entry,” explains Ken. “He isn’t even out of school and already wants to be at the table helping the CFO make business decisions – that’s where their heads are at.”

Darren points out that those entering the profession these days are also very aware of the importance of work/life balance and devoting evenings and weekends to producing the company accounts does not appeal to them.

Finally, with business entering the post-pandemic, digital-first world, Ken summarises his advice to today’s CFOs: “‘Is your house in order?’ Number one.

“Are you producing the income statement, balance sheet, cash flow accurately?

“Do you have a single version of the truth? Do you have the systems and the technology in place to be able to operate effectively?

“And if it is in place, then ask yourself, ‘How can I be a change agent for this business?’ You’re sitting in a unique position, and you’ve got all of the information at your fingertips, so nobody’s in a better place.

“So take that hat off, congratulate yourself and then say, ‘How can I be a change agent to this business to take it to the next level?'”

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