CFOs: No Longer Mere Corporate Scorekeepers
Focus on Robust Financial Model
I believe the place to start is with a robust financial model or plan. Having a baseline of performance will enable any changes to be considered and a determination made of the impact to the business’s value. Modeling of changes to the firm’s strategy, developing new products, adding complimentary businesses, investing in a factory or machinery, etc. can quickly be assessed. We use an integrated financial model that allows us to determine how changes will affect income, cash, and overall shareholder value. The second area that a CFO needs to understand is what are the variables within the business that drive value and then add those “drivers” to the model in order to adequately simulate value generating activities. This is commonly known as identifying the “buttons, levers, and switches” that move the business. I have had the most success learning these influencing items by working directly with business unit or functional leaders and obtaining intimate knowledge of their businesses or functions. Spending time on the factory floor, sitting down with engineering, even taking a ride on a delivery truck can provide a better understanding of the value creators in the business. Lastly, real time metrics, dashboards, and “Key Performance Indicators” (KPIs) are key to driving the sought after performance. Having daily and weekly data to monitor performance against objectives allows an organization to make mid-course corrections. Waiting until the end of a month or quarter does not allow time for recovery if performance is off-track. These three areas- robust financial modeling, understanding the business drivers, and then monitoring them through data analytics can enable a CFO and their finance organization to have a seat at the table in driving “Shareholder Value”.
"The key to Finance providing value to an organization is having a finance team that is high powered and very capable"