Why Operational CFOs Are Needed to Navigate the Crisis and How to Become One

Modern CFOs wear many hats:

• Steward: In this role, the CFO controls and protects the company’s assets by meeting compliance regulations, following accounting and auditing practices, and doing investment analysis. 
• Operator: Operational CFOs are financial drivers who look at optimizing processes to save costs, modernize operations, and drive growth.
• Strategist: In this new role, the CFO helps align finance and business goals, develop long-term investment strategies, and drive M&As.

Which of these roles is more important and where finance leaders should concentrate more, has always been a question of debate. While CFOs need to fulfill the responsibilities of the multiple roles they have, to weather the recession and high inflation environment successfully, they’ll need to wear the heavy cap of the operator for a larger part of their working day.

In this blog, we look at the various facets of operational CFOs and their key responsibilities. We also offer tips on how to become an operational CFO who can navigate the business through market downturns and volatilities and achieve short and long-term financial gains.

Who is an operational CFO?

Operational CFOs are finance leaders who focus on improving the company’s processes to strengthen its bottom line. They are key drivers of business growth and are often referred to as traditional CFOs since managing operational finance has always been a critical responsibility of finance heads.

As the key focus area of any CFO, this operational role continues to remain crucial for the success of a business but has expanded to include new ways to achieve operational efficiency – digital transformation, autonomous finance, AI assistants, and more.

Operational CFOs are number crunchers, cost optimizers, tech wizards, and process experts whose key objective is to ensure business profitability. And this trait makes this role the key hat to wear to tackle inflation, the impending recession, and uncertainty.

Source: Excerpts from the CFO RoundTable 2022

Key responsibilities of an operational CFO

In this section, we’ll dwell deeper into the role and responsibilities of an operational CFO to understand how they help tackle difficult market and economic conditions.

1) Cost optimization: One of the biggest responsibilities of a CFO is cost optimization or elimination of avoidable spending to maximize business value and drive faster returns on investment (ROI). According to a survey we conducted earlier this year with 150+ CFOs in the US, 79% remarked that cost optimization is their biggest priority in 2022. This makes the role of the operational CFO key to navigating the turmoil and opportunities present in the market currently.

2) Operational efficiency: Traditionally, CFOs have risen from the ranks of accountants and controllers. But to be an outstanding CFO, you need to understand your business operations inside-out. Knowing the various steps in the business operations and how they are affected by market volatility will help CFOs improve their budgeting process and identify inefficiencies and cost reduction opportunities. Operational CFOs take close interest in business process optimization and collaborate with process managers to identify efficiency improvement areas.

3) Long-term financial planning: Operational CFOs look at long-term planning and work with other business leaders to drive growth. They also evaluate all opportunities and threats strategically before making decisions. Our survey revealed that four out of ten CFOs would be focusing more on financial analysis, expenditure planning, evaluating finance technologies, and strategic planning in 2022. Operational CFOs play a key role in budgeting, financial planning & analysis, and expenditure management.

4) Tech enablement: Operational CFOs are often technology-first executives and use tech tools effectively to drive cost optimization strategies. They also apply technology for decision-making and use tools that support scenario planning, forecasting, and decision trees. Some of the key fintech ecosystem tools that modern operational CFOs use include accounts receivable and payable solutions, treasury management solutions, accounting software, and financial planning and budgeting tools. Operational CFOs are aware of operational process KPIs and ensure that tech projects do not go over budget. They make sure that tech investments add value to the business processes using a holistic and data-driven approach.

How to become an operational CFO to manage crises?

Wearing the cap of an operational CFO is essential to get hands down to work and bring in immediate to short-term gains for the organization. Here are some ways you can slip into this hat when needed:

• Get well-rounded experience: To be a successful operational CFO, you need to have broader experience and exposure which is not limited to accounting. Spend time with other business unit heads to build bridges and know more about business operations, IT architecture, talent acquisition practices, etc.
• Use data effectively: Operational CFOs must use data effectively to identify improvement areas and inefficiencies without having to actually be on the site. Investing in dashboard tools, alerts & notifications, etc. can help you view data in real time and stay up-to-date.
• Have a long-term view: While operational CFOs strive to make immediate gains, they do not lose sight of the long-term goals either. They take a broad view of investment spending after understanding critical business needs and market dynamics. They help drive ROI from technology investments rather than seeing them as experimental implementations of emerging technologies.
• Build a strong team: To be an operational CFO, you need a strong team of professionals who can efficiently manage a lot of other finance areas such as accounting, treasury, etc. You need to recruit the best controllers and accounting officers to support you in your drive to become an operational CFO.
• Wear your strategic hat as well: Being an operational CFO doesn’t mean that you stop becoming strategic. Ask the relevant questions to identify how and where the company is positioned and what the opportunities and threats to it are. Frame a roadmap to position and drive the business’s future growth. Understand competitor moves, spot M&A opportunities, and look at the broad picture while striving for cost optimization and efficiency gains.

Source: Excerpts from the CFO RoundTable 2022

HighRadius for the office of the CFO

HighRadius is a leading fintech company that offers autonomous finance solutions for the office of the CFO. Our solutions help operational CFOs automate mundane tasks such as bookkeeping, invoicing, dunning, and data entry. We also support CFOs in more strategic tasks such as cash flow forecasting, credit risk optimization, and collections prioritization.

Our autonomous solution suite enables CFOs to embrace finance 4.0 and achieve gains in cost optimization, days sales outstanding (DSO) reduction, and higher productivity.

To learn more about our solutions, talk to our experts.

Need more resources to tackle uncertain economic conditions and changing market dynamics? Check out:

• 5 Recession Strategies to Help CFOs Avoid Cash Flow Woes
• The Changing Role and Responsibilities of Modern CFO
• The Future of Finance: How to Prepare for It