On Being a Strategic CFO

Strategic CFO
Via Flickr by Walmart Corporate

CFOs have traditionally been focused on improving their companies through data. They analyze past records to make choices about the future. CFOs are always looking back at the data that is available and making inferences to report on the value of the company. While this is important and useful to work in this manner, it might not be the most effective way to ensure your company’s success in the future.

Enter the Strategic CFO. The idea of the Strategic CFO is a shift from what is traditionally understood about CFOs. No longer does a Strategic CFO sit and wait for data before making his analysis. As Robert A. Howell writes for Financial Executives International, “many CFOs feel more comfortable working in the areas of compliance, reporting and control,” as has been the traditional role of CFOs. But the role of the CFO is changing – it’s getting broader and more complicated by the year.

A strategic CFO, in contrast to the traditional type, is a CFO who faces the future based on what he knows now. He or she would be involved as a financial voice on strategic and important non-financial decisions that the company would make. One example, as Robert writes, is that a strategic CFO is focused on “free cash flow generation and reallocation rather than on income and earnings per share.” A strategic CFO is involved in higher management in a more complete manner, not just stuck in his corner when it comes to finance.

What Is Necessary to Be a Strategic CFO

Essentially, for CFOs to be successful in a strategic manner, they need to understand the nonfinancial aspects of their company and the issues associated with that area. This means understanding customer demand, suppliers, supply chains, markets, and competitor actions in order to weigh the financial issues with the nonfinancial. This enables them to provide more useful and solid input on decisions facing the company.

This takes a lot of time and effort, but the value added to your corporation because of a strategic CFO’s perspective would be worth it. Some of the most important operating decisions that a strategic CFO would have include diversifying, expanding, and growing through purchases, all of which are all incredibly complicated decisions to make.

When it comes to investment, a strategic CFO has a lot to determine. Acquisitions are often the primary method that a firm uses to grow or expand, but these have not generally been very successful. For example, a strategic CFO would have the understanding to know when acquisitions, tangible assets and intangible assets are best for encouraging corporate growth because of their greater understanding of operations in the company and the market as a whole.

Be sure to read more about being a strategic CEO by clicking here.