14 CFO Best Practices for 2024

Joseph Tsidulko | Content Strategist | April 3, 2024

The responsibilities of chief financial officers have evolved from what they were even a decade ago. Now, CFOs are less focused on just financial and risk management and much more focused on driving their organizations’ growth strategy.

As such, today’s CFOs are typically called on to create and implement a financial roadmap that guides new product initiatives, market expansion, organic growth, and acquisitions. They still need to know the books inside out, but they also are increasingly expected to anticipate unforeseen risks; be strategic partners to the CEO in business planning; clearly communicate the organization’s financial picture to management, shareholders, and regulators; and work with the CIO and chief information security officer to protect proprietary financial data.

Those expanding duties are necessitating that CFOs become well-versed in the cutting-edge digital technologies that enable forecasting, automation, collaboration, and other modern processes that help their teams—and the business as a whole—drive profitability and growth.

Key Takeaways

  • CFOs are expected to be much more than their companies’ chief accountants. While crunching the numbers, preparing budgets, and disseminating financial statements are still key responsibilities, CFOs at major enterprises must create and implement a sweeping financial strategy that drives company growth.
  • As trusted partners to the CEO, CFOs need to build dynamic teams that take the lead in assessing long-term risk, funding strategic initiatives, adjusting capital structure (e.g., re-classifying shares, issuing debt or equity), and evaluating organic and M&A opportunities to accelerate growth. They also work with the CIO to procure critical IT systems.
  • The proliferation of financial data and evolution of advanced analytics technologies have allowed financial teams to derive better insights into how to allocate their companies’ financial resources. CFOs must embrace AI and other new data-driven methods.
  • CFOs are judged mostly by their companies’ success in increasing cash flow and boosting profits. They can improve both by controlling costs, mitigating financial risks, and effectively managing the cash conversion cycle. Making investments vital to long-term success can erode cash flow and profits short term, an outcome that could affect some CFOs’ compensation packages.

14 CFO Best Practices

There’s no standard job description for today’s CFO. Expectations have evolved so much in recent years that it can be difficult to describe the specific attributes and professional experience that suggest someone will excel in that critical leadership role. And there’s no playbook for what that executive should do once on the job. There are, however, best practices that tend to drive financial success in a demanding, fast-changing, and results-oriented business landscape.

1. Assess the company’s financial health

It’s the CFO’s job to take the lead in ensuring that the finance and accounting teams compile accurate and up-to-date assessments of their company’s financial health at a regular cadence and continuously monitor that health, even if the major reports typically go out only monthly or quarterly. Those efforts start with crunching the numbers, including cash flow, revenue growth, debt levels, and profit margins.

CFOs also must ensure compliance with financial regulations, oversee audits, project future revenue streams and liabilities, and even identify industry trends. All those assessments must go beyond cold figures to paint in plain language a detailed and descriptive picture of where the company’s finances currently stand and where they’re headed. The CFO should present that information in a clear way to stakeholders outside the finance organization, highlighting opportunities and concerns.

2. Bring a finance perspective to business strategy discussions

CFOs should be integral to business strategy discussions. Their perspective on the company’s financial capabilities and budgetary constraints is crucial to planning and implementing almost every consequential business initiative, whether it’s an acquisition, capital investment, development of a new product line, or a major marketing campaign. Sometimes that means pouring cold water on unrealistic plans; other times green-lighting ambitious programs. The CFO also can play a critical role in linking the diverse business units that formulate strategy, such as product development and marketing, by sharing (or demanding) data on the companywide implications of various approaches.

3. Create a financial vision

All CFOs are immersed in the day-to-day finances of their companies, but the truly excellent ones are always looking to the future as well. They’re helping define their companies’ long-term financial goals and the metrics used to assess their achievement. Working with the CEO and other executives, the CFO should paint a picture of how they would like to see the company’s financial performance and structure look in the coming months and years based on current trends and the desired evolution of the business. That financial vision must be grounded in hard numbers and real-world challenges and risks, while also aspirational in its ambitions.

4. Participate in hiring and onboarding

Like every company executive, CFOs are responsible for building strong teams. Those consist of not only financial experts who mesh well with each other and the larger company culture, but also increasingly employees who bring AI and data science skills into the finance organization. CFOs can best exert influence on team building by getting directly involved in talent acquisition and retention, including recruiting, onboarding, training, and career development. Those who prioritize identifying talent often participate in networking groups and functions where they can forge relationships with skilled finance professionals and promote open positions in their organization. Some CFOs also work closely with HR to define the skills and job parameters for prospective candidates, as well as take part in interviewing and vetting applicants for high-level positions.

5. Embrace new financial strategies and systems

To some degree, finance will always be a conservative function, one that must rigorously adhere to standard accounting and reporting practices, time-tested funding approaches, and conventional methods of managing the budget. For public companies, investors and government regulators set a lot of the expectations and write most of the rules. But those parameters shouldn’t preclude the CFO from embracing new ways of doing things, both within the finance organization and in supporting other divisions of the company.

Within limits, CFOs should be open to innovative methods of structuring their companies’ finances, assigning duties to their subordinates, sourcing supplies from vendors, measuring financial performance, billing customers, and coordinating with outside auditors and accountants. They should also take advantage of the latest finance systems to automate routine workflows, apply AI to analyze data, share and integrate financial information companywide, manage risk, and ultimately improve efficiency and accuracy.

6. Focus on data-driven decisions

The finance organization is awash in data—on revenues and costs, marketable securities and other assets, debt obligations, cash flows, inventory calculations, market trends, and more. That data is essential—not only to assessing the current health of the business but also to making informed decisions that will impact its future. Careful data analysis can generate insights into how to better invest the company’s money, adjust its capital structure, when to take on debt or buy back shares, and when to internally fund projects or seek new capital. CFOs still rely on experience and intuition, but the best ones take advantage of advanced analytics tools, some of them powered by AI, when making the most consequential decisions, whether they’re related to growing the business or mitigating risk.

7. Communicate openly and wisely

CFOs often find communicating with stakeholders to be a delicate balancing act. Transparency is paramount when sharing financial data with executives, boards, investors, and regulators. At the same time, the competitive and regulatory environment creates situations where discretion is wise or legally mandated, especially when it comes to proprietary information. In 10-K filings especially, CFOs should make sure that they openly, accurately, and optimistically communicate specific financial information to all parties entitled to it—whether that’s the general public, regulators, or investors—while they zealously guard proprietary information and company secrets.

8. Know the ins and outs of the business

CFOs always know the numbers. They’re masters of financial statements, but the job doesn’t end there. To be an effective finance leader is to be knowledgeable about the ins and outs of the larger business, including products under development, who the major competitors are, what the talent pipeline looks like, and how the company goes to market. The hard numbers in a ledger represent investments in products, wages paid to employees, and bills sent to customers. By knowing the business and its top priorities and risks, the CFO will be more effective in allocating financial capital and creating a financial structure to support long-term goals and in providing business leaders with the data and insights they need to make informed decisions.

9. Forecast risk

The business world is rife with economic shocks, political turmoil, acts of fraud, and other extraordinary happenings (think pandemic) that can disrupt the best-laid financial plans. That’s why an excellent CFO not only has in-depth knowledge of the current state of the business and its markets, but also an eye on potential threats. CFOs should take a lead role in analyzing all available financial and market data, both internal and external, to identify changing market conditions and competitive dynamics that could divert their companies’ financial roadmap. To this end, many CFOs work closely with the company’s chief strategy officer and line-of-business leaders to evaluate market dynamics and size up competitors. They also work with the CIO and chief information security officer to head off system breaches and fraud.

10. Know when to buy and build

Growth is a top priority for most companies. And when they look to introduce or expand product lines or move into new markets, they often confront the age-old question: Buy it or build it? Of course, many nonfinancial factors and capabilities weigh heavily into the decision of whether to pursue organic or inorganic growth, such as in-house engineering, development, and manufacturing assets; the existing business model; company culture; and the availability of promising candidates for potential acquisitions. But matters of funding and financial position, such as cash on hand, stock value, and borrowing costs, can make or break a growth strategy. The CFO should break down for the company’s leadership team and board the financial advantages and risks of adding capabilities internally or through acquisition. Modern information systems can do a lot to refine their analysis of the competitive implications, debt obligations, and time to market of each approach, as well as the potential revenue synergies and business integration challenges that come with acquisitions.

11. Invest in automation and technology

People in the finance organization used to spend a lot of their time manually inputting and updating numbers, running reports, sending out invoices, and handling payments—processes that were both time-consuming and error-prone. Modern cloud applications, especially those embedded with AI features, automate much of that kind of work, freeing finance team members to perform sophisticated analysis of the data flowing into the organization, as well as to forecast financial trends and do other higher-level work. By reducing time spent on rote functions, these applications can also cut finance department costs by boosting productivity and making it easier to integrate and share useful information.

12. Focus on effectiveness over efficiency

Efficiency is a common buzzword these days, as every enterprise aims to do more with less. But enhancing efficiency alone usually delivers only marginal gains. A better objective for CFOs is effectiveness, which entails setting a strong technical foundation for profitability and growth rather than just tweaking and streamlining what’s already in place.

Efficiency improvements often result from implementing technologies, workflows, and processes that cut costs but also boost productivity. Effectiveness, on the other hand, often stems from novel ways of managing financial operations that more directly deliver desired business outcomes. For example, implementing more efficient processes may entail laying off employees to cut labor expenses and boost profitability. But a CFO focused on effectiveness may opt to upskill those same employees, training them to work in entirely new ways and perform altogether different tasks that drive growth.

13. Build trust inside and out

Statements and reports from a finance leader can inspire investors, motivate partners, prompt media coverage, and encourage customers to buy more products. Mere words from the mouth of a CFO can move markets. With such a great responsibility to their company and its shareholders, it’s critical for CFOs to nurture an environment of trust, starting with their own teams. CFOs must always encourage honesty and integrity within the finance organization and across the entire enterprise. That means all employees feel empowered to speak up if they question a financial practice or representation, or if they have concerns about potential fraud or dishonest statements. A climate of open expression gives all interested parties, whether employees, investors, regulators, or the press, confidence that the organization’s finance leader is communicating accurate, comprehensive information. And it helps ensure that the CEO, the board of directors, and all business unit leaders have complete faith in the veracity of the financial picture painted by the CFO as they make critical planning, budgeting, and scenario modeling decisions that guide business development.

14. Improve profits and cash flow

CFOs are judged largely on their ability to deliver a return on equity, which often comes down to driving cash flow and profits. The finance leader can improve both by controlling costs, mitigating risk to ensure financial stability, optimizing debt and equity structures, and effectively managing the cash conversion cycle as well as the company’s working capital.

But cash flow and profits aren’t the same thing, and CFOs often need to strike a balance between the two. Cash flow impacts a company’s immediate ability to purchase inventory, make payroll, pay debt, and keep the lights on—liquidity problems that often arise while waiting for invoices to be processed and transactions to clear. CFOs must also appreciate that strategic investments, be they in on-premises IT infrastructure, IoT devices, integration of cloud-based systems, or non-technical assets such as real estate or additional staff, might require different capital structures involving greater debt and operating expenses that can cause short- and long-term reductions in profitability and cash flow. However, that doesn’t mean they should be avoided if they are critical to spurring growth.

Lead the Way with ERP

The latest cloud-based applications equip finance teams with the data and analytics tools they need to automate and improve the core financial function, freeing the CFO to focus on advancing strategic business objectives.

With Oracle Fusion Cloud Financials, part of the Oracle Fusion Cloud Enterprise Resource Planning (ERP) suite of applications, CFOs get a real-time view of their companies’ financial position and evolving outlook so they can respond at the speed of business to new opportunities and challenges. Other solutions within the comprehensive ERP suite support supply chain management, project management, procurement, risk management, and compliance, help ensure consistent processes and a single source of data across business functions. Advanced data analytics tools embedded with AI help CFOs forecast risk, optimize and automate processes, and inform decisions.

As CFOs embrace their role as business leaders, cloud-based financial applications are letting them move beyond their traditional responsibilities of closing the books and reporting the financials, empowering them to look over the horizon to assess risk, identify opportunities, and set a course for growth.

“These cloud-based technologies allow CFOs to eliminate the repetitive, so they can put more time into the strategic,” says John Hallin, vice president of Oracle Consulting. “These days, CFOs have to be thinking about the future of the business while simultaneously attesting to the fidelity of their accounting systems. CFOs have the imperative of looking out to the distance rather than just looking inward.”

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