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It is now well understood that the role of the CFO has changed almost beyond recognition in the last few years. Technology in general and modern cloud-based technology in particular, has allowed the CFO’s responsibilities to become both broader and deeper than in the past.
I recently spoke about this shift with Per Vasegaard Hansen, Managing Consultant at HerbertNathan & Co, an independent and highly respected management consulting firm in the Nordics that is often brought on as an objective adviser in the procurement process. Per specializes in advising organizations on both cloud-based and on-premise business applications, Enterprise Resource Planning, and the role of the CFO. He has more than 20 years of ERP related experience.
The role of the CFO has changed almost beyond recognition in the last few
In Per’s view, the CFO’s role is not dissimilar to that of a co-pilot, or in business terms to what we might traditionally expect of the COO. He believes the CFO has become much more involved in strategy, process and infrastructure than a traditional interpretation of the role would suggest.
One of the most important effects of this broadening of the CFO’s role is that they are now much more obviously a business enabler who uses sophisticated cloud-based technology to inform key strategic decisions. This is a point that also came up in a recent conversation with Nick Castellina, research director at the Aberdeen Group. Nick believes that in the last five years the CFO has become the key source of quality data for decision making at board level and throughout the business. Per supports this view.
We lease cars, we pay for streaming subscriptions rather than buying content, so it is only natural this trend makes its way into the professional arena.
If we consider the specific case of cloud-based ERP, for example, Per points out that on-premise systems can be rigid and fixed in terms of their functions and features. By contrast cloud-based systems are flexible and agile, which means finance departments can easily update and populate content to be in-line with the evolvement of the business.
Co-Pilot of the business: Finance is the new guidance system
This agility is not the only benefit of cloud-based systems. Per points to a range of other advantages compared with on-premise systems, including quick and easy deployment, low internal maintenance fees and, very importantly, the ability for an organization to “pay-as-you-go”. This last feature, which allows cloud services to scale as business needs develop, is particularly attractive for today’s budget conscious organizations. It also fits in with a wider approach to service procurement that comes from our experience as consumers. More than ever before, we are inclined to lease rather than to buy. We lease cars, we pay for streaming subscriptions rather than buying content, so it is only natural this trend makes its way into the professional arena.
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The connection between the changing role of the CFO and the development of cloud-based applications does not just apply to the largest of organisations. Indeed, Per stressed that many of the advantages are equally relevant for small and medium sized enterprises (SMEs) as well. For example, cloud systems offer more secure, accessible, and risk-free computing than on-premise solutions. In Per’s own words, cloud is “most often a no-brainer for SMEs”.
Importantly, the CFO does not necessarily need a huge technical team to help them make the most of cloud based systems. No CFO should need to be a technical whizz kid to do their jobs. Per told me that systems from most of the more serious cloud based ERP vendors he knows allow for changes to be made without the need for in-house IT specialists. This is hugely valuable, as it allows the business side of the organization to adapt the technology ad-hoc.
“Cloud is happening, and it is happening faster than I think anyone could have predicted.” said Per. He is absolutely clear that the CFO who finds it difficult to keep up with the responsibility and expectations placed upon them by these developments may struggle, and some may even need to give up their positions. As he put it: “The ones that will survive are the ones that are ready for change and have an infrastructure that can change with them.”
According to Per, there are three ways in which CFOs can embrace their new role and the possibilities of the cloud in finance.
No CFO should need to be a technical whizz kid to do their jobs.
The evolution of the CFO’s role is inescapable, and with this has come an opportunity for finance leaders to act as more than just an advisor to the leadership. “For CFOs today, it is all about becoming a valuable sparring partner for the CEO”, says Per.
The challenge for CFOs is therefore to expand their view of the business beyond typical financial metrics to other strategically important factors. Their “cockpit” is going from a five-gauge environment to one with 15 to 20 gauges or more. The cloud affords CFOs with the wider reaching view of the business they require to best counsel the CEO, and to challenge them when needed.
“However you choose to put together your new finance cockpit, and whichever vendor you choose to work with, you need to look for two things; scalability and flexibility”, advises Per. Scalability is crucial to ensuring finance systems can grow and evolve with the business. Flexibility is a must for two reasons; one, it ensures systems will be compatible with future demands, and 2) it allows finance leaders to take a more tactical, personalized approach to their role.
In Per’s words: “A flexible system is a modern CFO’s new best friend. CFOs must be able to quickly and easily navigate complex data to find the answers they need – there is no time to waste, and hence little time for IT to configure systems each time they want to pull data.”
Clearly, finance leaders need new functionality from their systems, but where is the money to get that? According to Per, CFOs should begin by earning quick wins with cloud-based systems to free up capital while simultaneously building up a suitable future platform.
CFOs will always be responsible for the company’s cash flow situation. By adopting cloud-based systems, they can save a large portion of the up-front investment to implement faster core processes. This in turn allows them to start leveraging standard functionality today, thereby freeing up capital to implement new systems on a wider scale.
How do you see the CFO’s role evolving? What are your “top three” priorities as you manage the rapidly changing role of finance? I look forward to hearing your thoughts!