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How CFO 3.0 changes the game for the finance function

(Image credit: Image source: Shutterstock/wrangler)

Today’s financial departments have technology that allows them to become highly tuned time machines, which can streak forward and back through a wealth of data at a moment’s notice.  With the evolution of accounting and finance has come the evolution of the CFO.

The early CFO, or CFO 1.0, was the historian. Next came CFO 2.0 – the real-time analyst who could catch issues with real-time dashboards.

But now is the opportunity to become CFO 3.0 – a leader who can see into the future.  CFOs will be familiar with using a rear-view mirror to provide business information – looking behind themselves while attempting to steer forward.  With data and predictive analytics, companies can understand data to look ahead.

The role of digital transformation

Driven by new technology such as the cloud and automation, combined with increasing customer expectations, any business needs the right technology foundation to undergo digital transformation, where tech is integrated and co-ordinated across the entire business ecosystem.

In growing businesses, the first investments are often made in financial management, building out the technology CFOs will need for success.  However, this also means the business requires CFOs to be front and centre when it comes to leading change through digital transformation.

This puts CFOs in the ideal position to evolve from CFO 1.0 and CFO 2.0 to CFO 3.0. They can put what they need in place to move beyond the traditional role and lead their business to new heights – they may end up driving business transformation beyond finance boundaries.

CFO 3.0 means they’re the visionary.  While many CFOs are focused on the past and present, tomorrow they’ll need to make use of vast amounts of data that is available in our digitised world. This will help them predict the future of their business, uncover hidden opportunities and close information gaps.

According to a new piece of research by Sage, where 500 senior in-house financial decision makers from the UK were surveyed, that shift is already happening.  Sage’s report, CFO 3.0: Digital transformation beyond financial management, revealed that more than two thirds of CFOs (70 per cent) said they have full responsibility for digital transformation.

How is the finance function changing?

In a digital world, e-commerce is critical to integrating front and back office processes, with our research revealing that 65 per cent of finance leaders believe e-commerce is the only way to maintain control in the face of digitisation.

We just have to look at retail today and the impact online shopping has had on retailers both old and new.

To achieve top-level visibility of business performance, finance teams must have the right digital tools and flexibility to use them. Only then can CFOs dovetail with the other sides of business and collaborate for growth.

Digitisation means companies can have advanced analytics to improve decision-making, metrics for real-time financial information, and the insight they need into their operations to uncover growth opportunities.

Challenges that CFOs and finance leaders face

Of course, owning the digitisation journey and becoming the data gatekeeper is a big responsibility. This means the role of the CFO role is expanding.

As well as data and technology, CFOs need to manage employee and stakeholder expectations. Embrace this responsibility and CFOs can boost the whole business. A failure to grasp the opportunity leaves companies at risk of being overtaken by competitors.

 To deliver data-driven insights, companies are going to need to upskill their team – more than three quarters (78 per cent) of financial decision makers view technology literacy skills as essential to the future of the finance department.

There is still a digitisation skill gap to bridge – two thirds of CFOs (70 per cent) still make decisions based on gut feeling rather than data.

As the gatekeeper of data, fraud, cyber-misuse and data privacy are increasingly falling under CFOs remit, and that of the finance department.

While this sounds like more work, remember that emerging technology can decrease the risk of data breaches – the cloud, for example, can enhance levels of verification and secure data in a more comprehensive way.

CFOs should look at skills training, whether it’s for themselves or other members of their team. The changing dynamics of CFOs’ job mean they need to keep learning to have the business, analytical and data skills both them and their team require.

How automation is making an impact

When it comes to how the finance department functions, it’s administration that hampers productivity – 70 per cent of CFOs agree that admin has a significant effect on team productivity.

New technology can drive improvements in efficiency. And naturally in the process of leading digital change, CFOs will need to invest in the right financial management platform to move money and data within their business.

It’s here where automation can cut the hours CFOs spend each week on collecting and preparing data. It shifts the burden of dealing with onerous, repetitive and simple tasks from CFOs and their finance team to machines, which will help to ensure increased efficiency and quality.

More than nine in 10 CFOs (94 per cent) agree that financial management technology will play a crucial role in tomorrow’s finance function.

Beyond benefiting the finance department, it can also lay a foundation for the better use of critical data and insights across the business.

Conclusion on CFO 3.0

Technology can help CFOs build a finance function that can withstand future challenges. It can support them with the changing legislative environment – 45 per cent of finance leaders expect Brexit to increase the costs of goods, services and tariffs, while 44 per cent think it will lead to an increased regulatory burden.

CFOs will need to lead their finance department in a world awash with data, so focus on honing management processes though data flow, data governance and analytical insight.

There’s no getting away from the challenges.

But the future is bright because they’re receptive to new technology and the digital transformation required – three quarters (76 per cent) of businesses are already in the process of transforming to automate most of their processes.

And critically, 86 per cent say automation has already improved business productivity.

With technology to support CFOs’ endeavours, they have the space to become a CFO 3.0 – a visionary who can uncover the hidden opportunities and close gaps through data and insights.

Asavin Wattanajantra, Global Business Writer, Sage