The Critical Role of Today's CFO

by Bob Eberlein

The weak economy makes it very challenging to balance all the needs of the enterprise.  Tight credit and uncertain revenue streams intensify financial challenges.  At the same time, customers and other key stakeholders amplify any sign of operating weakness.  If you focus too much on fiscal issues, you risk losing focus on the real mission of the enterprise -- focus too little on fiscal issues and risk losing the whole enterprise!

Today's CFOs play a key role in this balancing act.  They must ensure the business has the resources to satisfy all critical obligations.  This includes defined legal and contractual obligations as well as less defined obligations such as innovation, succession planning, and other elements essential to the future of the business.

To succeed, CFOs need to be strong leaders with skill as managers, technicians, and innovators.  Consider the examples below. 

Cash Manager
Cash is the oxygen of the business, and the CFO must manage this area to ensure adequate liquidity. 

The primary instrument is a detailed cash projection.  This critical tool must:

• accurately incorporate all sources and uses of the enterprise's cash
• consider foreseeable risks, investments, and opportunities
• look out far enough to provide adequate warning and time to remedy shortfalls
• anticipate contingencies. 

When outside financing is required, a CFO must be able to identify appropriate lending sources and present a 'winning' case to lenders.  Banks are lending but they are being more selective and they are demanding a clearer picture of the borrower's business, cash flow, and collateral.  Also, since recent staff cuts leave lenders with fewer people to evaluate potential loans, they often dismiss requests that lack logical and comprehensive financial information. 

CFO's must also ensure compliance with lenders' covenants.  In addition to reporting, compliance often involves active management of hedging, cash rationing, working capital, and restructuring.

Technician
Technical competence is sort of like defense in sports: it's not as glamorous as offense but you can't win without it!  Here are a couple of reasons why technical competence  is more important than ever. 

Since many 'new' accounting rules are less intuitive than traditional historical-basis accounting, the enterprise is more reliant than ever on their CFO to educate key stakeholders on the impact of these new realities.  Intuitive or not, accounting rules have a profound impact on the health of the enterprise.

Information management is also increasingly important.  In addition to entity-level reporting, the enterprise needs filaments of data to evaluate performance of individual product lines and regions.  More sophisticated analyses are required for marketing in our increasingly dynamic society.  Data-security breaches are a growing threat and a potential source of embarrassment.  The CFO must ensure that data is accurate, useful and secure. 

Each CFO does not need to be an expert technician in every area but the CFO's leadership is required to ensure the organization has a solid 'technical' foundation.   

Disciplined Innovator
Innovation requires creative genius -- profitable innovation requires creative genius and discipline.  The CFO must bring that discipline to the process. 

Instead of being a naysayer, a quality CFO should embrace the benefits of proposed innovation while also being cognizant of the costs, challenges and uncertainties.  The CFO helps innovation by ensuring the enterprise does not attempt likely failures, carefully monitors performance of new ventures and aggressively supports the winners.

Bob Eberlein is an Associate and an Interim Executive with Cerius Interim Executive Solutions, the largest provider of Interim Executive management services.  He specializes in improving the cash flow and financial performance of entities, especially those confronted with liquidity crises, rapid growth or other significant challenges.

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The Human Capital Institute "Gaining a Business Edge through Interim Executive Management".

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