The roles and responsibilities of the modern CFO

As a CFO, you've probably noticed your role is changing. Everyday, news of AI innovations, challenging macroeconomic conditions, and changing consumer attitudes spread, impacting how small to mid-sized companies (SMBs) look at the CFO role.

Keeping pace with all these changes must seem mind-numbing. How can you navigate them and position yourself for success?

In this article, we look at what SMBs expect from their CFOs, the challenges your role faces, and seven best practices that will position you as a strategic leader in your company.

The four roles of a modern SMB CFO 

Modern SMBs are asking more of their CFOs than before. As an SMB CFO, your company most likely expects you to satisfy these four roles:

• Function as a business continuity enabler
• Offer insights into an uncertain future
• Be a strategic advisor
• Lead business transformation

Here's a deeper look at how you can fill these roles successfully.

Function as a business continuity enabler

 CFO roles might be changing, but legacy tasks aren't going anywhere. Chris Martinez, Finance Analytics Manager at The Kraft Heinz Company, lists a few.

"Companies still expect CFOs to execute traditional or legacy tasks that are fundamental to the financial health and operational efficiency of the organization," he says. "CFOs must manage the company's working capital, prepare accurate financial statements, develop and manage the organization's budget, and work to optimize expenses."

Kirk Kappelhoff, Director of Strategic Finance at Drivetrain, points out that CFOs don't have to execute every task themselves. "Carving out the more traditional finance parts of the CFO role manifested itself in the form of a new role: the Controller," he says.

"These [traditional] operations still fall under the purview of the CFO but are delegated to the Controller for active management." 

Aleksandar Stojanovic, CEO and Founder of Fiscallion, a CFO and FP&A consultancy, says traditional CFO tasks still offer firms plenty of value. 

"Regular financial audits and embracing digital tools for financial reporting can streamline processes, ensuring compliance and financial accuracy," he says. 

"In my previous role, I implemented a dynamic cash flow monitoring system. This was crucial during a period of rapid growth, as it allowed us to make informed decisions about investments and operational expenses."

The bottom line: Despite the strategic shift happening with the CFO function, traditional CFO tasks still offer you the chance to make a positive impact.

Offer insights into an uncertain future

SMB markets change constantly and unexpectedly. Stojanovic highlights an example many CFOs will likely have experienced. "I led a strategic pivot during the COVID-19 pandemic, where we shifted our focus to more resilient market segments."

"This involved analyzing market trends and adjusting our financial strategy accordingly," he explains. When asked what CFOs can do to navigate such incidents, Stojanovic says keeping a pulse on emerging market trends is critical.

"Regularly updating financial models and projections based on current market data is key," he says.

Kappelhoff drills deeper into this observation. "Breaking out macro-level changes into bite-size pieces serves as a sort of lighthouse, leading the CFO down the path of metrics that matter," he says.

"Granularize it. Break out a macro change into micro pieces and analyze the drivers of the macro change at the micro level. Malcolm Gladwell’s insight that 80% of any given activity can be attributed to 20% of the drivers is still true today."

Christoph Ott, CFO at Planisy, believes CFOs can bring a sense of calm to their businesses during uncertain times.

"CFOs can actively build bridges between departments, promoting seamless communication and resource visibility," he says.

"This collaboration becomes particularly crucial in a defensive economic climate, ensuring that departments are supported and working collaboratively for optimal business outcomes."

The bottom line: Changing conditions help you position yourself as a trusted guide. Scenario planning, data-driven decision-making, and stress testing your business in normal times will help you prepare for rough weather. 

Be a strategic advisor

Storytelling is an essential skill for the modern CFO. You must dive beyond surface-level numbers and translate what they imply for your business. These insights help CEOs steer the business forward.

Ott explains. "The CFO's strategic involvement in decision-making regarding investment prioritization and budget cuts is paramount."

Collaborating closely with the CEO and establishing a strong rapport with leaders across the organization enables effective decision-making."

By working with the CEO, you can understand the context behind expansion plans and model business risk accordingly. Collaboration of this kind will also help you analyze the risk-reward profile of an opportunity.

For instance, you could source goods internationally at low prices, but bureaucratic processes may threaten profits in the future. Hubert Roth, Managing Director of Mecheltron GmbH & Co. KG, an iBanfirst client, illustrates an example.

"China offers a huge variety of sources of supply and sales opportunities," he says. "But the biggest problem with sourcing goods is when quality issues arise."

"The exporter has to re-import the goods via the proper channels and incur considerable import duties," he explains. "On top of that, there are the transport costs. This often means that it’s [returning goods] not worth it. So, in case of doubt, you are left with defective goods."

A forward-thinking CFO can model the impact of defective products on the bottom line, the costs of opening an international office to monitor product quality, and present an accurate picture of the best way forward.

The bottom line: CFOs must offer strategic insights with stories, not just run reports.

Lead business transformation

 "CFOs should prioritize investments in technologies that offer both immediate efficiency gains and long-term strategic value," Stojanovic says. "It's important to balance the budget between quick wins and major digital initiatives."

He cites an example of aiding digital transformation in a previous role. "I led a digital transformation project where we digitized our invoicing system. This not only improved efficiency but also provided better data analytics for financial decision-making."

Martinez points out that transformation has a 'people' element beyond technological choices. "I believe CFOs should prioritize investment in training and development programs to enhance the digital skills of the finance team and other employees," he says.

"This ensures that the workforce is equipped to handle new digital tools and technologies effectively."

Kappelhoff extends this point:

"The CFO that listens to their day-to-day workers is the CFO that knows the right time to go digital," he says.

"Is your team telling you they are overworked? Time to go digital. Which tool is right for my organization? Ask your team."

Ott reckons CFOs must spearhead collaboration to better understand digital transformation initiatives.

"CFOs are pivotal figures in spearheading digitalization and effectively implementing new technologies across various departments," he says. "Additionally, promoting collaboration between departments, particularly finance and IT, is essential for smoothly integrating new technology."

Bottom line: CFOs must move beyond finance and look at the benefits of technological transformation for their businesses.

The challenges facing SMB CFOs

While SMBs expect their CFOs to execute the four roles we've just discussed, what challenges are hindering them? 

Recent industry reports indicate the following factors as top CFO challenges:

• Economic uncertainty
• Balancing innovation and budgets
• Keeping pace with role changes and expectations

Here's a deeper dive into what's keeping CFOs up at night.

Economic uncertainty

The top factors impacting companies’ future growth according to CFOs. Courtesy: Datarails

Datarails' 2023 SMB CFO Sentiment Report revealed that an uncertain macroeconomic picture is complicating CFO strategies. Surging FX rates are a particular concern, along with rising interest rates.

Examining the wide range of these concerns (from supply chain disruptions to energy prices) reveals the breadth the modern CFO must cover.

While navigating these conditions is tough, relying on the insights in the previous section will help you position your business for success.

Balancing innovation and budgets

Long-term CFO priorities that are facing near-term cuts. Courtesy: EY

Almost every CFO understands the importance of future-proofing their businesses. However, the programs that drive such change are clashing with company budget constraints.

EY's 2023 Global EY DNA of the CFO Report highlighted some of these conflicts.

Crucially, technology and digital innovation face the second-highest number of constraints, despite every company understanding their importance.

The lesson for CFOs is to prioritize innovation programs based on criticality and urgency.

For instance, allocating resources to currency risk management is critical to safeguarding profits when conducting business in multiple geographies and currencies. CFOs must weigh this advantage against other initiatives (like AP automation) to balance innovation and budget constraints.

Keeping pace with role changes and expectations

SMB CFOs find themselves in an odd place, according to EY's report. The CFO role has more potential to impact businesses than before, but navigating it has become tough.

CFO paths are increasingly complex. Courtesy: EY

The first observation in that chart is instructive. Companies need CFOs who can interpret data over people who can run reports, which probably explains why a lack of extensive finance experience isn’t a dealbreaker. 

As Kappelhoff pointed out previously, companies expect Controllers to assume those traditional tasks. Modern CFOs must become data-oriented to present themselves as a viable strategic partner to their businesses.

7 best practices for modern CFOs

Given all this information, what should you do? What processes can you follow to align yourself with company expectations and handle challenges?

Here are seven best practices for modern CFOs:

• Prepare for volatility
• Embrace technology

• Rethink your KPIs
• Foster collaboration
• Structure finance for the future
• Create a data-driven mindset
• Realign finance around CX

Let's look at these in more detail.

Prepare for volatility 

 If economic volatility is a concern, embrace it. 

A diverse array of financial products is at your disposal to mitigate currency fluctuation risks. Team up with a reliable FX specialist who can help you evaluate their benefits, costs and associated risks while keeping your company goals front and center.

Stojanovic recommends studying international markets, especially emerging ones that experience plenty of volatility. "Working in a volatile market in Southeast Asia taught me the importance of agile financial planning and the need for robust contingency plans," he says.

"Continuous learning in areas such as foreign exchange risk and global economic trends are essential to staying adaptable."

Embrace technology

Technology is an asset for finance and plays a crucial role in how you structure your finance department. Empower your team to explore technological options and educate them about how it can empower them to work smarter, not harder.

Charley Hochet, CFO of Docshipper and an iBanFirst client, is a testament to the transformative impact of technology in finance.

His experience underscores that incorporating iBanFirst not only streamlined cross-border payments, making the process easier and faster, and reduced costs for Docshipper but also provided a significant competitive advantage. He notes:

"We can invoice our clients in their local currency. It makes a real difference for them to know they won't have to worry about exchange rates."

While technology extends its impact beyond cross-border payments to areas like accounting and invoicing, there might be hesitation among some individuals about technology potentially replacing their roles. Stress the need for evolving with the times and and encourage a perspective where technology is seen not as a threat, but as a valuable tool to enhance and refine their skills. For instance, help them explore ChatGPT's benefits for finance.

Forward-thinking CFOs lead the way by leveraging technology to speed up routine tasks, freeing up time for their teams to focus on higher-value work.

Rethink your KPIs

 Financial KPI planning is a critical task, so make sure your KPIs are:

• Relevant to your business
• Reviewed by your team periodically
• Recorded in an intuitive dashboard
• Updated in real-time as much as possible
• Accounting for international context (FX budget rates, for instance)

Foster collaboration

 Companies expect CFOs to contribute strategically, and collaboration is the best way for you to gain a better perspective on your business. Martinez highlights the promotion of digital transformation initiatives as an example of collaboration driving change.

"Work in collaboration with IT and other departments to develop a digital strategy that aligns with the company’s financial objectives," he says.

"This involves understanding how digital initiatives can drive revenue growth, cost savings, and efficiency improvements."

Such collaboration will help you balance technological investment and budget constraints.

Structure finance for the future

Your finance department's structure must reflect changing reality. Technology is now an asset, but you must leverage it with the right skills.

Here are a few ways of achieving this goal:

• Explore automation options in operational finance
• Prioritize data analysis skills in strategic roles like FP&A
• Review your department structure periodically to ensure effectiveness
• Follow the right finance influencers to keep pace with modern trends

Create a data-driven mindset

 CFOs and finance departments routinely weigh the pros and cons of several potential projects. Embracing data and using it to drive decision-making is critical.

"CFOs should conduct financial modeling and return on investment (ROI) analysis for projects," Martinez says. "This helps in assessing the financial viability of these initiatives and determining their potential impact on the company’s bottom line."

"Advocate for a culture that embraces digital innovation," he continues. "This involves encouraging the adoption of digital tools and practices across the organization and fostering an environment where digital transformation is seen as a key driver of future success."

Once again, collaboration with IT and technical departments will help you understand how your company stores data and what kind of analysis your infrastructure supports. 

Understanding this will help you prioritize the right digital investments that put better data in your team's hands, giving you better insights.

Realign finance around CX

Companies have long viewed finance as a back office function, but this view is rapidly changing. CFOs who wish to contribute strategic advice to their companies must realign their departments around this objective.

CX is a great North Star to align your team around. Encourage your team to understand customer needs and orient customer-facing finance teams like AR around CX.

For instance, technology investments can align sales and AR, eliminating common invoicing errors that create disputes. In turn, your AR team will have more time to address complex issues that need a personalized touch.

The result is memorable CX that builds strong customer relationships.

How will you adapt to the changing CFO role?

Finance and the role of the CFO have always experienced change. Kappelhoff says the best way forward is to embrace change wholeheartedly.

"History tells a story of not only change, but change at an increasing pace," he says.

"Show me an adaptable leader, and I will show you a successful CFO."

"New metrics come out every day, industries grow and die overnight. The CFO who finds enthusiasm in a changing order will be the CFO who does not burn out."