In 1986 Top Gun was released in theaters. Between the time of its release and its sequel 36 years later, the checklist required by CEOs from their financial wingman or wingwoman has not changed that much. As a CEO, I often talk to others in the same position from different generations. I find the demands by a CEO of their CFOs remain remarkably consistent.
If you asked CEOs back then what they wanted in a CFO they would ask for credible forecasts, dispassionate hard-headed analysis, balanced focus between the cost model and growth, teamwork, and someone who really understands the business.
Though these core tenets have not changed, it is true they have become much harder. But here are five ways that CFOs can meet the wish lists of today’s CEOs.
1. Understand the Business Strategy and Optimize Forecasting
Circumstances normally seen over the course of decades have been condensed into a couple of years. That makes forecasting more complex. Businesses struggle to project quarterly sales and are navigating ongoing shipping delays and pullbacks in demand or investment. Therefore, to meet the businesses’ top priorities, CFOs must lean on their financial planning and analysis (FP&A) function like never before. FP&A should add value by looking externally and paying attention to what’s going on with customers, the broader industry, the competitive environment, financial performance rates, and economic forecasts and integrating that information into the short-term tactics and long-term strategy.
2. Prioritize Cash Flow Planning
Obviously, any CEO needs to know about liquidity — cash cannot be an afterthought. We lean on our CFOs and their team to model cash flow in efficient ways, which helps identify how many weeks of liquidity the company has under stressed business scenarios. That includes understanding the company's sales cycle, cash outflows, and the key levers it has to play with.
3. Provide Better and Cleaner Data
Being data-driven is table stakes for any CEO and for our investors. Having poor data can sink companies. Unfortunately, few companies I have seen can say they don’t have a data quality issue.
Many spend a long time in a black hole of morale-sapping time in preparing and consolidating data. In a recent survey of CFOs, we found the problem of manual data processes sees 41% of the work done manually (10 hours each week of skilled finance talent spent on manual work). This is stopping CFOs from being the effective business partner we need. In fact, 81% of CFOs believe they suffer from the most intensive daily manual work compared with any other role in the C-suite. In the worst cases, CFOs or their teams could be providing the wrong story, which is catastrophic.
In contrast, when asked what they would do if given this time back, CFOs in our survey responded by listing things CEOs want their CFO to do. We found that 52% of CFOs would spend more time on business partnering if freed up, 44% on analysis, 36% on new types of financial reporting, 33% on better communication, and 32% would enjoy a better home/life balance. All of these are vital for the success of a business and ensuring the CFO’s role remains visible and effective as a driving force for the company.
4. Challenge Legacy Technologies
Finance technology has been historically underfunded. To stress the tech gulf in FP&A teams, 47% of those in consolidated annual planning and budgeting use digital technologies. Around the time of the initial Top Gun fanfare, of course, Excel was launched. Like Tom Cruise, it has hardly aged, and Excel is used by more than 70% of CFOs at U.S. businesses for core tasks such as budgeting. But the other side of the Excel success story is that version control issues, collaboration, and time-consuming manual processes place a widespread burden on finance teams nearly forty years later. Overall, it is important that the entire ecosystem of tech is synced for the benefit of the entire company. This includes mapping all systems data, removing individual Excel pilot errors as much as possible, and ensuring the data from business units talks to each other.
5. Communicate Clearly and Know Your Audience
Working with so much uncertainty, the CEO prioritizes agile communication with all critical stakeholders. The CFO is a vital support for this. For instance, quick drill-downs into the numbers for management are vital on any given day. Some CFOs have established a cross-functional SWAT team of people in their organization to understand and identify the vital inputs critical for scenario planning. Elsewhere, CFOs spend plenty of time talking to investors, board directors, regulators, and other stakeholders, which is vital to conveying the real picture of a business in tough times.
It is crucial that CFOs are in good shape to adapt their organization, acquire new skills, provide timely information to make decisions, and optimize technology. Getting this right will keep CEOs and their businesses at the right altitude to survive and thrive in these headwinds.
Didi Gurfinkel is CEO and co-founder of Datarails.