The future of the CFO: crunching numbers in the age of Big Data

The role of a Chief Financial Officer has always been a question of numbers.

Accounting, bookkeeping, digits on spreadsheets, that sort of thing. But modern-day CFOs find they are spending less and less time on finance. They now have bigger fish to fry.

CFOs’ duties and responsibilities, their expertise and their value have all been changing radically over the last two decades. Driving this rapid change are still, in a way, numbers. Perhaps more precisely, the role of the modern Chief Financial Officer is a question of data.

The sheer amount of data at our disposal – the number of numbers, if you like – is colossal; harnessing it requires somebody who knows how to deal with numbers.

Enter the CFO.

A CFO used to be seen as a company’s account-in-chief, the person responsible for drumming up reports of past performance and the point-person for questions on taxation or compliance. It’s in the last 20 years or so that things have changed quickly.

The turn of the century saw a shift towards Enterprise Resource Planning as software began to mature. When CEOs wanted their company to transition to integrated business planning, they often turned to their CFOs to implement and integrate the new tech solutions.

Global economic turbulence has long proven to be a catalyst for change; after the financial crisis of 2008, more importance became attached to efficient money management and the CFO began to take on business and strategic functions to steady the ship. Covid promises to be another landmark moment in the evolving role of the CFO, as it has put the focus on change management and the need for companies to adapt fast when faced with crisis.

The rise of the start-up has also pushed change over the last decade. Finance Directors joining these young companies that often saw double-digit growth began to see their responsibilities expanded considerably to the point where they often found themselves as privileged advisors to the CEO, the trusted consigliere to the capo, a partner who would drive the integration of new business solutions.

Larger companies are also part of this trend and increasing numbers of CFOs, helped by their new-found experience in strategic planning, are finding themselves being promoted up the ladder to CEO.

Back to the eternal link between CFOs and numbers. Digital technology has brought with it an exponential increase in the volume of numbers – that we’ll now call data – that define a company’s future strategy. Every aspect of a company can be quantified and all that data passes under the microscope of the CFO: logistics, customer relations, production, marketing, HR…there is no department in a modern company that cannot be scrutinised through data. There’s so much of it that it needs to be correctly harnessed if it’s to be analyzed to its full potential. “Taming” all this data has fallen to the numbers expert: the CFO.

Until the early 2000s, a CFO would typically report on performance that was in the past, on what a company had done. Now, data is visible in real-time and CFOs are able to report on how a company is performing right now. This change in time-frame has gone hand-in-hand with the rise of predictive modelling.

The game now is not about checking numbers generated in the past, but rather about filtering real-time data in order to make decisions about the future. Hence the rapid development of a CFO’s strategic role in a company.

Mastering analytics has therefore become an essential skill for any would-be CFO. The sheer volume of data on each company department is overwhelming, so the challenge is to develop solutions that centralise all that information and identify which data is pertinent when it comes to making business decisions. Modern CFOs need to know which data will give them instant answers to questions such as:

• What is the optimum price for a client or supplier right now?
• What specific information does a certain manager need to be able to improve his department’s efficiency for a new project?
• What inventory do we need to quickly withdraw from the supply chain?

In future, CFOs and finance teams will continue to invest more focus into developing analytics tools that will drive predictive models. That makes understanding technology and digital tools a vital skill for people with that profile. CFOs will likely need to work closer to CIOs and CTOs than they have done in the future.

If digital transformation is priority, CFOs need to know where to start. A survey by McKinsey* on the future roles of finance directors picks out four points that are key in companies’ digital evolution:

• Automization: how to go from an Excel spreadsheet to a fully integrated and automated software.
• Data visualization: data-viz tools will help finance teams analyze, plan and forecast.
• Analytics tools: filtering the vast amount of data will also benefit forecasts for budgets and business plans.
• Digital integration: how do you encourage the transition to digital across the whole company without falling into the trap of over-centralization? It will require integrating the widest range of elements possible, including cost monitoring, operations management and supply chain. For data to truly become a driver of performance company-wide, the approach will need to rely on agile systems.

CFOs who took part in the ACCA study generally agree that marketing is a powerful tool for their own profession. In future, they would like to use social media more often as a strategic channel. Companies already communicate with each other via the posts of their CFOs on platforms like Twitter and LinkedIn. It’s a particularly effective way of promoting expansion plans, product launches and company branding and values.

Marketing is also extremely useful to finance departments in terms of data analysis. For example, a finance director can learn much about future sales volumes from customer satisfaction surveys, or understand better what investment is needed in either paid or organic online ads. It’s just another way in which a modern-day CFO can guide company strategy thanks to quantified data.