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From behind the scenes to frontline: The evolving role of the CFO

A recent study by PAC (a Teknowlogy Group company) on behalf of Unit4 has identified significant changes in opinion and thought since the last report, particularly regarding growth drivers, the role of CFOs, and the urgency of digital transformation. This blog will explore the evolving role of the CFO in professional services organizations (PSOs) and how it impacts the future of business.

CFOs have numerous responsibilities to handle, and now there is an additional demand for them to take on a more prominent role in areas traditionally managed by the sales or human resources leadership teams. As technology and digital transformations have become integral to all businesses, CFOs are no longer relegated to the background. Instead, they have taken a front seat, becoming a strategic partner that adds value to their organizations while still managing the traditional financial responsibilities. 

While traditional CFO tasks like financial reporting and compliance remain critical, the CFO's role has become more frontline and strategic. CFOs now need to be able to identify new growth opportunities and manage risk while also balancing the organization's financial interests. As businesses become more complex, CFOs are now taking a more active role in decision-making and developing strategies for growth. They need to understand how technology is transforming the business landscape and leverage digital solutions to drive efficiencies and improve financial performance.

New responsibilities and collaborations

According to the PAC report, most PSOs anticipate an increase in revenue (77%), with even more expecting an improvement in their cash flow (85%) and operating profitability (80%). Business leaders are preparing for a more uncertain period by ensuring they have sufficient cash flow for investments in talent and portfolios to drive growth. This will put pressure on the office of the CFO to monitor progress on these measures and ensure that their growth ambitions do not compromise the right controls and platforms.

For a while now, CFOs have played a crucial part in shaping and implementing the M&A and overall business plan of professional service firms. According to the PAC report, over 60% of companies state that their CFOs have a strong or leading position in contract and deal execution, as well as sales and customer interaction. More than half (52%) of the firms also see their CFOs playing a significant role in recruitment and talent acquisition.

Sixty-four percent of IT services firms consider their CFO a critical player in the execution of contracts and deals. This emphasizes the need for commercial innovation to differentiate from competitors by offering unique deal structures or terms. Some vendors are now considering shifting from time-and-materials contracts to outcome-based engagements, where payment is determined by the quality and prompt delivery of work, so CFOs must weigh the potential risks and rewards to guarantee the success of these deals.

The report also states that high staff attrition has posed more of a problem for the professional services sector than any other industry in recent years, driven by the talent shortage in many areas. Poor utilization and high turnover will affect the bottom line, so CFOs should be looking to collaborate with their peers to develop solutions.

In the highly competitive talent marketplace, offering the highest salary to keep employees from leaving is not enough. According to the PAC report, 81% of business leaders believe that attractive roles and career paths draw staff away, while 76% recognize the need to improve employee engagement and wellness. Successful professional services firms are differentiating and reinforcing their talent management strategy by prioritizing the softer aspects of employee management. These impact the bottom line, which presents another need for CFOs to work alongside HR to develop recruitment, retention, and compensation strategies. 

 

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From steward to strategic partner: Adding value to the organization

Today, CFOs are expected to be strategic partners who bring value to the organization. They collaborate with other business leaders to ensure financial decisions align with the company's overall strategy. This requires the CFO to possess broad skills, including strong leadership and communication skills. CFOs must understand the business's overall objectives and translate them into financial metrics and reports. This will allow them to identify trends and forecast future performance, giving the organization a competitive advantage. They must also possess strong risk management skills and identify potential financial risks that could affect the company's long-term financial health.

CFOs need a firm grasp of technology and its impact on financial operations. They need to stay up-to-date with emerging technologies like artificial intelligence (AI) and blockchain and identify how these technologies can streamline financial operations and improve efficiencies.

CFOs have come a long way from their traditional role as financial stewards. They are now strategic partners that add value to the organization through their leadership skills, financial acumen, and understanding of technology. The evolving role of the CFO is critical to the organization's long-term success, and the CFOs who embrace this change will drive their organization's growth.

The role of technology in CFO's evolving role

In today's digital age, technology plays a crucial role in shaping the evolving role of the CFO. As businesses become more technologically advanced, CFOs must adapt and leverage technology to drive efficiencies and improve financial performance. With the abundance of data available, CFOs need to be proficient in data analytics tools and translate the insights gained from the data into strategic decision-making.

Advancements in technology have allowed CFOs to automate and streamline financial processes, reducing manual tasks and increasing accuracy. This frees up valuable time for CFOs to focus on more strategic initiatives and add more value to the organization. Emerging technologies such as AI have the potential to revolutionize financial operations. However, along with the opportunities, technology also presents challenges for CFOs. Cybersecurity risks are a top concern, and CFOs must ensure that robust measures, such as those that come with cloud-based solutions, are in place to protect the organization's financial data and systems.

Ready to learn more?

To read the full report and understand the complete picture of the professional services sector as we navigate 2023 and beyond, check out the PAC Research Study, Professional Services: A Benchmark for 2023, which you can download here.

To learn more about how Unit4 can transform your operations, check out our dedicated professional services industry page or click here to book a demo of our suite of solutions.

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