The CFO'S Perspective

Is My CFO Underperforming?

As executive financial recruiters we work with companies every day who have lost their CFO for a variety of reasons. The CFO may have left to pursue a better opportunity, retired, or made a career change. And in some instances, the CFO may have been shown the door due to subpar performance.

In all honesty, the latter scenario is the least common. Most organizations are hesitant to let their CFO go because of the inherent doubt in the process of doing so. First, there is the big question of how to determine whether your CFO is making the grade. (You certainly do not want to let your CFO go if you cannot be certain that someone else will be able to do the job better!) And, secondly, there is the daunting prospect of needing to find a replacement that is going to be better performer.

But just because it is not very common in practice does not mean it should be. Companies, especially those with owners and CEOs that do not have strong financial acumen themselves, do not typically evaluate their financial leadership as thoroughly as they should. Unfortunately, if your CFO is underperforming, not identifying this in a timely manner or not doing anything about it, can be extremely costly. When your financial leadership is falling short of expectations, strategic planning can fail, affecting revenue and profitability.

Topics: CFO Analysis Leadership Growth CFO Responsibilities Assessment Strategy

How a Fractional CFO Improves Financial Planning and Analysis (FP&A)

Attitudes around FP&A (financial planning and analysis) are kind of a mixed bag – everyone agrees it is important, but many people do not know what it really entails. As a result, businesspeople form their own opinions about who should handle it and what owning it should look like.

Some business leaders downplay the complexity of FP&A and mistakenly task their accounting and finance teams with this crucial function. This can be a mismatch because many accountants are not equipped to handle this level of financial responsibility and organizational oversight. Alternatively, some business leaders put FP&A on a pedestal and assume its critical role in the success of an organization necessitates a dedicated role.

Topics: Planning Analysis CFO Responsibilities

When to Use a ‘Decision Tree’ for Business Planning

For those not familiar with the term, a decision tree is a flow chart that works through all possible response options in a scenario to analyze resulting outcomes. Basically, it is a visual version of an “if this then that” statement across all possible alternatives.

The “branches” off each decision alternative that result use data analysis to forecast the most likely outcome of each decision. When one decision leads to another decision that must be made, that branch splits to continue extrapolating the effects of each subsequent decision. The result is a tree-like diagram (hence the name) that is easy to understand and interpret.

Decision trees can be more conceptual in nature or have numbers to back up decision scenarios, as is the case of pricing changes affecting revenue figures. For decision trees with complicated calculations, a software program can assign values and probabilities to streamline decision-making. A decision tree is a critical part of strategic planning because it allows decisionmakers to analyze the effects of a significant change throughout different areas of the business.

Topics: Data Analysis Planning Analysis Leadership Growth Forecasting Risk Management Change Management Strategy

How CFOs Plan and Prepare for Worst-Case Scenarios

The current economic climate, combined with the fact that September is National Preparedness Month, has many of us thinking about how we can prepare for possible threats and business disruptions. This kind of strategic planning allows a business to approach a worst-case scenario with a growth mindset instead of fear – increasing the likelihood that your business will come out of a crisis stronger for having gone through it.

During a worst-case scenario, leadership must decide whether the organization will make the necessary adjustments needed to continue with business as usual or change how the company will operate. And while the conversation will undoubtedly include operational and capacity considerations, it is primarily a discussion about financial capabilities.

Topics: CFO Planning Analysis Cash Flow Risk Management CFO Responsibilities Change Management Strategy

Financial Projections and Analysis Considerations

An important part of the business planning process is the preparation of financial statements to predict the outcome of an organization’s results in future periods.

Financial projections are based on compiling the internal and external accounting data you already use in the day-to-day management of your business. By projecting your revenue and expenses, you can get a more accurate view for how successful your business can be. Creating financial projections is not an easy task but is a very important part of developing a sound strategy. The financials tell you what goals to keep and what to cut.

Topics: Analysis Financial Projections