A yellow canary on a branch

The expanding role of the CFO

AIM WA's CFO Peter Byala and Deloitte's Paul Wensor on the modern duties of a CFO

5 minute read
A yellow canary on a branch

The CFO acts as a canary in the coal mine

Arguably one of the more important roles in any company, keeping track of monetary growth naturally brings chief financial officers (CFO) to the table for the most crucial business decisions.

But more than simply signing off on the fiscal side of things, the remit of the CFO has expanded considerably in recent years to play a more proactive part in strategy and company oversight.

Deloitte Consulting Partner Paul Wensor breaks the modern duties and responsibilities of the CFO into four parts:

Steward: Helping to protect and preserve the assets of the organisation.
Operator: Balancing capabilities, costs and service levels to fulfil an organisation’s responsibilities.
Strategist: Providing financial leadership in determining strategic business direction and aligning financial strategies.
Catalyst: Stimulating behaviours across the organisation to achieve strategic and financial objectives.

Covering these bases means CFOs have a higher level of scrutiny placed on them than previously, according to Mr Wensor, especially in a business environment that frequently changes on a macro scale.

For AIM WA Chief Financial Officer Peter Byala FAIM, these four functions find their root in one overarching trait in CFOs – the ability to analyse risk.

A canary in the coal mine

“With COVID-19, you probably would have found in a lot of companies that the canary in the coal mine – the person who would have been starting to raise concerns early – would have been the CFO,” Mr Byala said.

“The CFO is now the first port of call when it comes to potential responses to risk and outlook, and how these events may impact the business.

“Now that may not have necessarily been the case with small to medium-sized enterprises (SMEs) dealing with a crises 20 years ago, but it certainly is now and that's because CFOs have to have a lot more tools around understanding what's actually happening broadly, not just within the narrow confines of finance."

“Finances tell a story"

"The trends give you a story of where we are, what might impact the business and what opportunities there are, so the ability to identify the story and then be able to tell it and accommodate for it is crucial.”

With over 20 years of experience heading up finances, Mr Byala said the change in what was expected of someone in the CFO role was highly evident in modern hiring processes, particularly for SMEs.

Mr Byala said CFOs of the past were primarily hired on the back of their technical knowledge around accounting and related disciplines, with a strong desire for those with a sound knowledge in taxation, how to deal with audit sets and who understood profit and loss accounts.

“It was a role very much centred on how to finance, and having really good technical skills around those sorts of issues,” he said.

Today, however, My Byala said the role had evolved, with more experience and a broader knowledge of the business expected in order to convey its direction and forward plan to invested parties.

“Being able to balance the books and have a sound background knowledge of the business is definitely one primary role, particularly important in SMEs a number of years ago,” he said. “But having just a typical knowledge of accounting and accounting-related issues is not enough anymore.

“You actually require clear and concise communication skills, both written and verbal, meaning you can’t just spend your entire time in your office crunching numbers and looking at your financial packages and excel spreadsheets like in the past. The implications of where you are going as a company have to be communicated."

Answering this question – where is the company going? – is no small feat, according to Mr Byala, and in larger organisations the task falls to a team of people.

For smaller businesses with fewer resources, however, the CFO alone is often tasked with forecasting the state of the road ahead and formulating an agile plan for traversing it.

“Larger-scale enterprises can spend a bit more time and analyse, because bigger companies often have roles which mean the responsibilities can be better delegated, or can be done within a committee where you have special skills in each team member,” Mr Byala said.

“When in an SME where you don’t have this level of governance, the CFO often has to compensate by being very actively involved in those areas beyond just keeping the books.

“SMEs are expected to reach the same standard as larger enterprises, however, usually do not have the resources to be able to invest in specialists across some of the areas CFOs and larger companies may be invested in.”

The recipe for a solid CFO

For those with designs on becoming a CFO, Mr Byala said gaining sound financial knowledge should still be the primary objective, but many skills would come as the product of experience.

“Being a successful CFO is a combination of experience and training, but ultimately, wisdom and knowledge will come from both,” he said.

“Universities are more likely to still teach you the generic accounting skills which you have to have – you do have to understand finance taxation and those sorts of things. Once you start to go into the role, you have to understand people skills, communication skills, strategy.

“Some of it will be fast-tracked by training, depending on what programs you come by, but a lot of it will just be experience; so, understanding the forces that make sense of business – how you communicate with people, what's important and what's not.

“Learning good forecasting practices, as well as developing good communication skills is also paramount to success.”