Monthly Archives: June 2015

The Ideal CFO Skills

What qualities are essential and what CFOs should really focus on

There was a recent discussion topic on titled “The Ideal CFO Skills” .  It evolved from a question by a Proformative member trying to get a better understanding of what CFOs should devote their time to and what basic skills they must possess in order to do so. The question was based on an article in by David W. Owens about skill sets provided by a recent CFO survey. The main categories given were:  Strategist, Catalyst for Change, Steward and Administrator.

Proformative readers were asked to form their own opinion on how much time CFOs should devote to each category and why. There were many responses to this question and the general opinion was that the “Strategist” was a critical category where CFOs must be able to continually analyze the performance of their organization using planning as a tool of reference, while also being a catalyst of change, usually in conjunction with the first category’s activities.

In my many years in accounting, finance, and upper management I have seen the CFO role evolve from the top accounting and finance person in the company to the CEO’s partner.  It used to be that if you wanted to become a CFO of an organization, your career path had to often start as a staff accountant, moving through the ranks while gaining experience and taking on greater responsibilities with each career advancement.  You often had to be a CPA (in the US) in order to be considered for the CFO position.

This has all changed in the last 10 – 15 years. Many CFOs in a variety of industries are not accountants by trade.  Some have sales and marketing background, others advanced to the position from operations management or the legal department.

CFOs are often the second in command at the organization, directly report to the CEO and in close contact with the company’s Board of Directors, investors and shareholders, and industry financial analysts.  It is common nowadays to see the accounting, finance, IT, Legal and HR departments report to the CFO.

The four skill categories given in the Proformative board discussion are all very important, but some of the activities in each category must be delegated more than others in order for the CFO to meet his or her objectives.

Strategist is by far the most important skill category. The CFO must work very closely with the company’s CEO while interacting with other members of senior management in order to clearly understand the organization’s performance, analyze it against pre-determined goals and milestones and be able and willing to affect change. This is where the second skill category mentioned comes in: Catalyst for Change.

The CFO must continually search for ways for the organization to adapt to changes in the company’s market place, its customers, product or service lines offered vs. actual or forecasted demand, existing and competitors’ technologies or product offerings, legal and moral issues and changes in the general economy. These continuous changes must be performed timely but always thoughtfully and with solid data backing up each change.

In being a Catalyst for Change the CFO must earn the company’s respect and trust, as in doing so, changes will be embraced by all levels of management and can actually take place within the planned timeframe and budget.

Stewardship, the third skill category pertains to all levels of management, CFO included.  This is what separates a great organization from all other companies. The CFO, backed up by the CEO and with the help of senior managers can set that example. In turn, this will trickle down through the ranks and will make every employee feel they are cared for and appreciated. The results are often profound.

And finally, Administrator is an important skills category. It requires the CFO to not only be organized and well disciplined, but also able to instill these skills and traits in other managers of the company, and most importantly teach them to pass on these traits to their direct reports and to all company employees.

To make these skill categories really effective, the CFO must above all partner with the company’s CEO, who must also posses these skills and fully endorse them. Close communication between the CFO and CEO as well as between the CFO and his/her direct reports will always ensure that the organization is moving in the right direction, be able to quickly change course and most importantly rapidly recover from inevitable mistakes and unexpected negative events.

Should Excel be Expelled?

What applications Excel should and should not be used for and why 

I just saw a great question followed by a discussion on the site about whether Excel should be completely eliminated  as a financial analysis tool. I was pleased to hear that many people recognize both the value and the risks and limitations of Excel (or any other spreadsheet). I contributed to the discussion and wanted this blog’s readers to benefit from the insight given and my own opinions.

It is a well known fact that Excel is one of the most common software tools in the workplace, not just in finance and accounting, but also in many other areas that require maintaining calculations or data analysis.

Excel (and all popular spreadsheets in the past 30 plus years) is an incredible tool with certain capabilities and functionality unmatched by any other software application.  Unfortunately, we have become dependent on it for far more applications than we should.

Applications such as planning, budgeting & forecasting, consolidation of financial statements and other critical financial processes should not be dependent on and performed in Excel (or any other spreadsheet). The risks of errors, omissions, broken links and the significant effort required to update complex models are far too great, especially given the fact that the practice of change management and internal audit of user computing controls is nearly non-existent when it comes to use of spreadsheets in corporate finance.

However, financial analysis can be performed in Excel as long as the data driving the analysis is primarily produced elsewhere (e.g., a dedicated planning and budgeting software solution, your ERP software, etc.). In this case, Excel should be used for its impressive formatting and display capabilities and ability to link it to data sources.

An example of this is Analytics Maestro from Centage Corporation. This application works within Microsoft Excel and uses all of Excel’s  incredible formatting and display capabilities without the risk of having bad formulas or broken links and without any user programming, as the data is seamlessly retrieved from the company’s ERP software and from Budget Maestro (Centage Corporation’s  planning and budgeting solution). A while ago I wrote on this blog about this new approach to analysis, A new Way to Look at Accounting Data.

Ideally in complex analysis, no actual formulas, links and other computational programming should be maintained in the Excel workbooks. In reality, many analysis worksheets will contain formulas, functions, macros and other custom programming.  These, however, should never be used in the production of financial statements and other critical external reporting activities. These worksheets should be set up under change management with proper design documentation and a change log.  Review and approval of all changes should be evident. Locking down worksheets, requiring access passwords and other security measures will reduce the risk of data manipulation by unauthorized persons.

When risk to accuracy and completeness of data in Excel workbooks or worksheets is greatly reduced, finance organizations will enjoy repetitive and consistent display of data in a familiar format and appearance, making the data simpler to understand and driving decisions quicker and with more confidence.

Microsoft Excel may very well be the most popular software application in the workplace; employees are familiar with its functionality, at lease on the most fundamental level, and get a good portion of their work done using it daily. Once we understand which critical applications Excel should not be used for we can safely continue to use and benefit from this software in many of our other daily tasks.