The chief financial officer (CFO) role has changed drastically over the past few years. No longer confined to traditional duties of financial oversight and compliance, modern CFOs are pivotal players in driving profitability and strategic growth. According to the 2024 Gartner report on CFOs, their top priority is spearheading their company’s digital transformation. Yet, at the same time, 70% of finance transformations are either less impactful or moving slower than expected.

How do CFOs ensure financial stability while leading from the cutting edge of innovation? There are several best practices CFOs can implement to balance financial stewardship with a focus on profit maximization.

Evolution of the CFO role

Traditionally, a CFO’s responsibilities revolved around financial oversight and stewardship. They were tasked with ensuring accurate financial reporting, maintaining regulatory requirement compliance and managing risks associated with the organization’s economic activities. This role was primarily focused on safeguarding the company’s financial health and ensuring that all monetary practices adhered to established standards and regulations.

With the advent of big data, business moves faster than ever. Due to their proximity to the largest volume of data across the C-suite, CFOs have shifted toward strategic leadership roles. Today’s CFOs are active business partners alongside the CEO and others, working closely with these executives to drive large-scale and high-impact organizational initiatives. They aren’t just required to curtail overspending and safeguard funds; CFOs are expected to drive strategic planning, business development, digital transformation and innovation.

Over the span of my career, I have witnessed the role transform from a focus on traditional financial stewardship to a more profit-centric approach. As the new CFO of a leading manufacturing company, I leveraged my skills as a financial analyst and controller to conduct a thorough analysis of my company’s financial data, identifying areas for cost reduction and revenue enhancement. From there, I collaborated closely with the CEO and other executives to devise and implement strategies for growth and increased profitability. The techniques I employed, which are outlined below, streamlined operations, harnessed technology and bolstered stakeholder relationships, leading to significant improvements in the organization’s financial performance.

Balancing financial stewardship and profit maximization

In contrast to the traditional approach, the profit-maximization methodology focuses on strategies designed to enhance revenue and optimize costs, ultimately driving growth and competitive advantages. This aspect of the CFO’s role requires a proactive approach to identifying opportunities for financial betterment and implementing programs that improve the bottom line.

Integrating financial stewardship and profit maximization involves discovering the delicate balance between stability and growth. CFOs must be expert multitaskers who manage the organization’s current financial health while also seeking out new opportunities for profitability. Doing this effectively will improve the odds for robust yet stable future growth.

Strategic mindset and adaptability: The keys to innovation

To keep organizations ahead of the innovation curve, it’s crucial for CFOs to cultivate a strategic mindset. This requires a commitment to consistency and development, staying plugged into the latest industry trends, and leveraging data analytics and technology to inform decision-making. By operating with this mindset, CFOs can better foresee and respond to market developments, positioning their organizations for long-term prosperity.

Adaptability is another crucial trait for modern CFOs. Embracing digital transformation is essential for staying competitive in this rapidly digitizing profession. A recent study from The Hackett Group highlighted the importance of digital transformation initiatives. CFOs can encourage innovation and promote collaboration across teams and departments to implement new ideas and solutions successfully. By staying fluid and agile to changes in the market, CFOs can set up their organizations to be resilient from setbacks and capable of overcoming rapid challenges.

The CFO’s leadership role in guiding innovation involves excelling across multiple channels:

• Setting the tone. Demonstrate a commitment to innovation through actions and words.
• Resource allocation. Support innovation initiatives by allocating financial resources.
• Reward system. Implement a reward system that recognizes and incentivizes innovative ideas and outcomes.
• Cross-functional collaboration. Encourage collaboration across departments to foster a diverse range of ideas.
• Risk management. Create a supportive environment where failure is considered a learning opportunity and calculated risks are encouraged.
• Technology adoption. Embrace new technologies that drive innovation in financial processes and decision-making.
• Continuous improvement. Cultivate a mindset of constant improvement and experimentation.

By promoting these practices, CFOs can create a culture where innovation thrives, leading to sustained business growth and success.

Essential soft skills for modern CFOs

CFOs need more than technical expertise to excel in their roles. Developing interpersonal skills to effectively interact and collaborate with colleagues is a requirement for long-term success. Leadership and communication skills are paramount to clearly articulate financial insights and strategic goals to their teams and other stakeholders. Effective and transparent communication fosters collaboration and ensures everyone is aligned with organizational objectives.

Emotional intelligence and problem-solving abilities are also critical. Balancing diverse interests within the organization, aligning goals and building a collaborative culture are essential CFO roles. Quick and effective responses to challenges are necessary to maintain momentum and address issues. These skills enable CFOs to navigate complex situations and make educated decisions that benefit the organization.

It’s equally important for CFOs to negotiate with stakeholders and align organizational goals with financial objectives. Their ability to influence decisions and drive financial stability and growth is crucial for the organization’s success. By leveraging these skills, CFOs can ensure that financial strategies are effectively implemented and the organization remains on a path to sustained profitability.

Leveraging financial data analytics and driving efficiency

The successful modern CFO leverages financial analytic tools to drive strategic decision-making. Deloitte’s 2023 CFO Insights report stated, “Now’s the time for CFOs to seize the data.” In other words, access to real-time data gives the financial executive agility. Identifying patterns and forecasting performance through predictive analytics allows them to make informed decisions that enhance profitability. By monitoring key performance indicators (KPIs) and tracking progress, CFOs can ensure that the organization is on track to meet its financial goals.

Process optimization is another critical area in which CFOs can become experts. By identifying and eliminating inefficiencies, CFOs can maximize resources through efficiency. This is done by continuously reviewing the financial processes and best practices that keep the operations running efficiently.

The CFO’s outlook

It is more apparent than ever that the CFO is a dynamic member of the C-suite and is tasked with driving growth, managing risks and guiding innovative programs to maximize profitability. The keys to doing so successfully include becoming an expert at managing the dual roles of financial stewardship and a driver of profit maximization, using finance to accelerate innovation, analyzing data in real time to optimize decision-making and incorporating soft skills to maximize collaboration. As the role continues to evolve, it is vital for CFOs to adapt and take on new challenges and opportunities. This will allow CFOs to position themselves and their organizations for long-term success.

About the Author

Nidhi Gupta is the CFO of APG, a leading manufacturer and distributor of fluid sealing and conveyance products. She has more than 15 years of senior finance and accounting experience across the automotive, energy, and manufacturing industries, including roles as accounting manager, divisional controller, segment controller, and controller. Nidhi earned her Bachelor of Commerce degree from Osmania University in Hyderabad, India, and she holds an MBA and a master’s degree in financial economics from Ohio University. Connect with Nidhi on LinkedIn.