The Journey of the SME CFOs: From Numbers Wizards to Strategic Trailblazers

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The journey of SME CFOs

1. Introduction

Situation

In recent years, the role of the CFO (Chief Financial Officer) has undergone a dramatic transformation. Once viewed merely as “numbers wizards”, they are now strategic leaders who play a pivotal role in driving the company success. Also in the SME space, CFOs face unique challenges that demand an adaptation of their skill set.

Traditionally tasked with financial strategy, supervising the accounting and financial controlling, supporting investor & stakeholder reporting, and regulatory compliance, CFOs now have a broader scope of responsibilities. They are increasingly involved in company strategic decisions and must possess digital competencies along with experience in company development.
Key activities with the CFO area
Figure 1: Key activities with the CFO area
The future role of a CFO within a Small and Medium-sized Enterprise (SME) is expected to continue evolving in response to various external and internal factors. While the specific duties may vary depending on the industry, size, and stage of the SME, several trends are likely to shape the CFO’s role.

2. Challenges & Opportunities

Key Challenges:

  • Numerous impromptu requests demand extensive effort, compounded by the fact that much financial data resides in “cryptic” spreadsheets. When financial data are housed in reporting applications, they often lack functionality for executive or business user self-service.
  • Continuous reliance on finance experts is necessary to handle leadership requests and craft presentations.
  • Particularly for CFOs of SMEs, resource limitations curtail the opportunity to dedicate sufficient time to digitally transforming the finance domain.
  • Investors and stakeholders exert pressure for enhanced value creation through data-driven approaches.
  • Emerging regulatory requirements, such as those pertaining to ESG, add to the demand for compliance.
  • Business environments are becoming less predictable, necessitating heightened attention to cash and liquidity management.

Key Opportunities:

  • Strategic Business Partner: CFOs can transition from being solely responsible for financial management to becoming strategic business partners to the CEO and other senior executives. By providing insights and analysis, CFOs can contribute to strategic decision-making and drive business growth.
  • Digital Transformation: CFOs can lead digital transformation initiatives within the finance function, leveraging technology to automate processes, improve efficiency, and enhance data analytics capabilities. This includes implementing cloud-based accounting software, AI-powered forecasting tools, and robotic process automation (RPA) solutions.
In a nutshell, CFOs of SME can shift to be more effective, informed, externalized and proactive (see figure 2).
CFO today and future
Figure 2: CFO today and future

3. Levers to optimize the current activities

The digitization wave poses one of the greatest challenges, especially for financial leaders. They must harness innovative financial technologies to automate processes and enhance efficiency. This necessitates enhanced collaboration between the CEO and CFO to access real-time financial data and maintain the stability of the enterprise.

However, SME usually cannot afford the jack of all trades. Depending on the level of knowledge and experience of those responsible for finance and the available resources, it may therefore be advisable to outsource certain tasks such as treasury or use CFO-as-a-Service services. The targeted use of digital tools can also relieve the burden on the finance department: thanks to digitalization, professional solutions that were previously only available to large companies are now also available to start-ups.

Accounting

Adopt Cloud-Based Accounting Software: Implement cloud-based accounting software such as QuickBooks, Xero, etc. These platforms offer features such as automated bookkeeping, invoicing, expense tracking, and financial reporting accessible from anywhere with an internet connection.

Automate Routine Tasks: Identify repetitive tasks such as data entry, invoice processing, and bank reconciliation, and automate them using accounting software or specialized tools. Automation reduces manual errors and frees up time for finance staff to focus on more strategic activities.

Integrate Systems: Integrate accounting software with other business systems such as CRM (Customer Relationship Management) and ERP (Enterprise Resource Planning) systems to ensure seamless data flow between departments and eliminate duplicate data entry.

Electronic Document Management: Digitize paper documents such as invoices, receipts, and contracts using scanning technology or document management software. Storing documents electronically improves accessibility, reduces physical storage space, and facilitates search and retrieval.

Financial Controlling

Implement Financial Planning and Analysis (FP&A) Software: Invest in FP&A software that offers budgeting, forecasting, and scenario analysis capabilities. These tools allow finance teams to create dynamic financial models, conduct what-if analyses, and generate accurate forecasts.

Automate Data Collection and Consolidation: Automate the collection and consolidation of financial data from various sources such as accounting software, ERP systems, and spreadsheets. Use integration tools or APIs to streamline data flows and eliminate manual data entry.

Adopt Cost Management Solutions: Implement cost management solutions to track and analyze expenses across departments and projects. These tools help identify cost-saving opportunities, optimize resource allocation, and improve profitability.

Ad-hoc requests from C-Level etc.

Enable the CEO and other key stakeholders for more self-service reporting to free-up time for new responsibilities. Digital native managers want to help themselves looking in digital tools and not be dependent on people from CFO team to prepare them the numbers that they need. Standardize Reporting Templates: Develop standardized templates for common ad-hoc requests such as financial performance analysis, budget variance reports, and cash flow projections. This reduces the time needed to prepare responses and ensures consistency in reporting.
ValueWorks self service Dashboard for the Management
Figure 3: ValueWorks self-service dashboard for the management
Centralize Data Access: Centralize financial data in a single repository or data warehouse that is easily accessible to finance team members. This enables quick retrieval of information and reduces the need for manual data gathering.

Ad-hoc requests answered e.g. by a co-pilot (see ValueWorks co-pilot in the figure below).
ValueWorks Co-Pilot
Figure 4: ValueWorks co-pilot
SMEs can minimize the effort required to respond to ad-hoc requests from C-level executives in the finance department, allowing them to allocate resources more effectively and focus on strategic initiatives.

Investor Reporting

Replace traditional spreadsheet or presentation-based reporting with a digital solution provided e.g. by Valueworks.ai. Establish a standardized reporting template integrated into digital platforms, automatically populated through connections with relevant operational systems. This enables investors to access reports in a self-service manner, allowing them to pose inquiries directly within the digital platform and receive prompt responses.

4. New responsibilities for the CFO

Strategic Leadership: CFOs will increasingly be seen as strategic partners to the CEO and other senior leaders, providing insights and guidance beyond traditional financial matters. They will play a crucial role in formulating and executing the company’s overall strategy, including identifying growth opportunities, assessing market risks, and driving operational efficiency.

Digital Transformation: As technology continues to reshape business landscapes, CFOs in SMEs will need to embrace digital transformation initiatives. This involves leveraging advanced analytics, automation, and cloud-based solutions to streamline financial processes, enhance decision-making, and improve agility in response to market dynamics.
Shifting focus of activities
Figure 5: Shifting of within CFO role (measured by time spent)

Strategic & operational controlling

Sales Funnel Analysis and Business Forecasting: CFOs will be responsible for driving robust financial planning and analysis functions within SMEs. This entails developing accurate forecasts, budgeting strategies, and performance metrics to support informed decision-making and ensure financial sustainability. Tighter view on sales funnel and related analytics to as precisely as possible predict revenues and identify weaknesses in the sales funnel management.
Cash & liquidity management: The accuracy of liquidity forecasts generated by tools like Agicap heavily depends on the accuracy of input data, such as sales figures, expenses, and cash flow information. Inaccurate or incomplete data can lead to unreliable forecasts.

Sales forecasting is the most uncertain element of liquidity forecasting due to external factors like market changes, seasonality, and evolving consumer preferences. Additionally, new product introductions, competitive dynamics, limited historical data, and internal factors contribute to this uncertainty. Despite using various methods, sales forecasts remain challenging to predict accurately due to these complexities.
Profitability Analysis: The foundation of entrepreneurship is built on profit. While the bottom line is a great indicator of general business health, it is also crucial to know how specific business units are contributing to the overall business growth. A CFO partner can help you determine how profitable a specific business unit is within an organization. For instance, if you’re running a SaaS-based product company, it’s important to understand the kind of ROI you’re getting from your product development team. Alternatively, if you offer multiple SaaS products, you need to know what a particular product line contributes to your business. CFO partners use analytical modelling to help you make the most favorable decision to drive business unit profitability.
Challenges calculating the project profitability
Figure 7: Challenges calculating the project profitability
With a modern data platform including a common data schema, the siloed data sources can be united, and the project profitability could be calculated on an ongoing basis by the system. That would save a lot of time for the finance area and provide real-time transparency for the business.

CFO programs

Sustainability and ESG Reporting: With growing emphasis on environmental, social, and governance (ESG) considerations, CFOs will need to integrate sustainability metrics into their reporting frameworks and business strategies. This may involve measuring and disclosing the company’s environmental footprint, social impact initiatives, and governance practices to stakeholders.

5. Summary and outlook

The role of Chief Financial Officers (CFOs) has transformed significantly in recent years. Once considered primarily as financial experts, CFOs are now strategic leaders who play a crucial role in driving company success. This evolution is particularly pronounced in Small and Medium-sized Enterprises (SMEs), where CFOs face unique challenges and opportunities. Key challenges include managing impromptu requests, resource limitations, and regulatory pressures, while opportunities lie in becoming strategic business partners and leading digital transformation initiatives.

To optimize current activities, CFOs can leverage digitization and outsource certain tasks, such as treasury management. Implementing cloud-based accounting software, automating routine tasks, integrating systems, and enabling self-service reporting are some strategies to enhance efficiency. Moreover, CFOs are expected to take on new responsibilities, including strategic leadership, driving digital transformation, and integrating sustainability metrics into reporting frameworks.

The future role of CFOs within SMEs will continue to evolve, demanding a diverse skill set encompassing financial expertise, strategic vision, technological proficiency, and leadership acumen. By embracing these changes, CFOs can drive sustainable growth and create long-term value for their organizations. They are poised to remain the linchpin of company success, contributing significantly to shaping corporate strategy and navigating the dynamic business landscape.

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