This is create the next from Pro CFO partners, where every week we explore strategies and ideas for financial management and growth to help today's businesses but their financial picture in context.

I'm Chris Bintliff, and I'm here with Nelson tepfer. From pro CFO partners, and we're talking about what is the CFO? And Nelson I think a lot of business leaders, in my experience anyway, come in with a notion or an idea or an expectation, or they already feel like they have a definition or a description of what a CFO does. What do you think most companies or leaders are actually getting wrong about their idea of what is CFO do? What is the CFO?

So Chris, I think a lot of this comes down to more the evolution of the role where it has been where it has changed to, for instance, in one of my very first CFO roles I jokingly used to refer to my responsibility, as making sure as much money as possible comes in Then as little as possible goes out, because at that time, the traditional CFO was more of a gatekeeper that was more of their role was that was actually their responsibility was more of a gatekeeper type of responsibility is watching what goes in and out.

So and then, let me ask you, when did when did that shift is that decades ago is that

about it was probably about two decades ago is when the shift really came into focus, I would likely say it was after the.com bubble was when they recognized that without the forward looking more that I both focus, more companies are not going to succeed or more companies tend to fail when they don't have the forward looking strategic focus, and they just have somebody who's watching what goes in and out. Hmm.

So when that shift happened when the strategic shift happened, was it an Was it an aspect of sort of necessity creates invention, that's sort of a thing or was it in defense of this horrible comics? And we'd better change things up. The short version, as it always is, it's probably a combination of the two.

In that I'm guessing the companies would not I'm guessing the companies, which did survive and come through stronger had someone in that role who was more like that. So as companies then evolved and shifted to what they were expecting from the role, they were looking for the ones who succeeded and who surpassed everyone else. And those are the ones which were guided by a more strategic viewpoint.

Do you feel like most companies that you engage with or that you spend time with understand this transition? And when you shake hands with them, they understand the strategic value of the CFO? Or is there still a lot of that's not what we do. Let's open our minds to new things,

everybody. There's a lot at this point, especially, you know, and I say at this point, in light of the recent developments with the pandemic, there's still a lot of they read them recognizing that, Oh, we don't really have this forward looking strategic function, or is it still an operational or a backwards looking one, so The short answer Curtis's, we're absolutely seeing many companies still not having made that shift. They think they know and they want it. But when it actually comes to they're looking what they actually have, most of them do not.

So what do they think the CFO should be doing? In my mind, there's a lot of confusion around an accountant, and CFO, or as you said, a gatekeeper an in and out, you know, the person who writes the checks. But don't you don't need to get involved in the direction of the company? What are they thinking is the role of the CFO that is really limiting their potential for growth or

better development? So it's interesting, I've actually done speaking engagements where I'm talking to a room of CEOs. And I actually asked them what they think the role of the CFO is, and it's interesting to me that I usually get about 10 different answers in this room. Likewise, a highly successful CEOs and it comes from you know, let's break this down a little bit. You mentioned an accountant or You know, there are different roles, we'll call this in this accounting and finance function. So the accountant is usually more tax related or tax focused, which is usually not the area of the CFO, they may have that background, but from their responsibility, it's more to make sure that they're working with the right accountant or tax professional more than it is to actually do the taxes. So an accountant or we found a really good accountants, very often before someone like us before strategic person at the top of their finance function gets involved. They'll be asking these questions to their accountants, and their accountants will answer as they can, but their accountants are not inside the company on an ongoing basis to be able to actually give them live forward looking data. What an accountant can do is look back and say, Well, last year, this is what we see happening. So this year, this is what you should focus on. And then the next year when you have that conversation, unfortunately, it will usually just be a rinse and repeat will be the same type of conversation because they're not involved on a day to day basis, and what's going on in the company.

Now, in my experience, this is almost epidemic. We make our future plans based on our past tense or lagging indicators. So how did last year go it went like this. Let's throw 5% on top of it and say that that's where our revenue goals are. That's where our profitability goals are. And part of what I think is important understand from your perspective, as you're saying, that's backwards. That's the wrong way to look at it. We think strategically we have to be forward thinking and there's other aspects that go into it. Is that accurate? Absolutely.

No question and the from our perspective in where we get to tackling that and changing that dynamic or changing that perspective comes from, you know, backing up a little bit to say, what is the overarching goal, or what are we working towards right now? How are we defining that in measurable targets? Because then we can come to well, if we've identified this as the goal where we want to be in whatever period of time or whatever the goal we're identifying, and we have to come into play, come back at into Okay, what is there for that mean we need to do right now, what do we need to set up within the company Right now to support that goal,

it sounds like as you're describing the CFO today, the modern CFO, that's a creative person, that's a person who can look past the obvious and get into the nuances of something. And that's not necessarily what is commonly associated with the financial expert. Do you agree with that?

So I'll push back a little bit on the creative because I've been called many things. Creative is usually not the most common adjective used to describe the CFO role. So what I will say it's more along the lines of experience as having actually done this, you're able to recognize that this is what we're trying to do this just everything that's in place in order to help achieve that. It's not so much of coming up with a creative solution, although there is absolutely a lot of creative public problem solving involved in what we do. But from our perspective, becomes comes down to Okay, we know this company is trying to do this. We know there are holes These things evolved in order to help achieve that. So we need to look at inside the company. Is this all here to support what they're trying to do? And if not, how do we build it?

So experience? What are some other key characteristics that you feel described the modern CFO, if I'm, if I'm sort of trying to look for the ideal, what are some thoughts

that person possesses? So there's obviously the strategic, non operational, there's a proactive and not reactive, those are two common ones, especially we've seen recently where companies recognizing Unfortunately, that's not what they have. In addition to that, it is a measure of adaptability and flexibility. As there is no Well, this is what we've always done. So this is what we're going to do when we see something like this. And that is directly related to the problem solving that we just identified. Is that adapt, you have to be able to recognize that that what we're working with today is not where we were a week ago, and this has never been more prevalent than at this point in time. So when we talk about all these issues that companies are coming up with a natural experience CFO will look at the short you know this have the thing, everything that happened this pandemic right now, from our perspective, this is just par for the course. We've been through variations of this in companies across the board and looking at it like this. It's like okay, yes, this is what happened. This is what changed. Good. How do we adapt? How do we change what we're currently doing to support where we see ourselves currently in the marketplace? create the

next is brought to you by pro CFO partners who believe every business deserves to work with an expert CFO to guide its success. Pro CFO partners, our expert financial officers network across industries, verticals, specializations and situations, fulfilling the role of a part time CFO with all time commitment, pro CFO partners utilizes the innovative and exclusive FGC financial flywheel as a framework that creates momentum to drive your financial functions for sustainable success. Visit pro CFO partners comm to explore how we can implement a systematic and scalable financial system to help you achieve your goals. Pro CFL partners calm.

So aside from that adaptability, then there's actual leadership part when you're thinking of the CFO, you have to be able to actually lead the company in doing this and not just point out a solution and sit back at the end of the table and wait for everybody else to figure out how you actually do it. So it's the strategic it's a proactive face the adaptability and it's the leadership aspect. That was that was, on

my mind was this leadership aspect because I think historically, thinking about the CFO, not an organization, certainly, and in many big organizations, we can always point to it, but I think a lot of maybe small and medium businesses don't think of that person as a strategic compliment to the CEO, to the vice president to the C suite in such a way that they are help shaping strategy is that one of those things that you're finding smart companies or modern companies are adjusting their behaviors towards?

Definitely. What we've also found a lot of adoption depends on that CEO. Knowing what kind of help or how the help needs to be phrased for themselves. And this comes to the CEO knowing or recognizing what the business owner knowing and recognizing this is how they make the decisions. So they need to find a complement to that process. It's not just someone who's gonna give them their advice, it's someone who's going to give them advice in a way that they need to understand it and actually be able to take action on it. For instance, there are some people and this speaks more to people in general, as opposed to the CEO, business owner. There are some who need to see all the data, all the information and analyze it six different ways before they'll make a decision at the CEO level. And there are some who will just hear these types of things. This is what we're going to get if we do this. Great. Let's go do it. So a lot of it comes down to what is the support? Or what is that right hand person and the CFO look like who's going to be able to help that CEO make those decisions in support of achieving their goals?

I feel like that's a new way of thinking the idea of correct me if I'm wrong, I feel like the idea has been More information is better information. And part of what I hear you saying is strategically the right information is better information. And and it depends on how the leadership of the company and maybe the CEO in particular likes to receive that information and what they want to do with it. But it's up to the CFO to sort of be able to translate that or read between the lines or read the tea leaves to figure out, this is the thing that you need a CFO or CEO in order to help shape the guidance that you want to deliver in this particular organization. And to your point, Chris, we are we have never been at a time where there is more available nearly so much data available in every single company. So it is absolutely a lot of the responsibility we get involved with is what are we looking at that's going to inform our decisions? How are we taking that data and putting it into a framework that allows us to look forward and say, okay, based on this, therefore, this is what we're going to do. So more information is not necessarily better. information. That's interesting. And you said earlier that you're finding, you're finding that some leaders are saying, wait, this we're in, especially maybe in this situation, the pandemic situation. And as businesses are trying to adjust or maneuver, quickly pivot. It turns out we don't have what we needed in this space in this role. Can you tell me more about that? What does that realization? Like? What are the indicators that are held up telling me as a leader? Well, we have a problem here.

So we'll put simply, in colloquially, perhaps high tide hides a lot of rocks. So when everything is going well in a company and everything's going smoothly, you don't need as much from this role, perhaps, you may not be recognizing what you're missing out by not having it but at the same time, things aren't moving, okay? And everything's going well, so everything keeps moving forward. But the past few months have shown is that this person who's been at the top of that function, whatever title they may have, they are waiting for the CEO to come to them and say, okay, we need to adapt to this How are we going to do it, and then that person goes off and figures out how to do it, instead of that person coming to them and saying this is changing, we need to do this in our company so we can stay ahead or so we can survive or so we can actually do this for our customers moving forward. And that's the difference between reactive and proactive type of leadership leader in this function. The strategic vers operational is where we've seen where the person who was leading this function was actually doing a lot of the work on their own, and not actually leading the rest of their team in doing this. So this is the only person who knows how to do half the things in the company and the finance and accounting function. And the other five people on their team are a little bit lighter lost without a paddle right now.

That is interesting. There's a there's no one of you don't know what you don't know, how can you possibly give attention to a thing that you don't know should be or could be different. So then you're sitting in just a space of pain, without an idea that there's a pain reliever to that, but it requires a shift in thinking and then sort of at the same Time, those that are with these responsibilities in an organization can be so full of their own knowledge. And I think, do you think that that's historical. So I've been here for 20 years, I've been here for 10 years, we were smaller than we were less involved, then we had less dynamic marketplace then. And as we've kept going, and we all had to work hard. I've gotten better at understanding those things. But I haven't shared that knowledge with others in my organization.

We've definitely seen that on a pretty regular basis where that person who's grown into the role doesn't think anyone else can do it, because they've had to learn it by doing it. So they just keep doing it. And it's a bit of a fallacy in that they're looking at it as well. I can do it faster or better than anyone else. So I'm just gonna keep doing it. And if you think about it, again, strategically, as opposed to operationally is like Yeah, that's great when you're where you are right now, but what happens if you can't do it one day? What happens if you're if you're out for a week and something Nils needs to happen without getting In your overall institution model just trapped in your head, and the company actually has no benefit from it. And the third element we've seen, perhaps in the same vein is really more where they kind of have that gatekeeper has we discussed the beginning of this, and it's good enough. But now that person needs to do a lot more like go back and do things that they never had to do before. And frankly, they don't have the skills to do. It's just a higher level of skills that's being quoted on them right now, that they just don't have

imagined. There's a ton of resistance from that person. If they're being asked to do new things, and they've been very comfortable doing what they've been doing, and they're good at, but it's not the stuff that's gonna help drive the company forward. That's a tough decision. But this is also where many business owners or CEOs are recognizing that this person is again, while it may have worked before, is really not that true CFO to their organization. Can you help me? Understand? So as I've been listening and you're blowing my mind here, I'm new to this whole idea. I'm new to thinking strategically about my financial functions. I have had a CFO or a CFO type role. That is not what you're describing, I should go with what are some of the symptoms that I might be experiencing that I should look for? Or what are some of the first or best things I can do to start taking action in the right ways on this.

So symptoms, it's interesting we've seen, unfortunately, the symptoms can pop up almost anywhere in the organization. It can be from running into cashflow issues, because you don't have a good reporting function bill it can be shrinking profitability. It can be aimless targets or objectives. It can be poor execution on strategic plans, it could be unfortunately the symptom list can run on for quite a while. But perhaps the best way to think about it is the back end back this up to that 30,000 foot view and think about what is your actual objective. And then look at your company and think about is this structure to achieve this I'll give you a for instance, you know where your company was 10 years ago where it was selling one or two product lines of service. And therefore your reporting was just reflecting that. Now you're offering 10 or 15 different products or services? Do you have insight into how that's actually playing out through the company? at the top and bottom line? That's just an evolution where you're saying, Okay, if your goal is to help grow this to more services, or use your entire finance and accounting functions set up to give you the insight you need to to actually achieving those goals.

And so what steps should I start taking to move in this direction?

Well, for starters, is recognizing that you have the issue. Yeah, that's always the first step. Usually then is talking to your trusted advisors who you actually know and actually providing what they need to to see what insight they may have into this issue. Well, we do is obviously a solution for this, but that's not necessarily always the right answer. And there are many that can be solved without engaging part time CFO, but that can be handled with just a better accounting system, a better bookkeeping function or just higher the right person.

Nelson, thanks so much for helping us understand the modern CFO, what that person is and does, and some of the ways that outdated notions can be getting in the way of our growth and of our success. It's fascinating stuff, and we really appreciate knowing more.

Thanks, Chris. Thanks for listening.

And a special thanks to our subscribers. Consider becoming one today. Visit pro CFO partners calm and learn how we can help you build a framework for financial management and growth.