Chief Financial Officer | To Improve Economic Performance

Chief Financial Officer

You are not born a financial director; you become one at some point in your career. Previously chief accountant of the company chosen as a person of trust, controller or financial controller specially hired for this position. So the chief financial officer of SMEs must make his place in the company.

Different Degrees of the Function of Chief Financial Officer

1st degree: the “+” accounting provides fundamental: respect for accounting and tax obligations. It ensures the liquidity of the company by securing funding in the short and medium and long term.

2nd degree: it communicates to management analysis: margins by products or customers, profitability studies, but without participating in the actual decisions. At the same time, it optimizes the operation of its service. He is still considered a pure producer of numbers.

3rd degree: he participates in management decisions, investment, alongside the operational departments, including as a full member of the management committee. He takes advantage of the informal contacts with the general manager to sensitize him in “drip” to the financial problems. Its participation in the company’s strategy is most often to recall tirelessly the profitability objectives. Although the financing constraints that it is most often alone in the company.

4th degree: this positioning, usually specific to listed companies, is that of Deputy Director General in charge of finance. He advises the senior management on business choices and financial strategy very closely in order to satisfy the shareholders.

Challenges for a SME CFO

The issue of CFO of SMEs is indeed reaching the 3rd level of the pyramid. To get a foot in the operational, be recognized as the interlocutor that indicates the courses of action. Basically to improve the economic performance of the company.

Two precisions are necessary:

• He can only successfully reach a higher degree if he has secured credibility on the preceding degrees. Thus, how to claim to intervene in operational management choices if the accounting documents come out wrong or late?
• He can access the 3rd degree if it is the will of senior management, it is important to validate before taking office.

Here are some ways, not exhaustive, to achieve this:

• He must be really interested in the business of the company, out of his office to get closer to the operation. Only in this way will he be able to suggest improvements in the business model to satisfy customers in the best conditions of flexibility and profitability.
• He figures the financial stakes on the result and the treasury of the actions he proposes: negotiation of customer deposits, elimination of small unprofitable products, regrouping of different production sites, modification of the purchasing conditions, computerization of the management of production. Only by quantifying the financial stakes will he be able to convince the operational staff of the merits of the actions he proposes. It also shows that it acts in the interest of the company and is not part of logic of taking power.
• It suggests the establishment of procedures to improve economic performance. Thus, the establishment of an investment selection procedure based on profitability calculations aims to introduce economic rationality into investment decisions. The Chief Financial Officer helps senior management achieve the profitability objectives assigned by the shareholders.

More From Business Study Notes:- Debts and Equity Financing

Being at the same time a guarantor of the respect of the regulatory obligations and oriented towards the improvement of the economic performance can be a source of tension. Actually that the financial director can manage only by delegating. As an expert, he must continue to keep some expertise while becoming a manager.

Most of the levers for improving operational performance lie outside the scope of the Finance function. To activate them, the CFO must therefore develop several relational skills:

• Leadership or ability to convince and coach individuals with or without a reporting relationship
• Change management to successfully implement process and organizational changes;
• Transversal management by which he coordinates a team that does not depend on him hierarchically.