Many CFOs made gut-wrenching decisions in 2020 to help their company navigate epic disruption. As it became clear just how dire the Covid-19 pandemic would be, these executives also moved quickly to rethink how their finance team operates and how it’s staffed.
Now, they’re taking stock of those changes, fine-tuning approaches, and making strategic investments in people and technology to ensure their organization remains resilient through the remainder of the crisis.
Adaptability is critical for finance functions as uncertainty and change remain constant. There are positive signs on the horizon, though. In January, reports of payroll expansion in industries like professional and business services were welcome after the U.S. economy saw job losses of 227,000 at the end of 2020. Bureau of Labor Statistics (BLS) data show that unemployment is still running high; it was 6.3% in January. But that’s still a far better rate than the 14.8% reported last April.
And as vaccination efforts expand around the globe, recovery seems less distant, even as new coronavirus variants emerge. In the U.S., a proposed $1.9 trillion economic rescue package is also fueling optimism. There’s even hopeful talk of a potential return to full employment in the nation by 2022 if the relief plan is approved and implemented as intended.
Concerns About Hiring — And Sustaining Momentum
Many finance leaders monitoring these trends are also feeling optimistic about the impending recovery. In a recent survey by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta, finance executives said they expect to see their company’s revenues rise by 6.9%, on average, this year.
Still, some concerns persist, including companies’ ability to hire top talent. In fact, the quality and availability of labor in 2021 was the second most pressing worry cited in the CFO survey, right behind uncertainty about demand, sales and revenue. BLS unemployment rate data for in-demand finance roles may be a factor here: At the end of 2020, the rate for accountants and auditors was 4.4%. Rates were even lower for positions like compliance officer (1.9%) and budget analyst (0.6%). These lower rates are not a new trend, either.
Increasing CFOs’ concerns about the difficulty of bringing on new talent is the fact that their teams are already working at capacity. Some are stretched so thin right now they could easily slip into a state of overload if business demands rise even a little.
Even when maxed out, many finance functions have been able to help their companies not only survive but also thrive during the pandemic. In a recent finance priorities survey by NetSuite Brainyard, 42% of top executives, including CFOs, said their finance team has been “firing on all cylinders, providing all the business both needs and desires.” That’s great to hear, of course, but that momentum is by no means sustainable, especially as we edge closer to recovery.
Readying The Finance Function To Handle Even More Change
For many businesses, the year ahead may simply be a story of survival, much as it was in 2020. For others, continued or a new period of growth is in the cards. Either way, CFOs need to ensure the finance function remains at the ready to help the business move forward. Continuing to ride this unprecedented wave of change requires ever more creative pivoting and adapting.
CFOs must critically assess the current depth and breadth of the finance team bench and move swiftly to ensure essential skills and knowledge are in the pipeline. As a starting point, many CFOs will want to gauge whether they should consider making moves such as:
1. Hiring A Controller
The CFO’s role was becoming more visionary than fiduciary before the pandemic. But even the most forward-thinking finance leaders probably did not envision just how involved they would be today in setting and driving business strategy and serving as a change agent. That’s a lot of responsibility. And it leaves essentially no time for the CFO to oversee the company’s financial function with vigilance, creating a risk that no business needs.
By hiring a skilled controller, a CFO can confidently offload a whole range of duties, from monitoring accounts receivable and accounts payable to preparing a full range of financial reports. And by taking on these critical activities, a controller can, in turn, help the CFO and other business decision-makers craft appropriate budgets, reduce costs, deploy capital wisely and more.
2. Investing More In FP&A Expertise And Tools
Since the start of the pandemic, improving scenario planning has been a high priority for many CFOs trying to help their organizations make sense of uncertainty and chart a viable path forward. And activities like budgeting, forecasting, analysis, and cash flow management will all remain critical for businesses moving out of the current crisis and toward recovery.
CFOs will want to ensure they have access to a skilled financial planning and analysis (FP&A) team who can help them track the organization’s overall financial health, develop and maintain financial models, and produce detailed forecasts of the company’s future operations. When equipped with the right technology tools, the FP&A team can dig deep into data to yield insights that can be incredibly valuable for helping the business avoid risk—and increase profitability.
3. Expanding Data Analysis Capabilities
Developing a clearer picture of the future requires organizations to analyze financial and non-financial data continuously. The work of FP&A analysts contributes to that overall picture. However, businesses need to slice, dice, visualize and report on their data in many other ways, looking at everything from operating expenses to working capital to customer lifetime value and behavior.
There’s no question most companies today want to do more data analysis—and do it more granularly and expertly. In the NetSuite Brainyard study mentioned earlier, 61% of executives said using data more effectively is a top priority for their finance team right now; that compares to 56% of respondents to a summer 2020 version of the survey. More than half of executives (53%) said they also want to see their finance team produce better reporting and key performance indicators.
Hiring data experts like business intelligence analysts and data scientists or outsourcing analytics tasks to providers are obvious strategies for expanding data analysis capabilities. But so is equipping existing finance team members with these skills through training and professional development and investing in the right tools. That can take time but growing data expertise internally can be a smart investment for the business that can increase its competitive advantage in the long run.
4. Assessing Compliance And ESG Knowledge
Financial executives across industries, from energy to financial services to technology, are gearing up for an array of potential regulatory changes. For example, former regulators and auditors have said that new leadership at the Securities and Exchange Commission is likely to spur increased oversight of public company audits. There is also an expectation that, under the Biden administration, corporate taxes are likely to rise. Additionally, experts suggest that 2021 may be the year when comprehensive federal privacy legislation becomes a reality in the United States.
Organizations will also need to do a better job of describing their risk management processes for identifying and assessing climate-related risks such as greenhouse gas emissions. That’s not only because the new administration has prioritized tackling the issue of climate change as a nation. Many companies are also finding that their stakeholders, including boards of directors, investors and employees, want the business to be more transparent and detailed about environmental, social and governance (ESG) issues.
Given these trends, CFOs will want to waste no time confirming that the business has access to the expertise it needs to meet current and emerging compliance challenges and stay on top of reporting and documentation requirements. Depending on the needs of the business, strategies may include hiring a chief compliance officer, making strategic hires in internal audit and acquiring ESG specialists.
5. Exploring Managed Services
Many finance leaders have widened their embrace of flexible staffing arrangements during the pandemic. Now, as CFOs look to build a hybrid workforce for the future—one that includes both remote and on-site teams—many are considering making managed services arrangements part of the mix for the long term to provide additional capabilities and complete high-value work.
Managed services providers offer a way for companies to tap the financial, technological and other expertise needed to accelerate business transformation and further innovation. They also give companies quick access to business solutions that leverage automation and new technologies like artificial intelligence and machine learning. In short, managed service providers can help a company move forward and grow its competitive edge without unduly increasing costs and risks for the business.
Despite ongoing uncertainty, one thing remains clear for CFOs trying to lay a smooth path to recovery for their organization: The finance function is the heart of the business, the engine that drives everything. That’s why it’s critical now for finance leaders to make strategic staffing decisions and technology investments to keep it running optimally—on all cylinders.