CFO: need to know
Finance transformation emphasizes the importance of a CFO’s value creation role in an organization. CFOs must act as stewards of capital, enable their business and lead by example with an emphasis on results. If they do so successfully, they'll support business strategy and performance, and make finance transformation a catalyst for progress, transparency and profit.
|Finance transformation – find out more|
CFOs and finance transformation
The CFO’s role in fundamentally changing how finance and tax supports both business strategy and performance.
From saving to enabling
Yesterday’s finance transformations focused primarily on savings: cutting costs, gaining efficiencies, and establishing the right controls and risk-management procedures. Today, it is that and much more. In this post-crisis world, companies have done a risk reset. Like the CFO position itself, finance transformation includes a new focus on enabling corporate strategy, capital agenda and competitive advantage in the marketplace.
Topping the board agenda
Investors are paying heightened attention to capital, cash and growth, and they are rewarding companies that are making strategic decisions in these areas. With that added attention from investors, boards, increasingly, need to have confidence in their financial reporting functions. Thoughtful oversight from the board can be crucial to ensuring that tomorrow’s reporting reality is accounted for as part of today’s finance transformation agenda. A strategic finance transformation effort needs to enable enhanced financial reporting internally and externally and provide a robust scorecard for understanding whether real value is being created.
Ownership leads to success
Successful finance transformation is about ownership. Finance transformation is critical to creating value, particularly in strategic transactions – IPOs, divestitures and carve-outs to name a few. It’s the CFO’s charge to ensure financial operating model consistency, which increases the potential for value creation. An inconsistent model could slow down the transformation and dilute transaction value and increased potential for downstream risk.
Successful CFOs will take ownership of finance transformation by approaching it holistically and initiating key operating model changes centered on:
- Finance and tax operations
- Performance management
Tax and the transformation
Every finance transformation decision has tax implications. Remarkably, 50% of the time, tax considerations aren’t included in transformations. When tax isn’t addressed, the CFO is effectively:
- Losing control of the tax spend
- Heightening chances of misstatement
- Generating reputational risk
CFOs have to remedy this misstep. Otherwise, they’re making the company vulnerable to risk but also to potentially millions of dollars in avoidable costs. Beyond the savings, tax can contribute measurable value of as much as 10% of the overall payback of the finance transformation – without cutting tax headcount.
Change for the better
There are many benefits of a successful finance transformation– from increasing financial efficiency to heightening the company’s investor appeal to gaining more visibility into the data needed for decision making. Finance transformation is crucial to leading businesses today, and CFOs are the core of the process.
Viewpoints expressed on this page are exclusive to Ernst & Young GM Limited.