Examples of a Successful Operational CFO and How to Become One

In our previous post, we explored the emerging role of the operational CFO and how it's reshaping the landscape of corporate leadership. In today’s article, we will explore specific examples of how an operational CFO can get involved in non-financial aspects of a business, and what it takes to become an operational CFO.

Read more: Overcome Reporting Challenges of On-Premises Systems for the C-Suite

Contents

• Example #1: How an operational CFO can improve sales forecasting
• Example #2: How an operational CFO can thrive at a manufacturing company 
• How to become an operational CFO? 

Example #1: How an operational CFO can improve sales forecasting

There are several reasons why financial executives need to play a bigger role in the sales forecasting process. Faulty sales forecasts may cause companies to miss their earnings target. Furthermore, sales leaders can be overly optimistic, which may lead to overspends. 

On the other hand, CFOs can add the much-needed methodological and analytical approach to the sales forecast that leads to better decision-making.

Infographic: How CFOs can help improve sales forecasting

One major sales forecasting method is to measure all the activities that move prospects along the sales pipeline, such as calls, emails, demos, and visits.  

Using their analytical capabilities, CFOs can identify the pattern of prospecting activities as related to actual sales. For instance, data shows that when a prospect makes it through a product demo, there’s a 30 per cent chance that such a prospect will become a customer. 

An operational CFO can play a bigger role in the sales forecasting process via these 4 steps: 

1. Build trust and partnership with the sales function

Tension between sales and finance functions is not uncommon. Sales leaders may not trust finance teams with their data and do not want to answer their questions. How can finance people resolve this?

It is really all about trust. Make sure salespeople know that both functions are working together, and finance people are here to help.  

Building partnerships inside the sales function, CFOs should offer help with their analytical skills, and let sales leaders know it would be a win-win situation because salespeople can focus on selling.

Read more: Why CFOs should be looking to the Cloud

2. Create a single business dictionary

People use different terms across the company, creating confusion between departments. There may be a different understanding of terms between finance, marketing, and sales functions.  

What exactly do they mean when they talk about leads, prospects, etc.?  

Therefore, an operational CFO should ensure that there is a single set of metadata for terms (business dictionary), even if some may sound simple and straightforward. 

3. Make sure all forms are filled out properly

The CFO may not get sufficient data about the pipeline, and such data may not be in real-time, or accurate, because sales teams do not always diligently follow the rules of preparing the pipeline.  

Salespeople are not particularly detail-oriented like finance people, so CFOs have to make sure they fill diligently out information about the pipeline. 

One key factor in achieving accurate forecasting is real-time analysis. As a result, it is crucial that sales teams update their data regularly, ideally daily as it happens else preferably weekly. Management can then review it and make necessary changes if required. 

4. Aim for an integrated, easy-to-use system

To get the data moving across the organisation, you should be on one system. Multiple systems do not integrate so easily. A complex system is not desirable either.  

Salespeople should feel the system is helping them, not making their lives harder. Excel spreadsheets have widely been used to facilitate gathering and distributing data among functions. However, spreadsheets have many inherent shortages and companies should move on beyond that. 

When an operational CFO and sales leaders become allies and partners, companies can significantly increase their ability to achieve the overall business goals.

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Example #2: How an operational CFO can thrive at a manufacturing company 

Let's consider another example of an operational CFO actively participating in the operational aspects of a manufacturing company.

Scenario 

A mid-sized manufacturing company specialising in automotive parts is facing challenges with rising raw material costs, inefficient production processes, and increasing customer demands for just-in-time delivery. 

Here's how an operational CFO might get involved. 

Supply Chain Optimisation:

The CFO analyzes the company's procurement data and identifies that bulk purchasing of key materials could lead to significant cost savings. They work with the procurement team to: 

• Negotiate better terms with suppliers 

• Implement a new inventory management system 

• Develop financial models to optimize order quantities and timing 

Production Efficiency: 

After reviewing production data, the CFO notices high levels of waste in certain manufacturing processes. They: 

• Collaborate with production managers to identify bottlenecks 

• Propose and financially justify the purchase of new, more efficient machinery 

• Implement a cost accounting system to track expenses at each production stage 

Logistics and Distribution: 

To meet customer demands for faster delivery, the CFO: 

• Analyses the costs and benefits of opening new distribution centres 

• Works with the logistics team to optimise delivery routes 

• Develops a pricing strategy that incentivizes customers to order in ways that reduce the company's logistics costs

Read more: Accounting Best Practices for Logistics and Transportation Companies

Technology Investment: 

The CFO recognises that outdated systems are hindering efficiency. They: 

• Lead a cross-functional team to select and implement a new ERP system 

• Develop ROI models for various technology investments 

• Create a financial plan for digital transformation initiatives 

Performance Metrics: 

To drive operational improvements, the CFO: 

• Designs new KPIs that blend financial and operational metrics 

• Implements a balanced scorecard approach across departments 

• Creates a data dashboard for real-time monitoring of critical metrics 

Strategic Planning: 

The CFO takes an active role in operational strategy by: 

• Conducting a make-vs-buy analysis for certain components 

• Financially modelling various scenarios for expanding production capacity 

• Assessing the financial implications of entering new markets or product lines

In these examples, the operational CFO goes beyond traditional financial management to directly influence and improve various operational aspects of the business. They use their financial expertise to drive decision-making in areas like sales, supply chain, production, logistics, and technology, ultimately aiming to improve the company's overall performance and profitability. 

So, what does it take to become an operational CFO?

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How to become an operational CFO? 

To transition from a traditional CFO role to an operational CFO, several key skills, experiences, and mindset shifts are necessary. Here's what a CFO typically needs to become an operational CFO: 

Operational Knowledge: 

• Deep understanding of the company's core business processes 

• Familiarity with industry-specific operational challenges and best practices 

• Experience working closely with operations, sales, and other non-finance departments 

Strategic Thinking: 

• Ability to link financial strategies with operational goals 

• Skills in long-term planning and scenario analysis 

• Capacity to see the big picture and understand how financial decisions impact all aspects of the business 

Technology Proficiency: 

• Understanding of modern business technologies (e.g., ERP systems, data analytics tools) 

• Ability to leverage financial technology to improve operational efficiency 

• Knowledge of emerging technologies relevant to the industry 

Data Analytics Skills: 

• Proficiency in using data to drive decision-making 

• Ability to translate complex data into actionable insights for non-financial stakeholders 

• Experience with predictive analytics and forecasting 

Cross-functional Leadership: 

• Strong communication skills to work effectively with various departments 

• Ability to influence and lead teams outside of finance 

• Experience in change management 

Business Acumen: 

• Deep understanding of the company's business model and value drivers 

• Knowledge of market trends and competitive landscape 

• Ability to identify and evaluate new business opportunities 

Risk Management: 

• Skills in identifying and mitigating both financial and operational risks 

• Understanding of compliance issues across different business functions 

Continuous Learning Mindset: 

• Willingness to learn about new areas of the business 

• Openness to feedback and new ideas from operational teams 

• Commitment to staying updated on industry trends and best practices 

Performance Improvement Focus: 

• Experience in process optimization and efficiency improvements 

• Skills in developing and tracking key performance indicators (KPIs) 

• Ability to drive cost reduction initiatives without compromising quality

Stakeholder Management: 

• Strong relationship-building skills with internal and external stakeholders 

• Ability to communicate complex financial information to non-financial audiences 

• Experience in managing investor relations with a focus on operational performance 

Project Management: 

• Skills in managing cross-functional projects 

• Experience in implementing new systems or processes 

Industry-Specific Knowledge: 

• Deep understanding of the specific industry's operational challenges and opportunities 

• Network within the industry to stay informed about best practices and trends 

To gain these skills and experiences, a CFO might need to: 

• Seek opportunities to work on cross-functional projects 

• Pursue additional education or certifications in areas like operations management or data analytics 

• Participate in job rotation programs to gain hands-on experience in different parts of the business 

• Actively engage with operational leaders to understand their challenges and perspectives 

• Attend industry conferences and workshops focused on operational excellence

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The transition to an operational CFO role often requires a shift in mindset from being primarily a financial steward to becoming a strategic business partner across all aspects of the organization. 

This transformative journey is both challenging and rewarding. It requires a unique blend of financial acumen, operational insight, strategic thinking, and leadership skills. 

For organisations, the benefits of nurturing or hiring an operational CFO are clear. These professionals can drive financial strategies that are deeply aligned with operational realities, foster data-driven decision-making across the company, and play a pivotal role in steering the business towards sustainable growth.  

In addition to participating in the operational aspects of an organisation, modern CFOs must stay up-to-date with the latest technological advancements, such as cloud computing.  

Download our white paper to find out why smart CFOs are increasingly embracing the cloud.