Posted by Deepshikha Shukla
April 1, 2022 | 4-minute read (769 words)
The traditional duties of a chief financial officer include fundraising guidance, long-term strategy, financial reports, data analyses and cash flow monitoring. The role is particularly important for companies undergoing rapid growth and increasing complexity, along with the need for additional capital and financing. That said, the cost of hiring someone in-house for the role may be too steep for a small business to bear.
Citing data from Salary.com, Investopedia says the median salary for a full-time CFO in the U.S. was $393,377 per year as of May 2021. An outsourced CFO represents a cost-effective alternative for many businesses, coming in between roughly $1,000 to $12,000 monthly, depending on the type of work and time required, according to Milestone. Using an outsourced CFO allows firms to access financial expertise not available in-house, but with less of a commitment and at a lower cost than hiring a full-time professional.
CFOs must be cognizant of these issues to succeed in 2022
CFOs this year, including outsourced professionals, will be focused on addressing the effects of the pandemic, including developing policies to support remote workforces, as well as maintaining cash flow and alleviating financial risk. To that end, there are three prevailing issues that CFOs must consider when devising business strategies:
Higher corporate tax rate: Increase in the corporate tax rate over the past two years could spur corporate inversions. Companies can lower their taxes by finding a partner in a lower-tax country to acquire them.
Usage-based pricing: Prior to the pandemic, SaaS companies relied largely on subscription-based pricing models, but more firms are switching to usage-based pricing models. An OpenView survey revealed around 45% of SaaS companies employed some form of usage-based pricing in 2021 versus 34% the year before.
Clawbacks: The Securities and Exchange Commission has revised consideration of a 2015 proposal requiring companies to implement policies to recoup performance-based executive compensation that resulted from incorrect financial reporting.
How CFOs’ responsibilities are evolving
Several newer responsibilities have also become important components of the outsourced CFO role, such as meeting diversity requirements and planning for environmental, social and governance disclosures. According to a Deloitte survey, the top priorities named by CFO respondents for 2022 are talent/labor, financial performance and growth. Cost management, capital allocation, and IT infrastructure were also among cited priorities.
To meet evolving expectations amid today’s economy, CFOs will be working on:
The economy’s fragility necessitates that CFOs perform budgeting and operational planning more frequently. CFOs should align business plans and goals and offer direction on the scope, size and timing of initiatives.
Most companies are seeking more automation to be embedded in their operations. According to a PwC survey, 68% of CFOs indicate they anticipate their organizations to engage in digital transformation this year, and 58% cited automation as among their top priorities.
Digital finance skills
A CFO’s role requires digital expertise to develop analytics insights, particularly for technology-driven businesses, so they need to continually upgrade their skills. In an EY survey of finance leaders, 57% of respondents said that developing prescriptive and predictive analytics capabilities was critical to their company’s long-term success.
Managing the labor shortage
CFOs need to help their organizations address a pandemic-induced labor shortage. According to a North Carolina State University survey of 1,453 global C-suite executives and board members from a variety of industries, attracting and retaining employees was their second-most important priority in 2022.
Financial performance and growth
CFOs must regularly analyze real-time financial and operational data to support decision-making. They also must perform frequent forecasts and scenario modeling to predict business changes and navigate disruptions that could impair the organization’s financial performance.
Managing internal accounting and finance teams
CFOs can maximize the use of technology and tools to help internal finance teams maximize efficiency. Ron Oertell, CFO of Purchasing Power, suggests: “With the subdued interaction between employees across company functions, as well as within each department, the CFO and all accounting and finance professionals need to ensure everyone is aligned on projects, budgets, goals, and deliverables.”
Strategic planning and financial forecasting
Given the current environment of uncertainty, CFOs are focusing on shorter-term plans. In particular, they are working to decrease variable costs to ensure that the company can quickly respond to budgetary pressures.
Risk and crisis management
Even two years into the pandemic, it’s still not over. That means risk management will play a vital role for businesses in 2022. CFOs must work on strategies to help their company withstand challenges presented by the shifting business landscape, such as supply chain disruption and rising inflation.