CFO: CURIOUS Financial Officer
Why CFOs must become more curious?
There is a relatively universal view of CFOs and finance & accounting professionals in general as pure overhead—part of the necessary costs of running a business. In my 25 years as a CFO, the assumption that others had about my role that I liked the least—by far! So much so, in fact, that I made it a priority to shake that off and brand myself as someone who would make a very big impact on profitability.
Many financial professionals might think that what I mean here is the use (or abuse) of adjusting journal entries—those potentially problematic tools accounting professionals use to alter operating results. I am not talking about those! In fact, some CFOs have faced legal issues for their misuse of those tools (think Enron, etc.). No—here, I am referring to a real economic impact measured with cash, not manipulated reports.
Here are some of the ways I believe CFOs and finance professionals can and should have a real economic impact on the organizations they serve—all relying on the incredible ROI of curiosity.
Is all revenue good (profitable) revenue? Highly unlikely. Do we have products, services, customers, locations, incentives (etc.) that result in incrementally unprofitable revenue? Probably. A little curiosity, coupled with some good analysis, is likely to expose some of that revenue as well as how and why we elected to accept that revenue. This is potentially an enormous area of impact for CFOs to lead the charge on, and this topic cannot be addressed fully in this short document.
Do we know what the best (or at least better) practices are for all the costs in our operations? Do we compare more than just unit prices? Do we compare our costs/ratios/specifics to our own history, or do we know what our costs could and should be? There are plenty of no-risk shared savings resources for almost every cost or expense line item if only the CFO has the curiosity to delve into knowing vs. assuming. Too often, price is the only thing people evaluate when it is the last thing before all other cost factors are considered.
There are so many types of tax and related incentives in every industry and every city and state beyond the various federal tax and other incentives that might be available to an organization. Income tax credits, energy credits, sales tax exemptions, property tax incentives, hiring incentives, and on and on. It’s almost impossible for a company to say they are aware of and have researched them all. There are many shared-savings (success-based) advisors ready to help organizations identify these innumerable incentives if only they had the curiosity to check them out.
There are so many types of capital carrying a wide range of costs that it would be hard to create a complete list. However, different situations call for different flavors of capital. Sometimes, tax-favored (off-balance sheet) leases are better than buying certain assets. Knowing the after-tax cost of capital, both debt and equity/quasi-equity opportunities can have a huge impact. As always, it takes curiosity to explore options. Banks are not the only source of capital. Sometimes the list may even include suppliers, customers, and perhaps others with a vested interest in an asset or project that an organization wants to source capital to support.
The above areas are high-level indeed. Yet they are all areas CFOs/financial folks could learn more about if they activate their single best superpower: curiosity.