CFO Roundup

Are you setting the right pace for business growth? 6 mistakes that can cost you

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The market is great. Orders are coming in. Customers are happy. As we head toward Q2 of 2020, it may be an opportune time for you to focus on business growth.

But not so fast. Literally.

According to a recent study, two-thirds of the companies on the Inc 5,000 fastest-growing companies list have gotten smaller, been sold or closed their doors indefinitely, just five to eight years after earning the publication’s distinction.Business growth is good — if you’re managing it properly. As you’re planning for an expansion, be sure you’re making decisions that’ll support your business for the long haul.

From overestimating sales to hasty hiring missteps, the wrong moves can create disasters that you never saw coming.

  • Letting quality suffer. As your business becomes fixated on quantity — whether it’s servicing more customers or increasing product production — it’s easy to let quality slip. Keep in mind that first and foremost, you’re in business to provide superior products and services. If buyers lose faith in your brand, you may have a hard time repairing the damage.
  • Sluggish cash flow. Businesses need (a lot of) money to operate. As you’re growing, you may find that spending starts to outweigh revenue. Just because money is coming in the door doesn’t mean you can sidestep cash flow growing pains. It’s important to remain strategic and conservative, so you don’t end up in the hole.
  • Hasty hiring decisions. You’re expanding fast, and that means you may also need to expand your team. When time is of the essence and you’re rushing to fill a need, you may not allocate the necessary time or resources to find the best fit for critical positions. Remember that you want top-notch employees working on your behalf, and that process deserves careful time and consideration, as well as a comprehensive onboarding strategy.
  • Dropping the ball on service. Customer service demands will continue to increase with your business. If you don’t have the staff to handle the volume of product-related calls, orders or inquiries, your customers will feel the loss of customer care and personal attention, which may be perceived as poor management.
  • Putting all your eggs in one basket. Growing companies can set themselves up for failure by depending on one particular customer, vendor or employee for the majority of their success. The truth is, even the most loyal customers and vendors can jump ship and go elsewhere, and your employee of the month may be one job offer away from working for the competition.
  • Not scaling your technology. Every growing business needs technology that can grow along with it, ensuring your systems and processes are running efficiently. From data storage solutions to cloud-based applications, what does your business need now, and what technology might it require down the line? Don’t invest in solutions that aren’t going to serve your size, goals and budget for the future.

The tortoise or the hare?
Sometimes, in the race to grow, it’s better to step back and take your time to the finish line, so you can avoid costly mistakes that can hurt your business. If you need objective guidance mapping out a plan for long-term success, let us know how we can help.

Digital transformation: How AI will supplement (not supplant) the role of the CFO

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Artificial Intelligence (AI) continues to revolutionize the financial realm. And as a result, the role of the CFO is evolving, too.

AI is changing the organizational structure of how financial departments function. It’s allowing businesses to work smarter and faster, enabling their transformation into full digital organizations. But as technology fulfills core accounting jobs, what does that mean for the future of the CFO?

There are some shoes AI will never fill
The rise of AI is not likely to replace the CFO, but rather create a strategic partnership. Even as robots get smarter and more economical, they’re not equipped to take on every function.

According to a recent McKinsey report, the determining factor in whether a job is likely to be replaced is the type of work involved. The more predictable and repetitive the job, the more likely it is to be taken over by automation. So, it’s safe to say the core functions of a CFO will not be automated any time soon, and here’s why:

Decision-making skills are difficult to program. Not every question or business challenge can be broken down into quantifiable factors for AI to solve. AI isn’t capable of making judgment calls and tackling decisions that can impact an entire organization. There will always be unexpected problems to solve and machines will never replace human judgement.

Machines can’t easily adapt to the unexpected. Consider the self-checkout lines at big retailers. While they may help move lines faster and lessen crowds, they’re also susceptible to theft. It’s too easy for someone to input the wrong code and make off with a sizeable discount. What does that mean for more complicated machines? System flaws within AI are often unavoidable.

Humans prefer to deal with other humans. When it comes down it, people put more trust into the ideas and intuition of other people rather than machines. While robots are entrusted with smaller duties, it’s unlikely that any company would trust AI with taking over critical tasks.

The true value of AI is enabling CFOs to analyze data in more valuable ways. But this insight is worthless if you’re bogged down with daily accounting operations, like managing financial transactions and producing reports. With technology taking over the grunt work, you’ll be poised to lead change within your organization.

Working in tandem
Today’s CFO is responsible for contributing to company growth and increasing profits. AI provides the actionable information to support decision-making to reach organizational goals — but not take it over. Machine-learning algorithms lend the power to analyze, interpret and make predictions to improve operations and productivity. With AI, the CFO gains:

  • Increased efficiency. As low-priority responsibilities are automated, time is freed up to concentrate on more strategic and revenue-generating tasks.
  • Improve planning. Accurate and reliable data offers higher visibility to detect anomalies, pinpoint inefficiencies and make better planning and forecasting decisions.
  • Smarter fraud detection. The ability to verify information in real-time and ensure compliance can help mitigate risk and prevent fraudulent activity.
  • New ideas. AI can make sense of volumes of data, initiating new ideas and possibilities.
  • Internal reliability. Use data as proof points to build trust with stakeholders and justify key business decisions.

The bottom line
Al gives CFOs a huge advantage. By harnessing the power of data and automation to rise above tedious tasks, they can move into the future with more certainty and maximize their contributions to the success or their organization.

The rise of technology: What it means for today’s — and tomorrow’s — CFOs

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Organizations of all sizes are realizing the benefits of a digital transformation, and they’re turning to CFOs to adopt and develop critical technology-related skills. Once considered a numbers-only role, CFOs are now balancing traditional fiscal responsibilities with the increasing demand for data-driven analysis. As technology continues to steer change in the business environment, CFOs are playing an instrumental role in the success of a company’s digital initiatives.

A broader range of expertise
According to the Grant Thornton 2019 CFO Survey, 95% of finance executives report that the CFO of the future must possess increased levels of technology expertise, including data analytics. In fact, 55% identified data analytics as the number one skill they want to develop within the finance function, followed by:

  • Business strategy (40%)
  • Operations management (36%)
  • Technology acquisition (34%)
  • Innovation/entrepreneurship (32%)

In this digital era, CEOs look to their CFOs to lead the way. Finance teams are the go-to for delivering analytics and insights that support strategy and decision-making to help organizations identify new market opportunities, uncover trends, develop smarter forecasts for business planning and more. In the long run, organizations that embrace the digital will have the insights to bring innovative ideas to market before the competition. And the more time devoted to harnessing data and interpreting analytics, the greater the asset CFOs can be to their organizations.

Talking numbers
According to the study, finance teams are bumping up their use of emerging technology functions in the following areas:

  • Accountants payable/receivable (46%)
  • Financial reporting and control (44%)
  • Financial planning and analysis (43%)
  • Budgeting and forecasting (42%)
  • Corporate development/strategic planning (41%)

Going forward, executives plan to expand their strategic use of technology, especially in terms of financial planning and analysis (30%) and financial reporting and control (28%).

Future-proofing your CFO career
For finance professionals who want to achieve long-term success, Grant Thornton recommends adopting the following guidelines:

  • Identify processes that would benefit from automation and digitization. Partner with C-suite peers to determine which opportunities could offer the most value.
  • Shift your mindset to machine-first. Automate manual or low-level work, so employees can take on more strategic roles. Make sure you provide them the training to do so.
  • Implement better communication. How does finance interact with other business functions? Seek out new processes to ensure open lines of communication and mutual respect for each department’s needs.
  • Align investments. Determine how to measure the effectiveness of your digital transformation initiatives. How do technology investments link to your business investments and your ROI?
  • Create a culture of innovation. Give employees the tools to create and thrive in a digitally-aligned workforce.

CFOs: Rising to the occasion
Organizations aren’t just looking at data as a strategic asset, they’re executing strategies that leverage data to improve their business outcomes. And CFOs are at the forefront, driving initiatives to improve the bottom line.

Seeking a digital transformation? CFOs believe it’s worth the investment

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The role of the CFO has evolved considerably in the last decade. Thanks to the continuing intersection of most finance and IT departments, today’s CFOs have digital technology on their minds — in a more strategic sense. Many are finding themselves in a unique position to leverage digital technology to accelerate organizational initiatives and facilitate change across many areas of the business. And as a result, we’re seeing CFOs take a greater interest in technology investments and OK’ing the necessary spending to make them happen.

It’s not about keeping pace; it’s about staying ahead
Last year’s CFO Insights on New Technologies from Grant Thornton and CFO Research finds that 69% of CFOs plan to increase the money spent on technology investments that accelerate business change. As the study suggests, the adoption of new technology correlates with the immediate value it can bring to an organization — including better data quality, more streamlined reporting, optimized processes and reduced costs.

While the near-term objective is to optimize business processes, the ultimate goal for any technology investment is to improve the customer experience — with services that set your organization apart from the competition. So it makes sense that 41% of CFOs now say their companies’ upcoming digital investments are meant to help them overtake their competition through differentiation.

CFO analytics anxiety
Despite their plans to adopt new technology, the study also pinpoints one major concern: overall readiness. Almost 90% of CFOs feel they’re lacking much-needed skills in data analytics, and three quarters recognize their need to improve, while also securing leadership talent and finding adequate staff to fill day-to-day finance functions.

When it comes to staff readiness, CFOs are also considering the future once automation technology becomes common practice. Fifty-two percent would prefer to retrain existing staff, compared to 20% who would recruit new talent or 17% who would opt to outsource the work.

Outsourcing can offer CFOs a competitive edge — giving companies more time to focus on their strengths and high-value strategic tasks rather than the day-to-day number crunching. From bookkeeping, payroll and bill paying to audit assistance, a third-party team can handle finance-related tasks at every level, providing the technology and processes so CFOs can focus on bigger goals. Whether outsourced or in-house, the consensus is clear: new technology can support smarter decisions and drive more strategic efforts for the greater good of a company.

Find out how Magone & Company can help your organization operate more efficiently with the right technology, data and controls. Give us a call today at (973) 301-2300.

 

 

 

 

Bracing for impact: New employment initiatives hitting NJ businesses

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New Jersey Governor Phil Murphy took office earlier this year with an ambitious agenda regarding NJ employment laws. From a minimum wage increase to paid sick leave to companies’ drug and alcohol policies, Murphy’s agenda will impact the way you run your business, one way or another.

Minimum wage increase
New Jersey’s minimum wage currently stands at $8.60 per hour. During his campaign, Murphy vowed to boost it to $15 per hour. While many legislative leaders back this change, there’s still some uncertainty regarding its scope — just teenagers, or all minimum wage workers? It’s possible we’ll see a gradual implementation rather than an abrupt rise across the board. When this becomes effective, employers in minimum wage-heavy industries — fast food, retail, maintenance and personal care, to name just a few — will need to dramatically adjust their labor cost projections.

Legalization of marijuana
Nine states have already legalized recreational marijuana, with New Jersey poised to follow suit. Employers are not obligated to accommodate its use, and employees who test positive are still subject to termination based on your company policy. However, this may change if New Jersey passes an accommodation requirement for medical marijuana usage. Companies will have to review and update current drug and alcohol policies to follow the new law.

Mandated coverage of medication-assisted opioid addiction treatment
Drug addiction is covered under the New Jersey Law Against Discrimination (NJLAD). And employers are required to provide disabled employees with reasonable accommodations. If an eligible employee requests time off for drug treatment, you’ll be required to grant them leave for treatment, regardless of how business will be affected.

Statewide paid sick leave
The governor’s statewide paid sick leave ordinance, which becomes effective in late October 2018, requires employers to grant workers one hour of paid sick leave for every 30 hours worked, with an annual cap of 40 hours. Workers are entitled to time off to care for their own or a family member’s physical or mental illness or injury; when their child’s school is closed because of a public health emergency; or to address domestic or sexual violence. Employers are now in the process of modifying their leave policies to ensure compliance. Smaller companies, unfamiliar with sick leave laws, are more likely to encounter challenges along the way.

With major policy shifts like these poised to take place, it’s time to take a top-down look at how they could affect your HR policies, labor cost projections and cross-training efforts. And don’t forget compliance — failure to meet new requirements could result in severe financial penalties as well as a reputational black eye. Embrace the challenge and you just might uncover opportunities to strengthen your organization and become more competitive.