Become A (Better) CFO: Key Finance Skills To Highlight On Your CV
In the modern business landscape, the role of a Chief Financial Officer (CFO) (and the entire finance industry) has gone far beyond traditional financial management; therefore, you'll need more than just finance skills to succeed.
Today's CFOs are expected to possess a diverse range of skills to navigate the rapidly changing business environment successfully. In this article, I'll go over the most important skills needed to be successful as a CFO in 2023.
Some of these things seem obvious, such as being able to prepare and utilize good financial models; however, others are overlooked and leading to skill shortages across the entire industry. Read on to find out how you can ensure that you’re being the best leader within your role and for your organization.
Hard Financial Skills for a CFO
Every single hard skill on this list may not be relevant to your exact situation; however, don’t write them off simply because you don’t possess them. Consider your current (or desired) business, industry, and growth trajectory; often, the most valuable skills you can have are the ones that are going to become mission-critical one year from today.
Financial Analysis
Duh - an astute CFO should have a strong background in financial analysis. They should be proficient in analyzing financial data, creating and using financial models, and identifying key performance indicators (KPIs) to track and measure financial performance. This skill is critical to providing valuable insights into the organization's financial health and identifying opportunities for improvement.
One of the most impactful things a CFO can do is understand, interpret, and communicate the numbers to their peers. Other executives are going to have other functional advantages; make your models so clear that they don’t need to understand every nuance to use them effectively.
Accounting
A CFO should have an in-depth understanding of accounting principles and practices, including Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS).
While you don’t necessarily need hands-on accounting experience to be an effective CFO for many businesses, you should possess some functional accounting skills. It’s your job to oversee and manage the accounting function of the business, therefore an intimate understanding of the content will enable you to analyze and interpret financial statements to communicate financial information effectively to stakeholders.
Strategic Planning
Gone are the days of bean counters; we’re in the era of the strategic CFO. To be a useful business partner, you should be developing and implementing financial strategies that align with the organization's overall business objectives, as well as proposing strategic initiatives to help push the business forward.
At the basic level, this involves setting financial goals, forecasting financial performance, and creating budgets. At a higher level, strategic planning involves taking inventory of everything within the business and benchmarking its value; making decisions about what to invest in, reduce, or eliminate; connecting the vision and mission with market viability; and exploring the value of financial opportunities (and creating realistic financial plans) given your current business capabilities.
The strategic planning ability goes beyond the financial decisions; a valuable CFO can use critical thinking to make comprehensive business decisions such as go-to-market strategies, marketing strategies, and more.
Risk Management
Don’t be Silicon Valley Bank. Don’t ignore the risks or refuse to take the time to consider them.
In order to be an effective CFO, you should be able to identify and mitigate financial risks for your organization. You should have experience with, or at least be aware of (and have a risk advisory team executing on) credit, market, operational, and financial risk analysis. Additionally, you should be able to implement risk management strategies to protect the organization's financial interests in the case of risks coming to fruition.
Nassim N. Taleb, Professor of Risk Engineering and author of The Black Swan: Second Edition: The Impact of the Highly Improbable listed six mistakes that executives make in risk management, including:
- Trying to predict extreme events
- Relying on past data to predict future events
- Not listening to prudent advice
And more. You can read his full essay over at HBR.
Financial Management
Another obvious one. If you want to be a useful CFO, you should have experience managing financial operations, including overseeing financial transactions, cash flow management, and making investment decisions.
More than just overseeing and reporting on what’s happening, you should be able to develop and implement financial policies and procedures that effectively utilize financial vehicles for your organization, while maintaining a healthy buffer to manage risk.
Data Analysis
Financial operators in 2023 need to be data scientists - you should be able to collect, gather, and interpret data from your own organization and your industry as a whole, to make informed decisions about how to proceed as a business. Internal financial data is important, of course, but the ability to understand and synthesize useful information from external data is what makes the difference between a financial operator and a finance leader.
You should be comfortable using various tools and technologies, such as artificial general intelligence, data visualization software, and business intelligence software.
Compliance
Most organizations don’t have a Compliance officer, so this role falls to the CFO. You must be familiar with relevant financial regulations and compliance requirements, such as Sarbanes-Oxley Act (SOX) and Securities and Exchange Commission (SEC) rules, and ensure that your entire organization is adhering to them at all times.
If there are additional compliance requirements in your industry, you need to be staying aware of what they are, how they develop, and what you need to do to stay current and stay ahead.
Also, you should be bringing up and guarding against other risks, such as the risk of payment fraud. After all, if your organization gets hit, the finger will be pointing at you.
Taxation
While most organizations have a reliable accounting team or external service provider working on the taxation side of things, the benefits of taxation familiarity extend far past year-end filings and rebates.
An understanding of tax implications, requirements, and possible advantages can not only help you reserve more cash over the long term but can also help avoid large unforeseen tax bills when operating in a new jurisdiction.
Plus, if you want to help retain and empower your employees, consider becoming a go-to resource for them to gain personal tax advantages, both through company programs and through their own finances; most employees don’t have the same financial fluency that you do, so offering these things to them by way of written or recorded explanations or policies offers noticeable benefits.
Mergers and Acquisitions
You don’t have to work in investment banking to be concerned with M&A; by being familiar with the rules, strategies, and procedures of this world, you can create an incredible impact in your organization (and become known for it).
Whether you’re looking to acquire new business units or operating arms to build a deeper moat around your own business or become an acquisition for another company, there are myriad benefits to being “the M&A person”. Performing and delegating necessary functions, including conducting due diligence, negotiating deals, and integrating acquired businesses, can elevate you from “nice to have” to “need to have” executive in a heartbeat, solidifying your impact on the organization.
Soft Skills for a CFO
But I should just be able to focus on the numbers!
Maybe the above comment was true 20 years ago but, in 2023, ignoring the soft skills that modern finance leaders need is a surefire way to keep yourself out of the top position. A CFO needs to be well-connected:
- To their peers, to understand what new tactics and strategies are gaining ground and showing outsized success;
- To their external environment, to stay abreast on developments in and surrounding their industry; and
- To their team, since talent acquisition and retention within finance and accounting are becoming incredibly difficult (and don’t look to be getting easier any time soon).
And connection is often impossible without these human skills behind them.
Leadership
Duh. All business leaders need to have strong leadership qualities; however, this term can be used very broadly and doesn’t often dive into the practical details.
CFOs, as well as all C-Suite management, should be concerned with reducing barriers and enabling their teams to perform at the highest caliber. While a CFO is primarily enabling those in finance roles to succeed, their support enables all members of an organization. They need to be able to inspire and motivate their team to achieve their goals and enable their peers to achieve theirs.
Plus, leadership is an active term, not a passive one. To be an accomplished CFO, you must be able to lead by example to create a culture of accountability and high performance.
Communication
Take one of the previous, obvious skills that a CFO should have: financial management. You can be great at it, by the numbers, but pitiful at ensuring it’s being followed if you’re a poor communicator. Say you have a CEO that founded the business and has a bit of a… spending problem. They’re quick to approve large expenditures and quicker to suggest them, without actively tracking the ROI of each spend.
You may want to sit back and wait for the Board to expunge the CEO but, if you haven’t done anything about it, you’re going to be headed out right alongside them. By working on your communication skills, you can ensure that all stakeholders know what is going on with the organization’s finances, thus enabling your financial management skills to shine.
In addition to the scenario above, a CFO needs to be able to communicate complex financial information clearly and concisely to various stakeholders, including executives, board members, investors, and employees. Proper communication skills mean that they should be able to tailor their communication style to their audience and convey financial information in a way that is easily understood.
Collaboration
You are not an island.
To ensure financial goals are aligned and achieved, a CFO must establish effective partnerships with other internal departments and teams, such as sales, marketing, and operations. Oh, and if the perspective on those partnerships is “I need to report this to finance so they can say no to it”, you’re going to face a lot of resistance in your position. You must be able to give ground as well as take it, ensuring that others understand the why behind every no and becoming agents of yours throughout the business.
In addition to internal members, you should be able to build strong relationships with key external stakeholders, vendors, or suppliers, working collaboratively to achieve shared objectives.
Adaptability
Mike Tyson said it best when he stated, “Everyone has a plan until they get punched in the mouth.”
Your plans will change, your environment will change, and, for everyone’s sake, don’t hardcode values into your Excel models.
A useful CFO needs to be adaptable and able to pivot quickly in response to changes in the business environment, managing uncertainty and navigating complex situations effectively. We all know that the past few years haven’t exactly been the most consistent in the global environment, so you better be ready to create a few different forecasts and have flexible contingency plans up your sleeve when change comes a-knockin’.
Emotional Intelligence
If you didn’t already guess it, this is one of the most overlooked but simultaneously, important soft skills for a CFO to possess in our modern business context.
If you only see employees as numbers and efficiencies, you’re going to find that there are more than a few agents of change within your organization that want you out. Instead of taking the cold, hard approach to scenarios, consider what the numbers tell you and how realistic the strategies you’re proposing are for the people involved.
If you read the models and see that everyone’s favorite business unit, Unit A, is a financial sink for the company, whereas everyone’s least favorite business unit, Unit B, is the most profitable, you have an interesting scenario ahead of you. Of course, you could simply suggest that you scrap Unit A and pursue Unit B entirely but, in reality, that may not be the best course of action. Instead, you could practice your emotional intelligence by empathizing with the employees’ desires to work on Unit A and figure out ways to make it financially viable or keep it as a passion project, rather than eliminating it.
Strong interpersonal skills don’t just mean being able to understand others, though. Sometimes, they mean being able to manage your own emotions to communicate clearly and effectively in high-stress situations, to achieve the best outcome for all parties involved.
Problem-Solving
You don’t rise to the top position within the financial function by not being able to solve problems. The CFO has a notorious reputation for saying no, presenting facts, and walking away… but that’s very far from the reality of the role. Just as you prize employees that come up with solutions rather than perpetual problems, you’re similarly regarded.
A CFO should be able to identify problems and develop creative solutions to address them, such as alternative strategies to make Unit A profitable in the example under Emotional Intelligence. While being able to think critically and objectively and make informed decisions based on data and analysis, you also need to have the ability to come up with out-of-the-box solutions to common business problems.
With all that said, we’ll remind you once again that you are not an island! Many executives find it useful to create a stable group of trusted advisors that can help do this with you, such as a community of peers and mentors.
Negotiation
Say you have a sales leader that drives exceptional results but also submits exceptional expenses. Instead of simply saying “no” to their requests (and causing them to look externally for a role with more leeway on the spending account), you should be more diplomatic and seek out the why.
If you understand an internal employee’s why, you can negotiate with them and make them feel as though they have a real say in the decisions that are being prescribed to them; in reality, you likely have more ultimate power in many internal negotiations you perform but your counterpart mustn’t feel as though this is the case. By giving agency to employees, you create more satisfied and engaged employees, keeping them performing at a high level for the long term.
In addition to those inside your business, you also need the ability to negotiate with external stakeholders, including vendors, customers, and investors, articulating the organization's financial position, negotiating favorable terms, and more.
Prompt Engineering
You guessed it. Tech fluency is making headlines (and for good reason).
As new technologies emerge, CFOs must know these technologies and be able to leverage them to drive financial performance. Alongside new technologies come new skills, including prompt engineering, which involves leveraging automation and artificial intelligence to streamline financial operations and improve financial performance.
By understanding prompt engineering and working with your tech team to create lasting advantages with your prompts, you can identify and create opportunities to leverage these technologies and implement them effectively to improve financial efficiency and accuracy. By adopting these technologies, CFOs can focus on high-value tasks such as strategic planning and decision-making, while leaving repetitive tasks to automation.
Why Are These Skills Important for a CFO to Have?
Hard skills are essential for a CFO to have because they form the foundation of financial management. CFOs need to have a deep understanding of financial analysis, accounting, strategic planning, and the rest to manage the organization's finances effectively. Realistically, all finance jobs are going to require you to have a handful of these skills; the CFO is simply the one that needs to oversee them all.
Soft skills are equally important for a CFO to have because they enable them to communicate effectively with stakeholders, build strong relationships, and lead their team. CFOs need to possess the skills we outlined in order to navigate the rapidly changing business environment successfully and prime your organization for success in the future.
While possessing all of these skills would certainly be ideal, it may not be realistic to expect CFOs to possess every single one at the highest level of proficiency. CFOs are human, after all, and have finite resources of time, energy, and attention.
Ultimately, the success of a CFO is not solely dependent on their individual skills, but also on their ability to build and lead a high-performing team that can complement and support their skills. A CFO who can delegate tasks, collaborate effectively with team members, and leverage the strengths of their team will be better equipped to succeed in their role.
How to Gain Them
Becoming a CFO is a significant career goal for many finance professionals. Whether you’re already in the driver’s seat, or eyeing it up, you’ll benefit from developing and redeveloping the skills from this list over time. Here are some tips to help you on your journey to becoming a CFO:
- Build a diverse skillset: To be a successful CFO, you will need to have a solid understanding of financial management, strategic planning, and leadership. Take advantage of training programs, workshops, and conferences to develop your skills and stay up-to-date with the latest trends and best practices. Offer your insights more readily.
- Expand your experience: CFOs need to have a broad understanding of different areas of finance, such as financial reporting, analysis, and forecasting. Look for opportunities to gain experience in different areas of finance, such as working on cross-functional projects or taking on additional responsibilities outside of your current role.
- Develop your leadership skills: CFOs need to be effective leaders who can inspire and motivate their team, communicate effectively with stakeholders, and make tough decisions. Look for opportunities to develop your leadership skills, such as taking on a leadership role in a professional organization or mentoring junior members of your team.
- Build your network: Networking is an important part of advancing your career and becoming a CFO. Attend industry conferences, join professional organizations, and connect with other finance professionals to build your network and learn from others.
- Seek out a mentor: Finding a mentor who has experience as a CFO can be a valuable resource in your career development. A mentor can offer guidance and advice on career advancement, provide feedback on your skills and abilities, and help you navigate the challenges of the role.
- Stay up-to-date with emerging trends: CFOs need to be aware of emerging trends in finance and technology, such as automation and artificial general intelligence. Keep up-to-date with the latest developments in your industry and seek out opportunities to learn about emerging trends and their potential impact on finance.
Becoming a CFO takes time and effort, but by building out a skillset according to your strengths and referencing them against the list above, you’ll be well on your way in no time.
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