The CFO's great balancing act: as the traditional role of corporate cop gives way increasingly to one of strategic business partner, CFOs have more and more responsibilities with everything from compliance to IT to risk management and tracking costs and returns on investment.

• Author: Roth, Richard T.
• Position: Strategy

With the economy, if not the stock markets, in the midst of a turnaround, CFOs are under tremendous pressure to make sure that operating costs are leveraged and cash flows are maximized. Additionally, they are expected to have their finger on the pulse of the information in order to predict operating performance with precision. These challenges are further compounded by the expanded regulatory compliance responsibilities of The Sarbanes-Oxley Act.

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Under performance pressures from shareholders and boards, CEOs are, in turn, raising the bar for CFOs. They are tasking them with helping to meet today's challenging--yet, to some extent, conflicting--expectations for aggressive growth, while at the same time managing risks and costs.

Being a world-class CFO is becoming more and more challenging, since the job description keeps changing. As we approach the 2004 planning period, the time is right to reexamine, reshape and re-prioritize expectations of the multiple hats they wear in the organization. Although regulatory compliance and growth are major responsibilities, there are other roles that the CFO is also trying to balance:

Operational Excellence -- Increasing global competition has most finance chiefs acutely focused on reducing operating costs and headcount, with the primary focus being selling, general and administrative (SG & A) costs. The hunt for excess costs inevitably begins in their own backyard: finance. Finance costs as a percent of revenue for the average company are about 1.07 percent, yet world-class performers have established a significant cost advantage, at 0.76 percent of revenue. Many CFOs are evaluating a variety of sourcing options with the goal of reducing the cost of routine transaction processing activities, from shared services to outsourcing (see graph on next page).

Cash Flow -- Cash flow continues to be a priority, from both a cash management and operating-model perspective. One key to better managing cash is to gain better visibility into cash flow requirements. Optimizing cash flow can have a significant impact, not only on availability of cash for operations, but also on the income statement. A spread of 30 to 50 basis points between overnight and 30-day investments can yield a $500,000 annual return on a $100 million portfolio.

Compliance and Risk Management -- CFOs have always had fiduciary responsibility for ensuring adequate internal controls and compliance with reporting requirements...