Chief financial officers have a lot on their minds. The CFO role has expanded beyond financial duties to encompass strategic responsibilities across the company — so the majority are stretched thin. After closing the books on the extraordinary year that was 2020, CFOs face some of their toughest tests yet. Below are the Top 10 CFO challenges for 2021, as compiled from multiple surveys, studies and interviews with CFOs in companies of all sizes.
Role of the CFO: the Old & the New
Today’s CFOs are active participants in their companies’ C-suites, with broad, strategic responsibilities and report directly to CEOs and boards of directors. In fact, a Brainyard survey of leaders across 21 industries showed that most CFOs are responsible for functions outside of finance. Whether by focusing on strategic partnerships, evaluating technology or working to meet revenue and earnings goals, CFOs are expected to be strategic catalysts of company growth — not just the head of the financial organization.
This evolution of the CFO role has left very few of these execs focused only on finance.
This is not to say CFOs have relinquished their accountability for maintaining cash flow; owning financial processes; attesting to financial statements’ accuracy; and dealing with investors, auditors and tax authorities. The proverbial “buck” still stops with CFOs when it comes to the overall financial health of their organizations. Between that core responsibility and their expanded roles, CFOs log some of the longest working hours in most organizations.
And they worry about being effective in new strategic duties, a concern that’s perhaps more acute in smaller companies that may not have engaged controllers or finance directors. This tension is evident in almost every survey, as CFOs describe different versions of an expectation gap — the strategic role they are supposed to fill and the quagmire of gatekeeper tedium that takes up an inordinate amount of their day-to-day time.
This evolution of old and new roles is expected to continue, according to research by the Institute of Management Accountants, where 72% of members surveyed believe the CFO role will continue to expand in scope — sometimes significantly — through 2025.
The 10 Toughest Challenges for CFOs in 2021
When looking at what will keep CFOs awake at night in 2021, tough challenges come from all corners of their jobs. Here are ten of the most troublesome challenges.
Talent acquisition and retention
Finding people with the right skills to staff their departments is a critical challenge for CFOs. As their own roles and requirements have broadened, the skills CFOs need from their staffs have also changed. For example, Forbes reports that almost 80% of CFOs prioritize technological literacy when evaluating new hires. In fact, given the role technology plays in finance, some believe hiring data scientists and teaching them financial principles may be more effective in 2021 and beyond than getting financial folks up to speed on data skills — the additional costs of hiring workers with technical prowess makes it critical to focus on retaining employees with these skills.
Similarly, great communication skills are increasingly important from CFOs and their staff. The need to build consensus and convey policies across multiple media — email, text, in person and virtually — permeates the entire finance department. CFOs believe there is much room for improvement in this area; they’re training current staff and focusing on it for new hires.
Cultural change is a 2021 priority for about 70% of CFOs in an EY survey, while about half the CFOs in a PwC survey say that diversity, equity and inclusion (DEI) programs are an important part of their 2021 hiring and training initiatives. They feel DEI can provide advantages for developing strong teams with complementary skill sets.
Unify disparate data
CFOs will need to finally address the challenges posed by legacy data in 2021. The nimbleness demanded from businesses in 2020 amplified the need for current, accurate data to support decision-making. Unifying data for analysis eliminates the need to pull it in from disconnected databases and spreadsheets. At the same time, a single source of data also increases the speed of reporting and reduces the inefficiency and errors inherent in manual processes.
Accenture has found that 76% of CFOs believe unifying disparate data is vital to achieving business objectives.
Another important dimension in the disparate data challenge is the need for CFOs to ensure company financial statements are accurate and auditable. This is a perennial issue for public companies that will affect both public and private businesses of all sizes in 2021 — for example, when applying for loans. A corollary benefit of unified data: smoothed audit engagements and lower costs for professional services and finance department overtime.
Embrace big data
The events of 2020 caused “follow the data” to become almost a battle cry. For CFOs, the challenge in 2021 is to follow their data to uncover trends and insights that support forward-looking company strategizing. Big data analysis, done right, enables CFOs to forecast with more accuracy and makes the entire organization more agile.
To that end, CFOs and their staff are being asked to move beyond financial data. They’re being challenged to include data from operations, markets, social media and marketing, and to translate that information into actionable intelligence.
Paradoxically, while data analytics tools have become more available and effective, studies show that many CFOs rely more on intuition and experience than on data. Overcoming this challenge to embrace predictive analytics can be difficult for CFOs who have traditionally relied on historical analysis.
Add automation with technology
During 2020, many businesses embraced technology in new ways and found success driving revenue growth while keeping their workforces connected remotely. Further technology implementations to drive automation are a key challenge for CFOs in 2021 and beyond. Only about one third of finance tasks have been automated, although Accenture estimates that 80% can be. And while two-thirds of CFOs have responsibility for automation tech, about the same percentage say they aren’t knowledgeable enough to fully optimize technology — which concerns them because most believe (rightly) that financial management software increases productivity.
One underlying reason for this gap is that adoption can be hindered by a change-averse staff. CFOs need to point out that automating routine tasks frees finance staffers up to do more creative work, while the insights that come with automated intelligence can help the business succeed.
At the same time, while some CFOs are conflicted about automation versus their ability to manually or personally manage risk, the majority believe finance will be cloud-native within a few years. Regardless of the obstacles, though, strategic CFOs have stated that investing in new financial management technology is one of the most important goals for 2021.
More forward-looking CFOs are considering emerging technologies, like financial forecasting with machine learning, robotic process automation and blockchain, to help maximize business value and efficiency. As they work through their return-on-investment calculations, they’re looking for cost efficiencies across the company and setting targets to measure the effectiveness of those investments.
Prevent fraud and invest in cybersecurity
As part of the CFO’s mandate to be the economic guardian of the business, these leaders are often responsible for risk management, including finding and preventing fraud and investing in cybersecurity. CFOs recognize the need to keep sensitive data protected and the potential costs that cyberattacks can cause. Indeed, an EY study of global CFOs revealed that more than half see risk management as one of their toughest challenges in 2021 — and the percentage increases with the size of the organization.
The expected permanence of remote workforces adds a new dimension for CFOs managing potential fraud and cybersecurity risks and makes cloud more attractive, given security advantages.
Support a remote workforce
The shift to a remote workforce provides both opportunities and challenges for CFOs in 2021 and beyond. Organizations where this shift was successful are rethinking their investments in physical office space. The potential cost savings and returns on technology investments, together with benefits for employees, favor continued work-from-home or hybrid options.
The most-cited challenges for CFOs with remote workforces are the potential for employee burnout and the need to rebuild culture. While working from home during 2020, most CFOs, and by extension their staffs, increased the number of hours they worked to 50 to 60 hours per week — or more, Brainyard research shows. Exacerbated by the blurring lines between work and home life, this workload can cause unsustainable stress. The potentially lasting negative impact on finance team culture is a key challenge for CFOs, especially as business picks up again.
CFOs are primarily responsible for ensuring regulatory compliance for their companies, and 2021 will bring another batch of challenges. For example, changes in generally accepted accounting principles (GAAP) around lease accounting; increased disclosures on environmental, societal and governance (ESG) factors; and changes in fair lending reporting are all likely to require significant compliance projects. CFOs will likely rely on external auditors to help implement the changes.
How CFOs fill out their expanded roles will largely depend on how well they are able to lead innovation within their organizations. A top challenge for CFOs in 2021 is to continue the pace of change and innovation that enabled their companies to survive the economic climate of 2020 so they can capture future opportunities.
Working alongside other C-suite leaders, CFOs will need to use their intimate knowledge of business performance to adopt financial innovation in a way that drives growth. Tools like predictive analytics, dashboards and key performance indicators will play important roles in helping CFOs identify opportunities early so they can direct operations to adapt quickly.
Accelerate post-pandemic growth
CFOs are bullish on the second half of 2021, and especially the outlook for 2022. In fact, 68% are somewhat to very optimistic for 2021 business. The challenge is to ensure their companies are well-positioned to capture that growth. Strategic CFOs understand that businesses can’t cost-cut their way to growth; instead, they need to invest deliberately. They appreciate the balance between spending to gain new businesses and fueling core operations. Helping to increase revenue via customer growth, launching new products and mergers and acquisitions are at the forefront of many CFOs’ minds.
Manage taxes and regulation
The macroeconomic and political climate have 67% of CFOs focused on tax policy and regulatory risk in 2021, PwC says. Parts of the Tax Cuts and Jobs Act are set to expire, and increases in the corporate tax rate may be coming. Beleaguered state budgets may also cause state-level tax changes. Globally, changes in international taxation, like value-added tax (VAT) and goods and services tax (GST), may have a significant impact on operations, as will changes to international trade policies. CFOs will be challenged to understand how these changes will affect their businesses in 2021 and use scenario-planning exercises to help mitigate them.
Make Your Job Easier with ERP
Clearly, CFOs have a lot on their plates for 2021. Modern software solutions are built to handle many of CFOs’ toughest challenges. ERP systems, for example, deliver multiple integrated modules that support financial management and planning, order management, production management, supply chain management, warehouse and fulfillment and procurement. A modern ERP system with financial management capabilities can go a long way toward helping CFOs close the technology gap, while consistent, robust data combined with real-time speed and powerful analytic tools help CFOs and their teams deliver the right information at the right time for strategic decision-making.
CFOs are positioned to lead innovative strategies for businesses in 2021. Their toughest challenges include building the right teams, supported by the right technology and data to ensure they mitigate risks, achieve compliance and lead their organizations to innovative growth. It’s no small task — even for those accustomed to fast paced, far-reaching responsibilities.
CFO Challenges FAQs
Q: What did CFOs care about in 2020?
A: CFOs anticipated that they would be focused on three key initiatives in 2020: finance analytics, organization structure and finance technology optimization. The COVID-19 pandemic shifted that focus toward whatever each individual company needed to do to support remote workforces, keep employees safe and survive the most uncertain economic period since the Great Depression.
Q: What does a CFO care about?
A: CFOs are one of the few C-suite executives who have companywide responsibilities, and therefore they care about all facets of operations within a business. They are involved in strategic partnerships, evaluating technology, risk mitigation and advising the CEO, in addition to leading the finance organization.
Q: What are good questions to ask a CFO?
A: Universally good questions to ask CFOs of business of all sizes and industries include:
- What key performance indicators are most important to you?
- Where should investments be directed in the short, medium and long term?
- How can we increase productivity?
- Is the company structured and staffed for success?
Q: What keeps a CFO up at night?
A: In 2021, CFOs are likely to be up late at night thinking through the following issues: talent acquisition and training, managing and mining disparate and big data, expanding technology, preventing fraud and expanding cybersecurity, empowering their remote workforces, compliance, innovation and accelerating growth and managing tax and regulatory changes.