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Why There Are No Sacred Cows for Today’s CFOs

CFOs, chief financial officers, spend management, b2b

The global economy today is increasingly marked by volatility and rapid shifts. Geopolitical tensions, technological advancements and changing consumer preferences demand that businesses remain agile yet resilient amidst a backdrop of increasing uncertainty.

And in such a climate, there are no sacred cows for today’s CFOs. Every aspect of a business is subject to scrutiny and re-allocation as finance functions work to eliminate waste and clean up balance sheets.

That’s what top finance leaders have repeatedly told PYMNTS for the series “A Day In The Life of a CFO,” stressing that gone are the days when certain assets or expenditures were considered untouchable.

Today, every line item is under the microscope as CFOs are increasingly tasked with focusing on maximizing operational leverage and ensuring liquidity. This often involves difficult decisions, such as divesting non-core assets, renegotiating debt and implementing cost-cutting measures.

Operational leverage, in particular, a firm’s ability to increase profitability through efficient use of fixed costs, has become a focal point for CFOs. By optimizing operations, companies can enhance their earnings potential without proportionately increasing costs. But successfully leveraging this approach requires a deep dive into every aspect of the business, from supply chain management to production processes and beyond.

Fortunately, digital technology and data-driven solutions are there to help finance teams by automating routine tasks and employing data analytics for better decision-making — allowing these teams to free up their time and embrace more strategic-level thinking.

Read more: The Evolving CFO Role Is Helping Drive Better Results

Taking Cost Centers Out of the Business

The future is uncertain, and CFOs must prepare their organizations to withstand shocks and capitalize on opportunities. That’s why, even as businesses give priority to cutting costs, the same companies are still spending to grow — but the ROI of every investment needs to be incredibly justified and compelling. Cost centers are on the chopping block, while the hunt is on for key growth engines.

“Part of the tough job of the CFO is capturing the ambition of an organization’s growth wants and needs and putting that into a financial basket that makes sense, one that you can plan against and resource against,” Provi CFO Kevin Price told PYMNTS.

Think of today’s businesses as a little bit like a Formula One car: in order to compete and win, they need to be engineered as optimally and as intelligently as possible, maximizing efficiency and reliability.

“I feel immense accountability for how every team across our business performs,” Lauren Dillard, executive vice president and CFO at LiveRamp, told PYMNTS. “Smart and tight expense management is key, as is partnering with the business to really understand those different expense levers and ROI data so that we can quickly move the knobs and dials if we don’t see revenue materialized in the way we planned.”

Scenario planning and stress testing are essential tools for financial planning and risk management, allowing finance leaders to anticipate potential disruptions and develop contingency plans.

But CFOs must balance the immediate need for financial stability with long-term strategic goals. For instance, while finding balance sheet efficiencies through headcount reduction can provide short-term relief, it may also impair the company’s ability to innovate and compete.

Read more: Why Measuring the ROI of Transformative Technology Like GenAI Is So Hard

The Human Factor in Unlocking Operational Leverage

Amidst all these strategic and operational considerations, CFOs must not lose sight of the human element. Leading through change requires effective communication and transparency.

“The finance function is one of the roles that sits with a 360-degree view of everything and is the one, at the end of the day, that’s charged with the performance of the business,” Scott Casey, CFO at Robin AI, told PYMNTS.

“Instead of being a passive participant and getting information from the rest of the business, it is key to get out there and work with and really understand what is happening so you can know if what is being done is going to drive numbers that will actually work,” he added. “It has become more imperative to know about everything and be this kind of polymath about the business.”

After all, cross-departmental communication is key to grounding effective alignment toward common goals and enables more holistic business strategies.

“All that stuff only works well if we’re collaborating across the teams, working closely with other leaders to ensure that not only are our forecasts going well, but also to make future decisions on where to invest … the financial budget needs to be working toward the company’s goals in a very explicit way,” Jeff Bray, CFO at Semperis, told PYMNTS.

That’s why breaking down silos and fostering a culture of integrated decision-making where intelligence and analysis can be shared across the organization in a common language and understood by leadership is crucial to executing financial strategies that capture any marketplace or operational upside that may be on the table.