CFOs Focus on Profits as Working Capital Gets Pricey

The secret of change isn’t in fighting the old, it’s in building the new.

That’s an idiom that rings particularly true for the chief financial officer seat.

“Over the last three to five years, I’ve come to really appreciate the saying, ‘The more things change, the more they stay the same,’” Cedar CFO Scott Stockberger told PYMNTS during a conversation for the series “A Day in the Life of a CFO.”

And what has stayed the same, he explained, is having “sound business fundamentals, a relentless focus on the customer, and a firm grasp on unit economics and overall capital deployment.”

Considering — or despite — the impact of the pandemic, rapidly shifting economic cycles, and incoming waves of innovation like the emergence of artificial intelligence, the importance of strong financial management and protecting the balance sheet couldn’t be further from going out of style.

The macroeconomic landscape has influenced companies’ approaches to capital deployment, and Stockberger noted that in the past, businesses could accelerate their rate of capital deployment due to relatively easy access to capital. However, in the last 12 to 18 months, capital has become less accessible and more expensive. As a result, there has been a shift toward a greater focus on profitability rather than growth at all costs.

Now, savvy firms are going deep on a smaller number of investments rather than spreading resources too thin, he said.

“Today’s CFOs spend a lot more time on their toes being proactive than on their heels being reactive,” Stockberger said.

The CFO’s Proactive Stance in Balancing Growth and Profitability

“Right now, conversations at the board level, executive level, and I would say in the entire company are focused on those unit economic fundamentals,” Stockbergerger explained. “What are we building? How do we price it? How do we sell it? And how do we get the right ROI for our products while at the same time solving a real pain point for the market?”

“This is a muscle that we as CFOs have always had, but one that probably hasn’t needed to be flexed as strongly over the last two to three years,” he added. “We need to set our organizations up for success.”

Stockberger noted that CFOs are now playing offense rather than defense, investing in their functions and helping the rest of the business invest in theirs. The CFO’s role has evolved to include a closer partnership with technical teams to identify and integrate digital tools that improve efficiency and deliver better products to customers.

As a result, CFOs are now being brought into conversations earlier and more frequently across the organization. Instead of solely focusing on budget perspectives, CFOs are now involved in strategic discussions about whether certain initiatives align with the business’s goals. Stockberger encouraged CFOs to stay focused on the long-term vision, execute day-to-day and ensure their decisions align with the company’s mission.

“It is important to stay the course when times are uncertain, to make the best decisions with the information available,” he said.

The Role of AI and Digital Solutions Within the Finance Function

While AI solutions specific to the finance function are still in the early development phase, Stockberger said he envisions a future where AI could automate tasks and roles within organizations. From a customer perspective, Stockberger highlighted how AI can address pain points, such as patient out-of-pocket healthcare spending, by improving financial workflows and providing clarity on costs.

“The problem that we’re solving has existed for decades, and it’s persisted regardless of the macroeconomic landscape,” he said. “And that problem is patient out-of-pocket healthcare spending, a $390 billion problem today where roughly 36% of those invoices go unpaid by clients. That hurts patients, that hurts doctors, that hurts payers.”

Cedar has partnered with Google Cloud to further streamline and enhance its products, he noted.

“Depending on how you integrate some of these digital tools, it’ll allow you to rebalance some of your investments and find efficiencies in ways that you haven’t been able to in the past,” he said. “Tooling can be a great multiplier.”

Looking ahead to the future of the CFO role, Stockberger highlighted an ongoing shift, where internal conversations involving the finance team are evolving from, “Are we allowed to do this from a budget perspective,” to “Should we do this from a budget perspective?”

It is crucial for CFOs to have an impact on the mission of their company, he explained.