Nearly 1/3 of CEOs worry that their CFO isn’t prepared to face the challenges ahead, according to a recent KPMG survey.

And the average incoming CFO has 120 days to display competence in the role.

While it takes time to fully grasp the operational intricacies and interpersonal dynamics at play in the business, being able to control the budget is a minimum requirement within this time frame.

But beyond that, here is what I’d want a new CFO to focus on in those early days:

1. Gain a comprehensive understanding of the business

2. Optimize cash flow management

3. Evaluate and improve financial processes

4. Drive cost savings

5. Develop a strategic financial plan

6. Communicate financial insights effectively

Gain a Comprehensive Understanding of the Business

Devote plenty of time to thoroughly understand the company’s operations, objectives, and financial position. Do this first by forming an independent view of the resources, strengths, and weaknesses of the firm. Then engage with key stakeholders such as the CEO, department heads, and other executives to gain insights into their unique challenges and goals.

Don’t underestimate the importance of this task. This understanding will serve as a solid foundation for your strategic decision-making down the line.

Optimize Cash Flow Management

I’ve said it before, and I’ll say it again.

Cash will make or break a business.

That’s why you should immediately start tracking cash flows to reveal relevant patterns and take corrective action as needed.

What do I mean by this?

Look for opportunities to optimize working capital, especially through improved collections. From there, streamline payment processes more generally and revisit the company’s existing approach to debt management. For more ideas on how to do this, check out this post.

Second, develop a cash flow forecast. Doing so not only identifies unproductive spending but also highlights opportunities to optimize further. Additionally, your forecast will equip management to better prioritize what gets funded ongoing.

Evaluate and Improve Financial Processes

Conduct a thorough review of the company’s financial statements, systems, and processes. Identify areas that require improvement, such as poor bookkeeping, outdated technology, or inefficient procedures.

Begin to make the case here for automated reporting, forecasting, and predictive analytics. Doing so will free up your Finance team for more strategic work.

Before moving on, ensure the accuracy and reliability of all financial data and reporting, as well as the effectiveness of internal controls.

Take all the time you need to here since poor records will only cloud future decision-making, lower the company’s valuation, and slow you down.

Drive Cost Optimization

Your cash flow forecast can clue you into where cuts might make sense, but you’ll also need to make sure that the cost reductions you propose won’t in turn compromise quality or efficiency.

The best way to do this is to work with department heads to review budgets, implement expense control measures, and have them identify cost-saving opportunities from their perspectives.

The key here is to strike a balance between cost reduction and making adequate strategic investments.

Develop a Strategic Financial Plan

With a few tactical wins under your belt, work with the CEO and other executives to create a strategic financial plan that’s aligned with the company’s objectives.

To do this, identify the key financial metrics for the business and develop stepwise plans to meaningfully improve upon each one of them. Then, put risk management and growth strategies in place.

Your plan should provide a detailed roadmap for the company’s future success.

Be advised, however, that agreeing on the right metrics and strategies is easier said than done. Keep an eye out for assumptions based on incomplete information and overly wishful thinking at this point. Then, dig a little deeper as needed.

Communicate Financial Insights Effectively

As a CFO, it’s not enough to produce “snapshot” reporting. Instead, you should be regularly presenting the meaningful insights pulled from the financials in a clear, concise, and actionable manner.

Aim to also go beyond cost containment at this stage by evaluating the profitability of the business’s key offerings by market and benchmarking against the competition. This also includes identifying growth opportunities and allowing key decision-makers to weigh in.

Doing so not only keeps everyone in the loop about key metrics and trends in the business, but it also allows your non-financial stakeholders to proactively make the decisions that drive the business forward in their day-to-day.

Putting It All Together

Here are your top takeaways from this week’s post.

1. Your first priority as a new CFO is to gain a deep understanding of the business. This will serve as the foundation for your future decision-making.

2. Second, look for opportunities to optimize working capital. Then, create a cash flow forecast.

3. Conduct a thorough review of the company’s financial statements and procedures. Take the time now to clean up the books as needed. Failure to do so early on will limit what you can accomplish later.

4. Aim to cut the costs that don’t lower quality or efficiency. While your reporting can give you some initial direction in terms of what to cut, working with departmental leadership at this stage is key to making informed trade-offs.

5. Your strategic plan should provide a detailed roadmap for the company’s success. This includes specific action plans for improving each agreed-upon KPI.

6. Clean reporting isn’t enough. You’ll need to present high-level insights to your non-financial stakeholders in a way that empowers them to take action in their daily work. Try to avoid using jargon whenever possible.

Hungry for More?

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2. Shoot me an email with your questions or requests for what you’d like me to write about next.

‘Til Next Time,

Connor