CFOs as Value-Creators: Getting the Foundation Right
Private equity portfolio businesses want their CFOs to be strategists and decision makers – true value creators throughout the journey to exit. To deliver that value, the CFO needs to have the right technology and people in place. This blog is the second of a two-part series on the role of the CFO in private equity, following on from our last blog titled Value Creator: Today's Private Equity CFO.
The foundations of CFO value creation
The role of CFO has changed dramatically in the private equity world. Today’s CFOs are expected to lead on strategy and drive the change that the exit plan requires. But a CFO can only rise to this challenge if they have the time and opportunity.
Reporting is a necessary task that demands attention. And in some cases, CFOs are drawn into firefighting and day-to-day operations that dominate their time. CFOs can truly contribute as a leader and strategist with the right foundation: advanced technology and talented people to support them.
Technology in private equity moves fast. What didn’t exist five years ago is normal today. In five years’ time that cycle will be repeated. Reporting is one area that has been transformed by data and technology. With the right technology in place, the books can be closed in three days not 15. That leaves so much more time for add value. Instead of just looking back at historic figures, CFOs can see data in real time. They can be more informed and agile in their decision making.
Tools like Excel and Sage are no longer fit-for-purpose. Private equity investors and boards need to back their CFOs by investing in the latest technology – and in professionals who understand how to exploit it. The business case is there.
The CFO is the key to unlocking value, but the importance of the financial controller cannot be understated. Moving away from being a steward of information can only happen with a safe pair of hands to take care of it. A talented financial controller doesn’t just free up the CFO’s time. They give the whole business confidence – and prevent and pre-empt problems.
The whole finance team should also be up to scratch. In private equity businesses, CFOs know they have an obligation to run a lean finance team. At the same time, it must be a first-class function to support transformation. PE houses often prefer to hire in new talent rather than train and develop existing people – with an eye on getting results faster. Ultimately, the stronger the team, the bigger the CFO’s impact.
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