Leading the Drive for Profitability

Andrea Vardaro Thomas, Managing Director Business Performance Improvement
Neal Eisenberg, Associate Director Business Performance Improvement – Finance

The big picture: Half of the top 10 priorities of CFOs and finance leaders indicate a need for greater agility in finance organizations, according to Protiviti’s 2023 Global Finance Trends Survey. Marketplace uncertainties and economic challenges make the need for agility critical as organizations strive for growth and profitability.

Between the lines: CFOs can and should play a more transformative role in driving sustained profitability by leveraging their expertise in finance, analytics and business acumen.

The bottom line: Finance leaders should focus on embracing strategic financial planning, leveraging performance and profitability analysis, and adopting technology and innovation.

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In today’s dynamic business landscape, the role of the chief financial officer (CFO) has evolved beyond traditional financial management to becoming more of a strategic partner across the business. Finance organizations are well positioned to help their organizations navigate challenging market conditions by proactively identifying ongoing risks and opportunities through sound financial planning and analytics.

This was evident in the results of Protiviti’s 2023 Global Finance Trends Survey, in which half of the top 10 priorities of CFOs and finance leaders indicated a need for greater agility in finance organizations. Among the highest-ranked priorities for CFOs and finance teams are inflation, financial planning and analysis (FP&A), profitability reporting and analysis, strategic planning and enhanced data analytics. The need for agility has never been more critical as organizations strive for growth and profitability amid marketplace uncertainties and economic challenges.

Given these factors, CFOs can and should play a more transformative role in driving sustained profitability by leveraging their expertise in finance, analytics and business acumen. By providing meaningful insights derived from comprehensive analyses, CFOs can enable informed decision-making. From a profitability perspective, this includes determining whether to focus on traditional cost-cutting measures or to shift focus on driving top-line growth. This shift in focus will require alignment of financial goals with business objectives, leveraging meaningful data-driven analytics to instill financial discipline across the organization.

Below we explore three critical areas on which finance leaders should focus as they guide their organizations to capitalize on opportunities for continued growth and profitability: strategic financial planning; performance measurement and profitability analysis; and technology and innovation.

Embracing strategic financial planning

One of the primary responsibilities of CFOs is to develop and execute strategic financial plans that align with their organization’s business objectives, better positioning them to identify new opportunities and potential risks. Building solid partnerships across the business also allows for more cross-functional collaboration to develop impactful actions to achieve such agreed-upon goals.

To attain this, robust financial-planning processes must be implemented to unlock the agility necessary to analyze future financial trends and market dynamics, as well as to evaluate potential risks and opportunities. It is critical that such planning processes enable companies to allocate resources efficiently, optimize investments and adapt to changing market conditions. By providing timely and valuable insights based on data-driven analytics, finance organizations can strategically support better-informed business decisions.

Leveraging performance and profitability analysis

CFOs play a critical role in monitoring and analyzing key performance indicators (KPIs) to assess the financial health and operational efficiency of the organization. Developing comprehensive reporting mechanisms and utilizing advanced analytics tools can help finance organizations identify areas of opportunity and proactively take actions to increase profitability.

Data-driven analytics can be a powerful tool for driving top-line growth and profitability by providing valuable insights to optimize revenue and spend strategies. A few examples include:

  • Analyzing customer data to identify patterns within the customer base across demographics, preferences and purchasing trends to better target marketing messages and inform pricing strategies.
  • Analyzing sales data to provide insights around opportunities to expand existing customer relationships by upselling additional products or identifying complementary offerings. Focusing on key customer development can increase the value of a customer relationship with a more immediate impact than identifying and closing a new sale.
  • Leveraging predictive analytics and machine learning (ML) techniques to enable data-driven future demand and sales forecasts based on historical data and market trends. This allows for more proactive management of inventory, production, capacity and resources, while optimizing efficiency and ultimately driving profitability.
  • Using generative artificial intelligence (GenAI) techniques to analyze vendor data and recommend optimal vendors for specific goods or services that can contribute to a reduction in expenses while maintaining or improving quality.

Adopting technology and innovation

Increasingly, CFOs must partner with chief information officers (CIOs) to drive technology adoption necessary to enhance operational efficiency and business performance. Investing in a technology modernization program throughout the business can facilitate more streamlined processes and automation of repetitive tasks. This allows finance organizations to shift focus from manual tasks to analytics that can provide meaningful insights to the business. The adoption of advanced technologies such as AI, machine learning and predictive analytics further enables more timely identification of risks and opportunities, such as new revenue streams.

However, as the needs of the business and customers continue to change and evolve, the costs of implementing new technologies can have an impact on overall margins and profitably. As such, technology decisions should be made not only to meet immediate goals, but also with a focus on establishing a sustainable and scalable IT architecture and finance organization. Rationalizing technology platforms, enhancing the management and governance of technology assets, streamlining IT priorities, aligning with business needs, and consolidating vendors should also be considered, as these can significantly reduce operating costs and portfolio complexity.

Ultimately, the CFO’s role extends beyond that of a basic financial custodian – it’s about driving strategic decision-making that can shape the trajectory of the organization. CFOs can be instrumental in guiding their organizations to long-term financial success through robust financial planning, rigorous performance analysis and proactive risk management. By embracing innovation and technology, cultivating strategic business partnerships and fostering transparent communication, CFOs can not only optimize current operations but also pave the way for growth, profitability and resiliency.

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