CFO Talk - The “Business CFO”
Anand Soni shared a few of his insights regarding the changing role of the CFO in this CFO Talk – The “Business CFO”.
He explains the changes in the role over the past 5 years and how that change seems to be accelerating. The roles of compliance and reporting aren’t going away, while the strategic and commercial aspects of the role keep growing.
He identifies steps finance leaders can take to become “Business CFOs”
He closes the CFO Talk with the key challenges he expects CFOs to face in the coming year and, thankfully, outlines some strategies to tackle them.
Steve Rosvold 0:03
Welcome to CFO Talk, I’m Steve Rosvold. Today we are going to talk about the “Business CFO”, a term I first heard used by our speaker, and what it means. We will also discuss the challenges facing the CFO. Our guest is Anand Soni. Anand lives in Dubai. He’s a chartered accountant and a certified public accountant. He has held a number of CFO roles over the past 10 years and is currently the CFO of AAB Tools Group, headquartered in Dubai. Welcome Anand.
Anand Soni 0:54
Thank you so much for inviting me to join you for this episode of CFO Talk.
We’re excited to have you on the show. One of the first times we spoke you brought up this concept of the “Business CFO” and your explanation really intrigued me. Would you explain to us what a Business CFO is?
Alright, let me just say a few things first about where I’m coming from. To give you a perspective of my background I have been in the Middle East for the last 20 years. I have worked for family driven organizations, diversified businesses, manufacturing, contracting, construction, trading, real estate distribution and health services. I also have been a frequent speaker at conferences. I conduct corporate trainings and try to help people in whichever way I can. One thing which drives me throughout, and which I’m so proud about, is I strongly believe that I compete with myself every minute, every day. That’s the way I think we all improve. And that’s something which I think it is there within me as a driving force to get better.
So, let me just get back to you on the business CFO. When I first started as a CFO, more than a decade ago, honestly, I was a “bookish” CFO. Over time I realized things were changing dramatically. The businesses have become tough.
Basically, there are two main expectations from the CFO. First, whatever happens to the business, whatever happens to the economy, you’re still expected to ensure that you take the business from one phase to another. What does that mean? In case your business isn’t in survival stage, you take it to the next stage, which is consolidation to the next which is growth, and to the next which is the acceleration of growth. Second, because of this financial turbulence across the globe, as a CFO, you are expected to ensure your company is taking care against risks, mitigating events or decline that could run your company out of business. Now, Steve, when you have these two factors as key results for the CFO, then you better be well trained and prepared.
So, what is the business CFO? In my view? A business CFO is someone who understands the nuances of business. Regardless, the various business models, a few of them, which I quoted earlier. Now, the challenge with the CFO is, let’s face it, technically, a CFO understands everything. But when it comes to the nitty gritty of a business, that is typically not the core area or niche expertise of the CFO. So you see the challenge now is a CFO is expected to meet those two broad preambles.
They are supposed to get into the business, which is not always their core expertise. And that is where I find most of the CFO struggling.
So, that is the general concept of the Business CFO – technically strong and business savvy.
Let me share with you one simple example to drive home how it works. You see in one of the businesses I was handling, we had retail trading distribution. A question we faced when I joined was should we focus on distribution, should we focus in retail by opening showrooms, or should we go for joint ventures to expand our markets? Now, you see, typically, if you are a business CFO, you probably will advise to your board, that if it is a B2Bbusiness to business customers, then your showrooms will help businesses like interior fit out, financials, tax where you need to retail showrooms. Now change gears. If you have businesses like the health sector, medicine, food items, where you have B2B and B2C, you probably need a distribution center to get your goods across your niche audience. But tell me, Steve, unless you understand the business nuances, how would you be in position to do it? And that is the biggest challenge. When I speak at conferences and am asked about being a CFO leader, I think this is still the area where a lot of CFOs are big time struggling.
Well, it’s it’s interesting that you know, we learned the finance piece, we learn the accounting piece with all those technical pieces, but how do we get that deep business knowledge that you’re saying for the nuances that you’re referring to. How do how do CFOs immerse themselves in that? So you have a sales guy who’s worked somewhere for 20 years, he’s deep into the sales, he knows that really well, they bring in a new CFO who doesn’t really know the industry, how do they get to know enough of the business to really be successful?
I think that actually five points, five areas where the CFOs who are already CFOs and the new people who want to become the CFO have to address first get to know the process.
First, get to know the process of what you’re doing, you know, even if it doesn’t fall into your area, for example, a very simple thing, how does a shipment work? Now, that may not typically come under your domain, but if you know how the shipment takes place from start to end, and you master the process, it helps you get more into the business now.
Second, do you have the willingness to go and into the detail? For example, in one of my companies, we had the manufacturing base, the business was new to me. But I took pains to go to the shop floor and understand how the manufacturing process works. Now, the hardcore technical aspects of the product building I left out, but I did make efforts to understand how the process goes to have the end product. So again, over the span of time, if you have the willingness to go understand the process, same way, if you’re handling a construction business, go to the site, see what’s happening to the projects, understand, talk to the people that second.
Third, there’s always an element of cost and time and investment. Now, what we should not be doing is in our endeavor to understand about the business we should not focus our core two objectives, which I started with, we need to ensure the businesses go from the first phase to the second phase to the third phase.
Fourth, we need to ensure that we are mitigating the risks in the business. So, that’s where the fine line is, you understand what is required.
Fifth, you deal with the various people, whether they are into sales, whether they are into projects, whether they’re into production, or external stakeholders, and try to learn as much as possible from them. So this will give you the good understanding of knowledge and for you to take a decision. For example, one of the businesses I was we were discussing the pricing aspects, the revenues were under serious stress, probably if there was a “bookish” CFO, they would have given you the numbers by a presentation. And what a lot what can I do? This is what my segment is giving, which is not my segment bees giving. But hold on. That is not we expect from a business CFO. Now when the same thing was put to me, I asked my CEO, why don’t you get into a new area and I’ll give you a different pricing, I will give you something known as a minimum variable pricing model. So that you can understand the margin impact of getting into a new area. So hold on, you get two benefits, one, your revenue increases while you are still keeping your head above the water. And two, the most important, you are getting into a new territory. Now probably I could give the solution as a Business CFO because I knew how and what of the businesses. This is the way I understand you can pick it up, but it needs persuasion it needs species, and it needs persistence to get to that.
What a great definition. I really like the way you went down that list and when it comes to bringing tools and ideas, having the confidence to suggest a new product and to show how that could look financially, you’ve had to build up a good reputation, good relationships with those executives you’re working with. So they are willing to listen to you. If you suggest those things and you don’t have their respect, you are talking into a well, right? If you make those suggestions and people say “yeah, Anand, let’s try that” you have earned their respect.
How do you build up relationships where people have enough respect for you to really listen to the finance guy when they’re bringing those business decisions to the table?
Well, that’s a very, very tricky, but very interesting and challenging question which I will answer. This is something I am asked every time, “What and how do you manage people, how do you convince them and bring the people to the table to understand what you believe in.
And one thing I need to accept the CFO role at times is pretty thankless, because you have many people with their own visions; the board, the ownership, internal stakeholders and external stakeholders. Managing all these constituents is definitely a challenging task. Now, how do we do this? Couple of things first, as I said, definitely have a listening mind because you understand the business as a Business CFO. So, if there is a different perspective, which is coming from the different people in your group, or with the board, definitely hear them out. You should listen and convey that, “Yes, I have heard you”. So even if their opinions are different from mine, what I do is, I sincerely make all the attempts to understand the different views of the shareholders, the board members, the executives, my team and other significant stakeholders.
But that doesn’t mean I give up my thought process or what I believe in. But yes, if I heard them, if I believe that I need to change, I do change. That’s one part of the action. I take what I deal with the various people as you said, how to bring them together. That’s one thing I do. The next is. Once I’ve heard them, I still don’t give up on my views. So then the second step, which I do is to go back to my ownership board members, the other stakeholders and feed them with facts, figures, logic and the business sense which adds value in the business. This is very, very critical step because a “bookish CFO” will probably tell you, look, the costs are increasing, but a Business CFO will have information and opinion more like we can improve margins but taking this action, or we should do a Value Engineering at the cost of sales level and the range of outcomes you can expect from these actions. I did it in one of the organizations when we brought down costs significantly, not by giving the loss account, but specifically giving various actions and using facts and logic to convince the stakeholders. This is what I am doing to convince the various stakeholders
This “bookish CFO” compared to the “Business CFO” is really what you’re getting at and that communication piece becomes so important, where they learn that you’re respecting them by listening, making sure that you’re considering their views. I think that’s a great lesson for anybody and CFOs in particular. The old adage, we have two ears and one mouth for a reason, really applies here. We should be listening twice as much as we’re talking. And I think that’s one good step in developing the relationship. It gives you the power to bring your ideas forward.
I was going to ask who does this Business CFO apply to. But clearly, it is a direction that any finance leader should be moving towards. Understanding the business, bringing their ideas forward and being able to work with the executive team and the board with their ideas. As well as listening and being open minded enough to bring forward ideas from others. I think this is a concept that makes tremendous sense. And I think it’s definitely the way to go. And I particularly like this bookish versus business CFO It puts it in simple perspective. That is really good way to frame it. Thank you for that perspective on and definition of the business CFO.
Given we have a couple minutes to talk about the challenge’s CFOs are facing. It’s 2020. We are starting a whole new decade and there’s so much change happening. What do you see as the key challenges CFO’s are facing CFOs today?
Well, there are two broad areas, that are challenging the CFO. First on the business, and second is within the group. I suspect, that 2020 can still be a very tough year in terms of the liquidity so, yes, the cash flow management is going to be a stress for the CFO. And especially for someone like me who’s handling so many businesses and Alan eight businesses at the moment under my head. It’s really a challenge. How to handle all businesses, again, when I’m trying to meet those two keys objectives we discussed earlier. So it’s really a challenge when you’re handling diversified businesses, cash flow. That’s the biggest challenge, I believe, for CFOs. globally.
The other part, like they said, at times it’s a pretty thankless job. Because if you say something, raise a red flag, you can be viewed as paranoid, as if you don’t want the business to grow. And if you are extra lenient, well, then where are the controls? So, it’s a very delicate scenario, which I face as a CFO managing business, investment, money. Growth controls and meeting the wishes of the board. And yet ensuring that I meet the two objectives, ensuring that the businesses succeed, and ensuring that I’m mitigating the key risks the business is facing.
So, these two challenges are there. But yes, I don’t see that changing in 2020. But I still find it too exciting too challenging every day is a new beginning. But so long as you have the will, so long as you have the persistence, patience, passion to do it. You can do that.
It’s such an interesting perspective that because there is this conflict, there’s this, you know, you’re the stewards of the financials, you have these fiduciary responsibilities for the assets of the company. Yet the value-added part so nobody considers that value added. That’s protected. And it’s only the CFOs. And maybe the chairman of the board that recognizes that’s really valuable. But people’s, the rest of the girls don’t see that. So, they see where well how do you bring me more business, how you are creating, I need to, I need to make more sales, I need a better credit policy. And that balance between the commercial aspect and what we call the control aspect.
By the way, I’ll give you an opinion right now, the word control, we have done ourselves such a disservice by naming internal controls, as you know, wrapping something up, when actually what we’re trying to create is better processes, right. So, I think we’ve done ourselves a disservice as a profession by using this term internal controls. Because it’s got such a negative connotation. It’s exactly what we should be doing. But you know, but I thought about this recently that it’s really internal processes, what we want is the right process. So good internal controls are nothing more than really good processes. And we’ve let this terminology get into that we’ve kind of crept in that, well, I’m an internal control person. And that anyway, I’ll get off my soapbox on that.
I think you’re right, this conflict between governance, internal controls and risk management versus being a Business CFO, is a huge conflict for people. And you have to, we have to play both roles. And, and I think that’s really, that’s a big challenge. So, cash flow management, you know, can’t lose with that one. Right. That’s such a such an important aspect for so many businesses. You know, very few businesses have the luxury of not worrying about their cash flow. And, and this whole delicate balance. I think that’s really a good point that how we create that and manage that, and it never will change, I don’t think I mean, as long as the CFO has those responsibilities, which I don’t see that changing, that’s always going to be a balance that we’re going to, we’re going to have to a tightrope that we’re going to have to walk, but it’s really important.
Well, you know, I should appreciate the time you’ve taken, you know, it’s mid evening over in your neck of the woods and it’s early morning here in my neck of the woods. And between us I think I was I got up and was awake enough to listen to you, sir woke me up with a lot of your great wisdom. So, I really appreciate that, Anand. And then how can people reach you?
Well, I am available at all the professional platforms. I’m at LinkedIn, on my mobile, on my email.
And one thing I want to share with you because I always believe when someone has this sort of communication issues. One thing I’ve realized, I’m so convinced for you to be an effective professional, whether it’s a CFO or CEO or whatever. I think communication is the key in the current times. The fact that you have responded to someone you may or may not accept What they are saying, you may or may not give a convincing response, but the fact that you have cared about someone, and the fact that you have reacted, and I’ve observed many successful people in my career with the last 15 years, and I’ve one thing I’ve found in all of them very prompt, very quick, in at least saying what they have to say. And that is the key point, which as I said, if you if, if you have to be an effective Business CFO, you need to have this tool. So, I’m simply, I’m available, except the sleeping time probably all the time. Very quick response. WhatsApp? email? LinkedIn? Yeah, that’s it.
Well, it’s been a pleasure, to listen and have you share your time and wisdom with us this morning. We’ll share this with our network so everyone can learn from you.
This is CFO Talk. I’m Steve Rosvold, founder of CFO.University. Thank you, Anand Soni for spending time with us today sharing your views on the Business CFO and challenges facing CFOs today. Have a great day.
Thank you so much, Steve, for your time. Appreciate it and giving me an opportunity to share my practical experience with you. Thanks again.
You bet. Thank you so much.
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