Amid COVID 19, CFOs are in the thick of the action. They are playing critical roles in helping their organizations navigate through this crisis. They are like a Minister of Foreign Affairs whose job is to show the CEO and the rest of the world the story of the company and its various activities using relevant data. This week, we have brought more articles, informative for C-suite executives.
How a CFO manages through a crisis
In today’s time, finance leaders can no longer rely on finance skills alone. In an interview, David Mahok, CFO of a leading software company, Epicor, explained the importance of continuous and optimistic communication during the crisis in his article in Forbes. He stated that if the leaders are not responsive during the difficult times, it is an indication that the organization is going to face serious repercussions. During COVID 19, all the organizations are facing severe challenges. In such a scenario, the CFOs need to organize a company meeting with the entire organization to listen and understand the doubts of the employees and discuss the company’s action plan to overcome the challenges. Not only it will relieve them from the discomfort of unclear future course pf action but also assist them to focus on their tasks better.
Particularly this time, the business planning needs to be flexible and quick to strengthen the financial results keeping a focus on the needs of customers and employees. He further added that the role of technology cannot be ignored and requires all the functions of the organization (especially finance) to keep themselves abreast with the updates in the technology. CFOs need to work closely with the CIOs to explore the ways to ensure maximum efficiency and productivity with minimal cybersecurity threats. For instance, while changing the working model from the physical office to the virtual environment, employees must be trained in 6 best practices for working remotely:
- Using the proper technology: While working remotely, whether from home or public locations, employees need computers, emails, teleconferencing, internal network access
- Manage secure connections: Employees must have a secured Wi-Fi network connection with a trusted VPN (virtual private network). Any transmitted data needs to be encrypted to protect it from tampering and interception
- Set clear expectations: A “work from home” policy must be created that includes instructions about daily work schedule for an employee, company’s overtime policy, and protection of proprietary company information
- Trusting employees: Employers need to have trust in their employees to get their jobs done.
- Implementing communication programs: Sometimes, remote workers also feel isolated from the rest of the team, therefore it’s a good idea to keep in contact with them via telecon or video conference
- Testing the effectiveness of work from home: Post-implementation, the work from home policy must be evaluated once in every quarter or six months and amended based on the findings
How CFOs can push past fear to resilience and resurgence
Dayton Kellenberger, CFO of Vandavo, explained in CFO Magazine, the seven steps to shift the focus from adequate liquidity in the short term to resilience and resurgence.
- To begin with, finance leaders must protect the gross margins for the long-term prospects of the organization. To do so, CFOs must ensure tight pricing controls and sacrifice volume for margin where it is possible.
- Only the essential travels must be permitted with an increased level of approval.
- The savings must be invested strategically that will help accelerate your rebound and sustain in the business.
- During the crisis, C-suite executives must call All-Hands-meeting and encourage everyone to provide innovative ideas to maximize efficiencies across the organization.
- The practices adopted during disruption must be gradually turned into the best practices. As an example, regular review of cash forecast and weekly collections should be continued so that an action could be taken where discrepancies in the collection are noticed.
- Initially, working remotely may result in low productivity. However, using the right technology tools while working with IT team can help get rid of this problem.
- This is the right time to make progress on the digital platform plans. Using cloud technology will result in efficient working with minimal human errors.
During uncertain times, these steps will help to revive the business both today and in the future.
Financial reporting amid COVID 19
Quality financial reporting, both internal and external, is the hallmark of any CFO organization. However, the consequences of disruptions amid Covid-19 pandemic on financial statement reporting and audit engagements are complex. At present, there is an unprecedented uncertainty about the economy, future earnings and many other inputs that represent fundamental elements of financial reporting. Jim Deloach, Managing Director, Protiviti, described the matters CFOs need to address in the financial reporting. (forbes.com).
Firstly, the implementation of new accounting standards has been expedited especially for the companies listed on the Unites States exchanges. Over the last few years, FASB has issued standards in many areas including leases, credit losses, hedging and long-duration contracts and revenue recognition. CFOs of companies must not delay implementing any of these standards. FASB has granted the extra time due to the need to add resources to implement these changes and now the disruptions caused due to the COVID 19 pandemic. However, delaying the implementation of standards beyond the extended timeline may have negative consequences.
Also, starting from this year, external auditors of most of the US public limited companies are required to include in the audit report any areas that include the exercise of substantial judgment (i.e. critical audit matters). A critical audit matter (CAM) is defined as any matter arising from the audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
a) relates to accounts or disclosures that are material to the financial statements; and
b) involved especially challenging or complex auditor judgment.
CFOs need to be prepared when the external auditor raises the issues as CAM. As a best practice, it is advisable to conduct a testing process to identify potential CAMs so that everyone – management, the audit committee and the auditor are on the same page. In case the company is applying aggressive accounting, policies and there is a disconnect with the external auditors due to judgmental issues, the CFO must engage himself to streamline and improve the company’s accounting and reporting processes. Finally, during the meeting with the audit committee, CFO must be prepared for various questions, such as, the progress on accounting changes, to what extent the company is prepared to use CAMs as opportunities for improvement, how is COVID-19 affecting the financial statements and most importantly, whether the company complies with SEC guidance on pandemic-related reporting matters.
The value of Artificial Intelligence in the accounting world
According to the CEO of Stampli in financial executives, the accounting world still does not properly understand the value of Artificial Intelligence. Accountant see AI as a big risk to their jobs and due to this reason, they are criticizing it for last many years, however, nothing has happened till date. It is time to stop talking about the negative consequences of AI and reconsider how AI can shift the focus of accountants and draw out their real potential.
Today, the role of CFOs is getting wider. It is far more than to generate reports and stay in compliance. Now, they are more involved in strategic planning and advising CEOs. Due to continuous changing and increased responsibilities of CFOs, manual accounting jobs do not help them achieve their mission.AI has the potential to make accounting more valuable. AI can reduce the manual efforts and accountants can utilize their time for other constructive analysis. An accounting division that comprehends AI well can produce more relevant data and reports that will help CFOs to take critical decision based on such details which otherwise would be a challenge without the aid of AI.
It is the time to bring accountants back to their original function. Instead of getting them involved in repetitive and administrative tasks, they should be more involved in analysis, investigations and problem-solving tasks. AI cannot do what accounting professionals are capable of. Together with them, it can support the new mission of the CFO and give the business an edge.
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