Over the past decade, the CFO and finance team have played an increasingly pivotal role, providing strategy and financial stewardship while confronting critical issues like cash flow, regulation, corporate governance and business growth. But today's finance team is increasingly called on to deliver efficiency and direction across areas such as operations, human resources, and sales and marketing, giving rise to financial business partnerships that deliver growth across the organisation. With multiple and often competing priorities, CFOs face a growing tide of responsibility and mounting of issues that may keep them awake at night. So what is causing their insomnia?
FINANCE LEADERS' KEY CONCERNS
Nearly five years on from the start of the global crisis, the economy continues to weigh heavily on the minds of finance directors in the UAE. More than four in 10 (41 per cent) respondents indicate that the national economy remains one of their chief concerns, followed by the global economy (32 per cent) and the euro-zone economy (33 percent)1. Despite economic pressure and competition from some areas in South America and Asia, the rise of emerging markets was only cited by 28 per cent of FDs as a primary concern.
With economic unpredictability continuing to affect the global financial markets, it is unsurprising that cash flow remains high on the agenda for today's finance leaders. Nationally, three in 10 (29 per cent) CFOs consider cash flow a top concern, rising to 67 per cent for large companies.
Despite the improving global economic climate, customer / client insolvencies is the number one factor contributing to executives' concerns around cash flow, cited by nearly half (45 per cent) of FDs. This is followed by competitive pricing and low margins, slow-paying customers and higher business expenditure, all at 41 per cent of the response. The issues around cash flow are therefore not limited to the credit department - finance teams are having to work with various departments of the business, including sales and business development as well as operations, to ensure that cash flow issues remain in check.
Managing the balance sheets and access to investment financing are also cited as primary concerns facing finance executives, with nearly three in 10 (29 per cent) indicating so. Lack of funding, particularly among small and medium- sized enterprises, may be stifling economic growth, prompting the government to work with institutions, including the World Bank, to devise schemes to increase lending.
Looking at some of the additional factors making it difficult to secure investment financing, one-third (33 per cent) of CFOs consider the perceived exposure to bad debt and risk as the top reason, followed by poor credit rating (29 per cent) and operating in a perceived risky or depressed industry (27 per cent). Unfortunately, many of the factors that are most directly within control of the finance team, including managing finances and the balance sheets, at 24 per cent and 19 per cent respectively, were not among the top reasons that companies are challenged in securing additional funding.
More than four in 10 (41 per cent) finance leaders cite lack of time to complete work and projects as having a negative impact on their businesses, with one in three (32 per cent) indicating they face a shortage of permanent employees. Many finance departments are running with lean teams and have been reticent to increase headcount to pre-recessionary levels. Many therefore find themselves challenged in managing their workloads.
Compounding the issue is the fact that nearly three in 10 (28 per cent) CFOs indicate inadequate technical skills within their department and 27 per cent say that lack of mid- management leadership have an adverse effect. During a time when finance professionals are managing traditional accounting tasks while also working with various strategic and commercial teams throughout the business, having the right talent in staff as well as management-level roles is as important as ever.
Looking to optimise departmental effectiveness, nearly half (48 per cent) of CFOs believe that business process improvement is the top mechanism to do so. This is followed by improving communication between internal departments (45 per cent) and financial systems improvement (37 per cent).
To develop their finance and accounting teams, finance directors consider mentorship and coaching programmes - pairing rank-and-file employees with managers from across the business - as the most conducive in helping accountants advance their careers. Internal training, job shadowing and business partnering are also considered effective.
It is clear that the finance function has not yet completed its transformation. Ongoing concerns, as well as emerging ones, will continue to challenge CFOs who are under pressure to deliver growth in both bull and bear conditions.
2013 CPI Financial. All rights reserved.
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