A CFO’s Checklist for a Successful Q1

cfo checklist for successful Q1
Karrie Lucero
Karrie Lucero
In Finance
Karrie Lucero is a Content Marketing Manager at Xactly. She earned marketing and journalism degrees from New Mexico State University and has experience in SEO, social media and inbound marketing.

The Chief Financial Officer (CFO) of a company has many important roles in a company, but their biggest responsibility is managing their company’s finances. As a result, CFOs carry a lot of weight in terms of ensuring profitable quarterly results. For many companies, Q1 usually means unveiling a new budget, organizational goals, and sales compensation plan.

A successful first quarter comes from a combination of sales, marketing, and finance efforts towards the goals of your company. If you can, start Q1 following the momentum of your Q4 ending. Getting started on the right foot gives you a head start into a successful a new fiscal year.

The Top Issues Facing Modern CFOs

As your company’s financial leader, you should begin your fiscal year by assessing your challenges and key issues impacting today’s CFOs, and use that knowledge to your advantage. The world has become more digital, which has resulted in a transformation of the CFO role. Today, CFOs are taking on a much more expansive role, but it also means they are facing more challenges.

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One of the major issues is the fact that the world has become a lot less predictable as it has grown more digital. This has forced CFOs to become more aware and increase their efforts to reduce risk from societal, economic and political volatility. One way to manage the world’s unpredictability is to employ rolling forecasts to reflect current conditions. This helps you see best- and worst-case scenarios, and it will help you better prepare your company for a number of different financial situations.

Today’s CFO must also understand changing technologies and regulations. To do so, CFOs must be open-minded towards introducing automation technology into the company. For example, ASC 606 is requiring financial departments to pull more extensive data and expense commission payments in a completely new way. Pulling this data and managing it manually in a spreadsheet creates risk for errors, while an automated solution could save time and reduce errors.

CFOs must also be aware and actively protecting their company from ever-growing cyber security threats. CFOs handle the company’s most sensitive financial data, which makes them a prime target for cyber attacks. In 2016 alone, there was a 56% increase in the theft of intellectual property. It’s essential that CFOs are actively working with IT to take security threat measures.

To help you start off your new fiscal year right, we’ve put together a list of action items for a CFO’s successful Q1.

1. Create an Unbiased View of the Company’s Complete Value Chain

Since the role of a CFO is continually evolving, one way to leverage profitability in the modern market place is to start by acknowledging the real potential of an organization. This can be achieved through developing a holistic view of the organization’s value chain from back-office operations to competitor position, customer needs and vendor’s contributions.

You can then use those insights for producing specific initiatives. In essence, strategic decisions should be cross-functional and coherent. This breaks off from the tradition of CFOs putting shareholder value first. Today’s CFO must now focus on long-term investment. To do so, everyone in your company–including CFO’s–must spend time with customers and in each business unit.

2. Identify the Organization’s Core Customers and Products

This is a way of looking at the who and what drives  your company’s margins. With an understanding of your target customers and top-performing products and services, you have a better understanding of who is buying and what they’re buying. You can then use this information in your sales compensation planning with sales ops. With this insight, you can build a compensation plan that drives sales behaviors that promote your top-performing products and help reach financial goals for growth.

3. Become an Analytics Guru

There is no denying that the role of the CFO is rapidly changing. As it stands, many CFO’s spend about 50% of their time on transactional efforts and the other 50% on analytics. It’s important that the time CFOs spend diving into analytics is translated into financial growth and action. What do the analytics indicate, and how can you use that information to make changes to inspire sales reps and grow the bottom line?

CFOs are beginning to act more like true business partners. Long gone are the days when share price, earnings before interest, taxes, depreciation, and amortization (EBITDA) and margins were all that were needed for strategic decision making. Rather you need to track the right sales and financial metrics to formulate a better financial plan moving forward.

4. Communicate Effectively and Clearly

Strategic CFOs articulate financial and investment decisions clearly to other C-Suite executives and investors. This includes sales compensation. Both financial and sales compensation plans need support from executives and managers to be successful. On the employee front, they need to fully understand how they’ll earn money and the benefits of the plan for them. You must explain what you’re doing, why you’re doing it and when you’re doing it. Then, convey the implications for each business unit and the company’s full value chain.

5. Be Open and Advocate for New Technologies

Understanding the long-term impacts of strategic technological investments is becoming extremely important to financial leaders. Technology can transform legacy systems and business models, and in an changing markets, you will need to employ rolling forecasts in your CFO checklist to ensure your company continues to grow and adapt.

Consider your company’s need for high-powered computing, artificial intelligence and machine learning to provide the data and necessary insights to meet new regulatory demands. It’s important to also place a greater emphasis on predictive analytics, which can improve when supported by the right technologies.

Get the types of applications that will produce real-time information on dashboards with real-time performance tracking. This is just one of the urgent responsibilities CFOs must address besides finance. This is also how you can accurately ensure you are making progress towards your Q1 objectives.

6. Develop Company and Industry-Specific Metrics

It is critical for CFOs to develop more company and industry-specific metrics that are focused on customer value. These should include:

  • Market share as a percentage of market potential
  • Market favorability rating
  • Operating profit after capital charge (OPACC)
  • Revenue-weighted asset
  • Resource utilization

Furthermore, don’t think of these metrics in static terms. As consumer behavior, technologies, markets and regulations change, so should your metrics. In fact, they must always match changes in all of those factors–which, requires continuous revision. Q1 success is all about finding the right things to measure. Focus your metrics on competitors and customers.

7. Monitor Cash Flow Probability

During the first quarter, it’s important to start out with the same level of financial review and cash flow as you ended the fiscal year with. As you close out the books from the previous year, you can identify problem areas and create plans for growth in the new year.

Meet with your financial team as much as possible. Compare your current performance against the metrics mentioned above. It also helps to stay proactive to help avoid bumps and surprises in the future to determine the sufficiency of your cash flow and make financial changes, if necessary.

Final Thought

It is easy to take a backseat at the beginning of the year, especially if Q4 was successful. But, you must keep up the momentum and remain proactive. In addition, adapting to your evolving role is essential for positive accomplishments in Q1. Your CFO checklist includes a mix of focusing on the right metrics, taking a holistic and end-to-end approach, embracing technology and effectively monitoring cash flow probability.


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A CFO’s Checklist for a Successful Q1

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