How do you approach leadership in your finance function? Do you focus on day-to-day management, or do you take a forward-looking approach to guide your organization toward its goals and initiatives? Making the switch from a transactional to a strategic CFO allows your business to improve its goal progression, profitability, and productivity. In this article, we’ll explore how outsourcing for finance transformation can help you shift toward being a strategic CFO, including how you can leverage the associated benefits of changing your leadership style.
Breaking Down Transactional vs Strategic Leadership
There are two main types of leadership styles: transactional and strategic. Strategic leadership prioritizes future planning, while transactional leadership focuses on managing present situations. Understanding the core differences between transactional and strategic leadership in finance will help you unlock finance transformation. Let’s break down a few more of the main differences in these leadership styles.
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Focus
Strategic leadership looks forward to the long-term goals of the organization, understanding how the vision may change and what planning actions are needed to keep the company on track. On the contrary, transactional leadership directs its attention to the day-to-day operations, solving immediate challenges, such as a machine breaking.
Approach
Strategic leadership takes action well in advance. For example, you might work a new product launch into a budget a year in advance to ensure you have enough cash on hand. Transactional leadership takes action during the event. If a large, unexpected expense pops up, transactional leadership will look for immediate remedies, such as drawing on a line of credit.
Tracking
Since strategic leadership is forward-looking, leading indicators are tracked. Leading indicators measure future performance to identify trends, patterns, and outcomes. On the flip side, transactional leadership monitors lagging indicators, which analyze past performance and trends.
The Benefits of Transitioning from Transactional to Strategic Leadership
Making the shift from a transactional to a strategic CFO can have a profound impact on your organization. Let’s explore some of the benefits of changing your leadership approach.
Greater Goal Progression
Every organization has goals. This could be to take your company global, increase profitability by a set percentage, or have less customer churn. For most businesses, reaching these goals doesn’t happen by chance. It takes dedication, planning, and a strategic leadership style. By focusing on the long-term needs of your organization, you can make greater goal progression and ensure your company is on track for success.
Improved Workplace Culture
Handling situations as they come up isn’t an effective leadership style. In fact, it can cause employee panic, stress, and resentment. Strategic leadership fosters a welcoming environment that prioritizes innovation, diversity, and teamwork, all of which lead to a positive workplace culture, lower turnover, and greater employee satisfaction.
Increased Productivity and Profitability
One of the main focuses of strategic CFOs is improving productivity and profitability. For one, they search for ways to grow without restrictions, such as eliminating operational bottlenecks or funding shortages. In addition, they uncover strategies to increase profitability, such as switching suppliers and insurance carriers or changing employee compensation structures. Strategic leaders also find ways to support employees in their roles, which creates better margins.
Driving Innovation Through Finance Transformation
The Professional & Excellence Development sector of Harvard outlines that strategic leaders use their problem-solving skills and strategic vision to help both team members and the overall organization achieve their long-term business goals. This often translates to stronger innovation, with strategic CFOs pushing their employees to explore new ideas and think critically about how to solve challenges.
More Informed Decisions
At the end of the day, one of the most important benefits of transitioning from transactional to strategic leadership is more informed decisions. With a long-term action plan in place, the entire company can work toward its strategic goals. Everyone, from your marketing team to your warehouse employees, is on board and understands the company’s goals. This allows everyone to make decisions and take actions that support the organization.
The Role of Outsourcing for Finance Transformation
Unlocking the above benefits sounds great, but how do you actually become a strategic CFO? This is where finance transformation outsourcing comes into play, helping facilitate the move from transactional to strategic leadership. Here are some of the areas that finance transformation outsourcing helps with when switching to a strategic leadership style.
Gives Access to Experts
Outsourced finance and accounting professionals have years of experience on a variety of topics. Although you might excel at the finances in your organization, you may not know the intricacies of the tax code or state regulations. An outsourced professional understands which regulations impact your business, helping you create a compliant organization.
Additionally, finance and accounting experts are indispensable when trying to make informed business decisions. They can help you work through the tax impact of increasing cross-border sales or understand how changing your ownership structure or bringing on new partners affects your company. With an outsourced team, you always have an expert to turn to with any questions.
Reduces Costs
Despite what you might believe, outsourcing roles and responsibilities in your finance function actually lowers costs. For one, outsourced professionals are treated as independent contractors, meaning your company isn’t on the hook for payroll taxes or benefits. Even though you might pay your outsourced accountant or finance professional a higher wage or fee, you are saving money on payroll reporting.
Second, these outsourced professionals have access to state-of-the-art software programs, meaning you don’t have to make a personal investment in programs. For example, your outsourced professional might have depreciation software. Instead of purchasing this program, they can provide you with a depreciation journal entry to make in your general accounting system.
Offers a Scalable Solution
Scaling an organization isn’t always easy. From employee turnover to market changes, no one can accurately predict the future. When you have an outsourced finance team, you don’t have to worry about a key employee leaving or keeping up with raises to lower turnover. Outsourced finance and accounting teams are comprised of numerous individuals, all of which can take over your finance controls at a moment’s notice.
In addition, outsourced professionals are able to offer services that meet your business’s needs. For example, let’s say you have too much work for one internal staff member but too little for two in-house employees. Instead of hiring another individual and creating downtime or overloading a single employee, you can defer these tasks to an outsourced finance professional who has a team ready to cater to your needs.
Eliminates Mundane Tasks
One of the biggest benefits of finance transformation outsourcing is the elimination of mundane tasks. Leadership in finance shouldn’t have to worry about the integrity of data in the accounting system or clearing accounts payable. Instead, strategic CFOs are focused on the long-term projection of the company, making forward-looking decisions.
By outsourcing mundane and repetitive tasks to a finance or accounting professional, you free up time in your schedule, allowing you to transition from a transactional to a strategic leader. Not to mention that eliminating low value tasks improves productivity and efficiency for all of your team members.
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How to Implement Finance Transformation with Outsourcing
Implementing finance transformation with accounting and finance outsourcing will look different for every company. For example, one leader might only want to outsource tax reporting, while another wants to move the entire backend function to an outsourced professional. This makes it important to fully understand your business’s needs. Here are four steps to implement financial transformation in your company, helping you on your path to becoming a strategic CFO.
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Know Your Finance Transformation Goals
The first step to leveraging outsourcing for finance transformation is to know your goals. What do you want to accomplish with outsourcing? Do you want more time in your schedule to transition to a strategic CFO? How about wanting an independent opinion on your accounting records to pinpoint inefficiencies and areas of concern? Start by identifying your goals.
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Solidify Your Services
Now, it’s time to solidify your services. What tasks can you outsource that will help you work toward your goals? For example, if you don’t want to monitor accounts payable and accounts receivable, you will need to find an outsourced professional that offers these services. Other services include closing the books, filing tax returns, preparing tax projections, and forecasting growth.
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Find the Right Outsourced Professional
Next, you want to find the right outsourced professional. The ideal candidate or firm will be able to offer you all of the services you need, has the proper credentialing, and is cost-effective. Remember that you get what you pay for. The cheapest outsourced professional might not be the best fit if they don’t have the necessary industry experience or credentials to assist your company.
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Optimize Financial Transformation
Finally, leverage outsourcing to optimize your financial transformation. How can you shift from a transactional leadership style to a strategic one with outsourcing? Maybe you spend your extra time developing the company’s long-term goals or creating an action plan. Financial transformation optimization relies on you taking the initiative to better your company.
Summary
Leading transformation is one of the top priorities of CFOs in 2024, according to a Gartner study. If you’re ready to unlock financial transformation in your organization, outsourcing might be the path you’ve been searching for. Finance transformation outsourcing allows you to transition to a strategic CFO without being bogged down by mundane financial and accounting tasks.
Countless organizations report improved efficiency, productivity, and profitability when leveraging finance outsourcing, regardless of their industry focus. To see the power of finance transformation outsourcing for yourself, contact our team to schedule your free consultation.
