Being a financial leader entails handling multiple responsibilities simultaneously.
You keep an eye on the bottom line but also ensure that the business is growing and innovating. While difficult, accomplishing this balance is highly rewarding.
But how can you know if you are excelling as a financial leader?
Below are eight signs to help you start identifying the hallmarks of exceptional financial leadership. If you see them all, congratulations! You are doing an exceptional job.
Even if you’re missing one or two of these signs, there’s always scope for improvement. Read on to learn about the signs of exceptional financial leadership and some useful tips to help you unlock the next level of success.
What are the signs of exemplary financial leadership?
As a leader in the finance department, you will acquire various technical and soft skills over the years from different roles and responsibilities. Additionally, your educational background also helps you acquire many of the key skills essential for finance leaders to excel at their job:
Clear Vision and Strategy for Future
Successful financial leaders thrive in challenging situations that hyper-competitive markets present.
They do so with a clear vision that helps them see through the clutter surrounding key data inputs. As technology has advanced over the years, huge volumes of data are available to finance teams. It is therefore easy to get overwhelmed by the sheer volume of the information to process.
But finance leaders can draw meaningful insights from this data as they have clarity regarding the metrics they need to monitor to understand the underlying trends.
A clear vision is helpful in not only understanding the present trends but also in extrapolating them for the future. Agile companies are able to stand apart from their competitors because they have a well-defined strategy for the future.
This is where finance leaders come to the fore with their skills to help team members prepare a well-rounded strategy that covers multiple scenarios that might emerge in future.
Whether it be variations in the cash flow cycle or increase in the cost of borrowing, finance leaders are always one step ahead.
Successful financial leaders are proactive, not reactive, with their decision-making. In present times, companies must always be one step ahead of their competitors.
This is where agile finance leaders leverage Financial Planning and Analysis (FP&A) to undertake activities like planning, budgeting, integrated financial planning, performance management, forecasting, and modelling. These activities help understand the future trends in the industry and allow finance leaders to adopt a proactive approach.
Whether it be provisioning for seasonal variations in the budget or allocation of additional resources to other departments, they are in a position to take informed decisions without waiting for an event to occur.
Finance leaders use their data interpretation and analytical skills to evaluate all the available options to offer actionable insights to concerned stakeholders.
Excellent Communication Skills
Not every business user is equipped to quickly comprehend complex financial reports. It is therefore the duty of the financial leader to communicate results through data with important stakeholders.
Successful finance leaders possess excellent written and oral communication skills. They can present complex financial data and analysis to offer relevant information to the stakeholders in an accessible manner.
In fact, it is the duty of finance leaders to share relevant financial insights with other departments. They are in constant touch with board members and departmental leaders to help them make informed decisions to achieve the company’s financial goals.
Beyond internal communication, finance leaders must also be good at external communication directed at customers. They must simplify complex financial jargon into simple words to ensure that all stakeholders are able to comprehend the data.
It is also important to ensure that the reports and details shared with statutory authorities are presented in the prescribed manner to ensure compliance at all levels.
Calculated Risk Taking
Finance leaders must possess the ability to achieve success by taking calculated risks.
During the normal course of business, finance leaders must handle multiple risks, such as Forex risk, operational risk, reputational risk, and credit risks, deftly. Having an ultra-conservative or ultra-aggressive approach to risk-taking is a recipe for disaster.
In competitive markets, calculated risk-taking on the part of finance leaders is highly desirable. Financial risk management entails the process of risk identification and analysis to make informed decisions.
These risks can be qualitative or quantitative in nature and it is the responsibility of finance leadership to leverage suitable financial instruments to hedge the business against them.
Finance leaders must develop a decision-making framework that takes all the relevant risks into consideration during the decision-making process. For instance, many finance leaders now use FP&A software to run multiple what-if scenarios in minutes to test various models. This action allows them to mitigate the risks involved with every decision to a great extent.
Embrace Change and Innovation
To leverage the benefits of FP&A, companies are integrating the latest FP&A platforms with their existing tech stack to enhance the efficiency of their financial operations. As a result, finance leaders are not only required to handle the new software but also stay abreast with the latest technology and automation entering the workplace.
Finance leaders are no longer limited to working with spreadsheets. They must be comfortable with technology and possess the necessary skills to handle new innovations in terms of technology. It will allow them to use the new platforms to boost their efficiency and effectiveness.
Most companies are now using cloud platforms instead of on-site infrastructure for financial tasks. This allows them to avail multiple benefits like developing a single source of truth, building, maintaining and visualizing reports, plans and forecasts in real-time, and several others.
So, instead of being stuck with the traditional way of doing things, finance leaders must be willing to embrace change and innovation.
Another important aspect of financial leadership is taking responsibility for the actions.
Financial leaders hold themselves as well as their teams accountable for all the decisions they take pertaining to the company’s finances. They are excellent team leaders and bring forth a strong foundation for leading finance teams.
Finance leaders are responsible to offer guidance and directions to other team members. They take charge of challenging situations and can offer effective solutions to address the issues.
Financial leaders ensure that their department does not operate as an independent entity. Their teams take ownership of the entire financial planning and analysis for the company.
They work as partners with executive leadership and share with them timely reports and insights to help formulate policies to achieve long-term and short-term goals.
Business economics is rapidly changing with the impact of new technologies, shifts in competition, and uncertainty in operating conditions.
Ever since the pandemic hit the global corporate sector, companies are required to alter their strategies to stay ahead of the evolving circumstances. In this rapidly changing business environment, finance has come up as a core function that is helping company leaders with the decision-making process.
Financial leaders are no longer employees of a company, they are strategic business partners who are helping develop resilience to capitalize on transformation in multiple operating areas.
To help unlock the true value of enterprise data, financial leaders are helping accelerate the automation of enterprise performance management capabilities. The finance leaders are working to integrate the latest concepts like FP&A, FinOps, and continuous planning by taking ownership of all finance-related functions.
Transparency and Tough Decision Making
As part of the FP&A processes, financial leaders are helping usher in transparency in the decision-making process at their companies.
They help create a single source of truth where all departments have access to the same data that is being updated in real-time. This information presents a true picture of the business to all stakeholders and brings in much-needed transparency in the decision-making process.
Another hallmark of financial leadership is making tough decisions when required to ensure sound financial health for the company. For instance, due to seasonal variations, most businesses experience ups and downs with the demands of their products and services.
Financial leaders must work in collaboration with other departmental leaders and take some tough decisions regarding laying off some employees or cutting down on marketing expenses. It is their duty to ensure that in the new normal, there are no surprises that can derail their short-term and long-term plans.
The role of financial leadership is transforming
Financial leadership has assumed considerable importance with agile companies that always want to be one step ahead of the competition.
They must ensure cross-departmental collaboration at all levels and ensure synchronization in the decision-making process to drive growth. There are several qualities that all financial leaders must possess, and while some of them can be acquired through education and experience, others come naturally to the individuals.
Financial leaders must be open to integrating new platforms with existing systems to leverage the latest innovations to drive growth for their companies.