How to Improve the Board's Relationship with the CFO

Nicholas J Price
5 min read
It's a given that board directors and managers need to work together to help companies achieve their goals, but they aren't the only important players. The CFO is often the second-highest-ranking executive. Some boards underestimate the role that the CFO plays in helping the board and management meet its goals. While CFOs share the same goals, their process is not always as linear as that of board directors and managers because cash flow isn't necessarily linear. It's the difference in the approach to the company's goals that makes things a bit murky in the relationship between the board and the CFO. Understanding each other's roles better, improving communication and making the best use of technology goes a long way toward improving the board's relationship with the CFO.

Understanding the Role of the CFO

The CFO controls all of the money as it comes in and goes out. The challenge for the CFO is that the money for the corporate budget doesn't come in like a weekly paycheck, although, just like with home budgets, the CFO has to pay the bills and allocate funds according to the numbers in the accounts. Managers and board directors are looking at the projected revenues when making crucial business decisions. Obviously, the two approaches don't always line up.

CFOs are generally committed to managing the long-term strategic planning for growth as well as meeting short-term financial forecasts. Often, they face these goals while being restrained by tight cash flow. During times of unsteady cash flow, CFOs try to build greater cash reserves to safeguard the business's assets. Meanwhile, department heads are waiting for an allocation of funds for supplies and projects.

Word of cash flow problems has a trickle-down effect, as it places an undue strain on senior working relationships. The strain ultimately bleeds down to all employees. Unrest and uncertainty sometimes lead to impulsive or poor financial decisions, which may have an impact on the quality or timeliness of business decisions.

Just as board directors and managers need to work toward building a solid working relationship with the CFO, the CFO also needs to work to build better interdepartmental relationships between the finance team and board directors, managers and other stakeholders.

The Impact of Communication and CFO Decision-Making

CFOs make many difficult choices every day about how they choose to allocate funds. Multiple outside issues influence their choices in the decisions they make. As money unexpectedly ebbs and flows, CFOs must adapt quickly to prioritize financial resources.

During times of uncertainty, CFOs need to take what seems like drastic measures to keep the company moving forward on solid ground. This sometimes means moving certain projects to the back burner and freezing recruitment efforts temporarily. CEOs often want change to happen fast, and while the CFO is also motivated in that direction, the reality is that the financial situation causes the CFO to push back.

CFOs sometimes cave to the demands of board directors or managers who tell them what they must pay, often without information to back up their requests. When experienced CFOs don't have a good working relationship with their boards and managers, they develop a comfort level with the choices they make on their own. In all situations, the lack of transparency stagnates the work of the CFO. These are the types of issues that create friction between the board and the CFO.

Working Toward Better Relationships Between the Board and the CFO

In every industry, the best decisions are group decisions. Many corporations make the mistake of not including the company CFO as part of the group decision-making process. CFOs need to develop business relationships with board directors, especially the audit chair and the audit committee. A good start is to set up face-to-face meetings.

Budget allocation is a two-way street that requires trust between both parties. Department heads have a responsibility to provide CFOs with timely reports so that CFOs can reciprocate with budget projections. Not having needed information causes CFOs to delay the allocation of funds, which makes it hard for department heads to budget appropriately, delegate responsibilities and remain accountable for their efforts. Managers would do well to understand that CFOs may have been burnt by distrustful working relationships in the past, which colors their decisions. Developing trusting relationships requires strong communication and extended time working together.

Taking Some Help from Technology

Some finance departments work like machines generating antiquated, carbon-copy invoices in record time. Employees route invoices for posting, approval and filing in mindless, rote fashion. By the time the information reaches board directors and managers, the reports are weeks old and too late to have any meaningful use.

Software programs help managers and directors work together faster and more efficiently, which makes the CFO's job substantially easier.

Financial software is relatively inexpensive, and certainly saves money in the long run. More importantly, it creates company-wide transparency by allowing all pertinent parties access to financial reports in real time.

Being able to see transactions on a daily basis helps board directors to make faster and better decisions, and to address evolving issues quickly.

Good Financial Management Is Everyone's Responsibility

Corporations serve all parties best when spending commitments go hand-in-hand with financial planning. CFOs have a challenging role as they strive to meet the needs of everyone involved, including the employees, managers, board directors and, ultimately, the shareholders and other stakeholders.

When everyone is on the same page and works together, there is less chance that CFOs will become frustrated and overburdened, which could lead to troublesome and costly mistakes by the finance department. Clear communication between all parties is a key ingredient to developing relationships that are respectful and trusting.

Quality CFOs know that good financial management is a two-fold operation  a plan and a process. It's a financial plan with an interconnected process. Good financial planning is everyone's responsibility, irrespective of how high- or low-ranking their position.

Corporations can help to enhance the relationships with CFOs and finance departments when they embed the idea into the corporate culture that every person in the company has a responsibility to become a better financial manager.