Blog/Thought Leadership August 1, 2022

CFO Report: The transformation of the CFO with Duke Heninger

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In the past five years, business executives have been asked to apply their leadership, ingenuity, skills, and experience in unprecedented ways. Business has become increasingly more complex, shaped by the need for efficiency, innovation, and speed. The finance function is not excluded from the demands of the modern business world. More than any other business unit, finance is evolving rapidly, and so should its leader, the chief financial officer. 

CFOs are in the thick of transformation efforts, whether it involves revamping the finance function, optimizing operational models, or supporting the growth of other functions. These executives are expected to elevate the organization's performance and ensure it has the financial foundation for long-term growth. 

To better understand the evolution of finance and how it is impacting chief financial officers, we connected with Duke Heninger, entrepreneur, CPA, and fractional CFO with years of experience in public accounting, controllership, executive leadership, and business. Together we explore the evolution of the CFO and the skills needed to succeed now and in the future. 

So happy to connect, Duke! Can you tell us about your leadership journey? 

I'm an entrepreneur at heart and have found my niche helping other entrepreneurs gain valuable insight into their financials. My career in finance and accounting started when the economy tanked in 2008, and I moved from being a marketing major to an accounting major. I felt that a transferable technical skill would ensure I would have a job while expanding my understanding of business. Fast forward through a master's degree in accounting, CPA firm, working at a fast-growing company as a controller, and spending the last four years as a fractional CFO, I've come to love it. 

Throughout my journey as a finance professional, I always had aspirations to build a company of my own. So I bought and operated a company, which has given me the perspective of an entrepreneur. This entrepreneurial mindset has allowed me to think like and understand business owners, which has made me a more valuable, strategic CFO.

From your perspective, how have you seen the role of the CFO transform in the past decade?

I have definitely seen a shift; there has been an evolution in the role of the CFO. It has gone from executives with dated mindsets to those who know systems and processes, and understand software. Especially over the past five years, the shift has been pushing out individuals who understand all the aspects of the CFO position, except for the digital side of it. The finance function has gone from manual to automated, and we see varying types of software popping up. It's like a race to automate the accounting function. 

Accounting has always been a cost center. Traditionally, accounting has been a compliance-driven necessity required by the IRS, banks, investors, and creditors to mitigate risk for everyone. Nowadays, the compliance-driven aspects are being outsourced or automated. Moving into the future, businesses need finance leaders to transition the function from a cost center to a value center through insights, strategy, and guiding the company in the right direction. 

Many accounting tasks are a cost, and as finance leaders, our goal should be to decrease that cost, which requires a change of mindset in our accountants. CFOs must be able to help their accounting team move from being transactionally based to value-driven. So, for the transactional tasks, I encourage finance leaders to automate as much as possible so humans aren't touching things that don't drive value.

What skills are needed to be successful now and in the future?

There is a level of technical skills all CFOs need, like accounting and finance knowledge, as it is the foundation upon which everything is built. That is the baseline for the role, but what differentiates a CFO and makes them valuable is their ability to identify optimal systems and processes. That is where you simplify things and automate what doesn't need to be manual. Less manual work frees up time for the CFO and their teams to focus on strategy. Trained accountants look into the past, but the CFO needs to look into the future. They need to be able to say, here is where we are at right now, and this is where we are going. We still need past financials, but we do not need a large team of accountants just hitting the numbers anymore. Make the past simple so the finance team can focus on solving problems for the future.

How does the CFO contribute to digital transformation? 

We're still in this evolution of the CFO. It's so easy to keep doing the same thing you've always done, and if we have people in place who will not adapt to a new mindset, we won't see a change immediately. Lagging CFOs will fall behind; while they may have strong technical knowledge, the next layer needed for true finance transformation is lacking. So I think the people who are going to be CFO in the next few years are the ones who will make a significant change. It's not necessarily the current CFOs; it's those operationally minded controllers who are trying to find ways to simplify things. They will make an impact. They will become CFO, understand how it all works, and not be afraid to make it work better. 

How can CFOs be selective in their buying decisions regarding financial software to ensure ROI and value? 

I serve many different clients, and while one software may be great for one, that does not mean it will be as great for another. Businesses can have niche problems that need solving or internal constraints that limit their ability to easily adapt new software. 

Something that always helps is shopping around. When you find a solution, look for the competitors to that solution. I talk with various software representatives and shop to see if the product I am looking at is truly the best fit for the problem. First, you must experience the software's capabilities and how it aligns with your unique use case. Then, you must apply the software to your business setting to see how a new implementation will impact your business. For example, what processes and systems will need upgrading, what will become irrelevant, and how many internal stakeholders will be affected. Some software requires a complete company-wide transition, while others are great because you can plug and play.

Leading an evolving finance department requires strong change management. How can we better manage our teams and expectations? 

We're all driven to fix things by adding to the issue, but I have found that it is often better to subtract. We can simplify our operations by looking at all aspects to see what we can remove from the equation. For example, when I come in as fractional CFO, I go into companies generating between 5 million and 50 million dollars annually. Despite their efforts to fix their problems, they have layered on so many solutions that they often become trapped by their tech stack or the many different Google or Excel sheets they've built. 

My favorite thing is to go into their finance functions and first understand the process and find out what they are really trying to do. Then I work to figure out how we can do this without all of the clutter, and that can be difficult for people to accept initially. They say, "No, you can't change this process because it goes to this person after me." So I ask, "but why?" 

From an unbiased perspective, asking why helps clarify what we are trying to achieve. For instance, I've experienced an accounting department that wanted to hire two more people but didn't actually need to increase headcount. With improved processes and automation, their team of four could finally breathe and have a life again. Conversely, in other cases, we have decreased accounting departments and relocated staff to positions that are better suited to their skills and professional desires. 

Do you have a final word of advice for CFOs looking to uplevel their skills, or controllers looking to grow into the role of CFO? 

Within the CFO role, you have to know: controlling, FP&A (financial planning and analysis), debt & equity financing, but most important of all is the FP&A skill set. Successful CFOs are extremely good at forecasting and they understand which metrics are most impactful to their organization. 

Beyond the technical skills, understanding soft skills are fundamental, like knowing how to tell a story—learning how to step back and see things from a 30,000 ft view. I would say a very important skill to develop is being able to communicate financial data in a way that can affect change internally and influence external parties.

About Duke Heninger

In addition to working as a fractional CFO, Duke is passionate about helping newer controllers and CFOs. He is now growing his mentoring practice, Simple CFO Coach. At Simple CFO Coach, Duke mentors financial leaders at medium-sized companies who are responsible for annual revenues between $1M-$50M. In his program, he assists them in gaining the knowledge and tools they need to be massively valuable by offering best practices and training for controlling, FP&A, and financing.


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