The role of the CFO is constantly evolving. Technology and new marketing strategies have changed the game forever.
We first need to understand how this position has traditionally been viewed and functioned in order to explain its evolution.
What is a Financial Director?
You are the senior CFO of an organization and are responsible for the company's fiscal health, in other words, the financial management of your ad agency. His responsibilities include building a world-class finance and accounting team, ensuring expenses and revenues stay in balance, overseeing FP&A (financial planning and analysis) functions, making M&A recommendations, raising funds for businesses new and ongoing, and collaborate with department heads to analyze financial data. and create budgets for future investments, test the accuracy of your financial reports, and consult with the Board of Directors and CEO. CFOs are financial strategists, mapping out a roadmap for their agency and anticipating the best financial path.
CFOs are true visionaries. There's no question why startups and small business stakeholders are investing in his expertise. The global pandemic has highlighted the value of an experienced hand at the top of finance. They have an eye for the future, work closely with senior management, and aren't afraid to recommend strategic moves.
CFO's relationship with other senior members of an advertising agency
The CEO and CFO work side by side, reporting directly to the board, as we said, serving as a sounding board, forecasting new strategies, and managing risk to the brand.
CPAs (Certified Public Accountants) are financial controllers responsible for preparing financial reports and analyzing financial data. You take over accounting at an advertising agency and report directly to the CFO. The CFO team is comprised of accountants, accounts receivable and payable clerks, payroll clerks, tax advisors and auditors.
The CFO draws on the reports from these stakeholders to advise the CEO and the board of directors on the company's strategic financial direction. The controller and other specialists are responsible for meeting the CFO's requirements to provide good guidance to their advertising agency.
COO (Chief Operating Officer) is responsible for the daily operations of a marketing brand. This includes all activities related to marketing, sales, production and personnel management. Also known as senior vice presidents, they report to the CEO and often work with the CFO to review the financial health of the marketing company.
They can also help set the direction of technology, particularly fintech, and provide recommendations on everything from supply chain to marketing, based on their industry knowledge and tax insights.
Some key takeaways...
- CFOs are the heads of your team, covering both finance and accounting, and are made up of senior management in those areas.
- Crucial to the need for a CFO is the desire for a strategic advisor with a thorough understanding of finance.
- Working as a CFO requires a background in accounting or finance and an advanced business degree, which typically includes an MBA. But it also requires many other skills.
CFO Role Breakdown at an Advertising Agency
Oversight of the agency's financial activities, including responsibility for financial and accounting professionals performing operational functions and in a strategic advisory role to the CEO and other C-suite colleagues.
Achieving goals, generating revenue, and maintaining stable cash flow are clearly on the CFO's agenda. CFOs also mentor other department heads throughout the agency, helping them maximize revenue and control expenses without sacrificing client needs or the agency's reputation.
The CFO is also responsible for recruiting new talent to build a finance team up to the task and works with other departments to provide a human capital management budget.
They need to interpret complex data provided by many players within the agency, put it into perspective, and help the CEO make sound financial decisions by asking the following questions: Should we launch this new service or product? What are the tax implications for our employees? Can we afford to move our supply chain ashore?
Main Responsibilities of the Financial Director
The main functions of the CFO vary according to the size of the agency, whether public or private, but in general they fall under the following responsibilities:
Most importantly, CFOs don't just report what it is: a significant part of its value to a company is its ability to predict future results. Of course, these results include financial forecasts and models based not only on the agency's past numbers, but also on internal and external factors that can affect revenue and expenses. The CFO is tasked with interpreting the data and understanding the various departmental information provided and making earnings forecasts for the CEO and shareholders.
Internal factors may include labor and personnel costs, sales trends, raw material prices, and more, while external data may include opportunity costs of capital, emerging competitors and analysis of their strategies, new technological advances, and its impact on the software used in the agency, and changes in market demand.
To monitor what is happening in the external environment, CFOs typically rely on data provided by government, business, and major media and analyst firms, supplemented by insights gained through trade memberships and partnerships and input obtained from board members.
Liquidity refers to an agency's ability to service its short-term liabilities with readily available funds. It is usually expressed as a percentage of what the company owes compared to its property.
For CFOs, it's about ensuring customer payments are completed and on time, and controlling expenses so there's enough cash to meet financial commitments.
Financial reports include balance sheets and cash flow statements. They help both external stakeholders and internal management understand the Company's financial condition, and it is up to the Chief Financial Officer to interpret these statements accurately and in full accordance with accounting principles.
Return on Equity (ROI)
Part of a CFO strategy map focuses on ensuring a strong return on investment. ROI measures the probability of getting a return on the dollars invested. In general, it looks at the profit or loss of an investment as a percentage of the cost.
Additionally, CFOs add context to assess whether an incoming project is generating enough ROI to make the investment worthwhile.
It is usually given as a percentage. While a high ROI is always welcome, it should always be used in conjunction with other metrics like cost per sale and overall conversions.
As financial strategists, it is important for CFOs to consider metrics based on their business objectives so that KPIs (Key Performance Indicators) increase as ROI. These are valuable tools that in the hands of a good leader can transform your agency and lead it to its goals.
Weekly sales, customer support, the efficiency of your provider, the number of likes on your Instagram or Facebook page, the number of clicks your agency ads receive, the time they spend on your website are just some KPIs. But it's important that your agency keep things simple and focus on developing specific software to provide an answer to specific problems.
With all of that in mind, here are 4 main marketing metrics that serve as the basis for measuring the success of your agency's marketing campaigns, and in turn, you can see how well you're doing your job.
Total number of conversions
Conversions are the visitors that become records for your marketing database, allowing you to focus on what really matters.
Without objectives, you can't see if your visitors are responding to the desired calls to action when making a purchase, signing up for a service, filling out a form, downloading a brochure, or signing up for a newsletter.
You can reference the total number of conversions or segment them by audience type to detect nuances in your customers' behavior.
Scope and level of participation
Think of these two as the two main elements of the measurement process.
Let's look at social media marketing metrics. Each platform has its own digital marketing metrics such as Facebook Insights, YouTube or Twitter Analytics. Regardless of the way it is presented, the most important aspects to consider are these two. You can think of them as a measure of the health of your social media marketing profiles.
As for, are you visible? And are your online communities engaging with your content?
However, let's remember that social media marketing metrics are easily accessible. Trying to correlate reach, engagement, and activity levels is vague and non-existent. However, because social media activity effectively provides a stable platform for business impact, monitoring should be viewed as an important rung on the ladder rather than complete proof of success.
Conversion rate per channel
As a marketer, it is imperative that you determine which activity has the greatest impact on your ROI and sales. Measuring the conversion rate per channel will help you calculate it.
To get accurate data on your top-performing channels, you need campaign tracking, and Google's campaign tracking tool makes it easy to track your online activity back to your website, as long as you use it well and consistently.
Cost per sale/acquisition
When you start using campaign tracking, it's easy for you to determine your cost per sale or acquisition (CPA). However, it can sometimes be confused with cost per conversion, but there is a difference. Conversion is not revenue based like filling out a form whereas acquisition is about a customer spending money on your product service.
An easy way to calculate CPA is to take the average revenue per customer and use it to calculate how much you spend, on average, to acquire a customer.
Benefits of adding a CFO to your ad agency
CFOs lead their finance and accounting team and have a high-level view of the agency's financial health, allowing the CEO and the rest of the C-suite to perform better and focus on their goals and problems. operational. Although the CEO and COO have some background in finance or accounting, they do not have the same level of technical knowledge and experience as the CFO.
Additionally, a CFO can provide:
- Leadership skills that allow them to put together a good finance and accounting team. Understand when the agency needs to add staff in a specific area to meet agency needs.
- Growth experience gained by helping previous employers grow their business. They help find investment opportunities and use agency capital wisely.
- Industry knowledge allows you to pull competitors off the grid and benchmark yourself against your partners. Specialized expertise is key to creating KPIs and metrics for all types of businesses.
- Assessment and management of risks related to regulatory compliance, but also what can result from poor financial management: liquidity, fragile supply chains, poorly hired contractors and poorly implemented technology.
While it may seem like an investment at first, hiring a CFO really only means profits await you.
Not surprisingly, CFO surveys consistently show an evolution in their role. Strategic planning and cooperation in all areas of the company are the success factors. Especially in small and medium agencies. They tend to juggle too many responsibilities that are not always part of their area of expertise, such as B. assessing cybersecurity risks, managing systems and data integration, meeting talent needs, and evaluating the use of new technologies like blockchain and AI .
New insights permeate the role of the CFO. Let's dig into the potentially transformative effect marketing can have on financial effectiveness
Impact of marketing on the role of the CFO in advertising
Like any other discipline, marketing and advertising agencies have their own language, rules, culture, and norms. To contribute constructively, CFOs should strive to understand different media buying platforms and methods by reading marketing channels, attending marketing conferences that deal with finance, and even considering taking marketing courses. This will allow CFOs to better understand the agency's business as a whole and view their marketing departments as partners as they both move toward a solution that provides supply chain transparency and targets spend allocation that prioritizes a high return on investment.
Once they understand the language, CFOs can contribute by leveraging one of their strengths: supervision. The CFO is in a unique position to set new reporting standards, hold teams accountable for financial goals and require transparency in ad spend, and ensure that monitoring is an ongoing process. When both marketing and finance are aware of all of the above, companies can start making plans to fill in the knowledge gaps. You can reassess how marketing budgets can be optimized. Additionally, marketers can customize campaigns in-flight to test different results or achieve better results. Integrating technology to track financial media campaigns can ensure transparency and compliance in media spend and unlock significant value. If CFOs don't have complete visibility, they should try integrating these tools into their technology stack.
The role of the CFO has changed, it has changed significantly in the last 5 years. In the past, the basic job of finance managers was to count, control and report cash flow. While a wide range of job profiles still exist, the traditional spreadsheet administrator position, focused only on historical data sets, has largely died out. This directly impacts the areas that matter most to the CMO: strategy, data, digital marketing, and pricing.
Some of the functions that marketing influences or needs to influence to improve customer service and product development are now under the responsibility of the CFO management team, so a healthy relationship between the two can be invaluable. to effect or accelerate changes in decision making. Although CFOs control many of the levers today, few members within the organization can create as much value as marketers.
More than half of CFO or finance functions are at the forefront of digitization, whether in automation, analytics, robotic processes, or data visualization. The marketing focus is also on future revenue. However, marketers are outward-facing and therefore tend to have better insight into these two areas: the external market as a whole and, crucially, the customer. This understanding of the customer should allow marketers to unify and focus their efforts across the business and finances.
While the relationship between marketing and finance has traditionally been tense, their departments have always been separate: they think and behave very differently. Marketers are driven by creativity and brainstorming, while finance professionals are drawn to numbers and budgets. While both departments have the best interest of the company in mind, they view the business in very different ways.
In the past, there has been a competitive tug-of-war between the two departments, with marketing spending while finance tried to cut costs. Fortunately, this relationship is becoming more symbiotic, with both departments working together to achieve a common goal.
For this relationship to work, the marketing department takes responsibility for managing and developing the company's growth, while the finance department works closely with marketing to monitor company trends and manage the effectiveness of marketing initiatives. marketing. Marketing needs funding now more than ever. From a marketing perspective, there are three ways you can improve your relationship with finance:
communication is key
The perception is that marketing will always ask for more money and finance will always cut the budget without considering the reasons for spending. Regular meetings between the two departments are required to negotiate and discuss expenses and budgets in line with the company's objectives.
share the success
If the finance department sees large expenses without knowing anything about it, they will want to reduce expenses. That is your job. Those in marketing should take the time to explain why the funds are needed and how they will benefit the business. Both departments must be willing to compromise.
As a seller, do some research on how much a project will cost before you send it off to finance. That way, finance doesn't give its numbers to marketing, rather marketing gives its own numbers. This will make the trading process much faster and easier.
All of these changes have created new alignments in the Marketing and Finance roles with significant opportunities for collaboration and alliances. When marketing and finance teams work together to expand a brand or create a different brand for a new target segment, the output might include an assessment of risk, the impact of different pricing structures on cash flow, sales, and cost effectiveness. Similarly, a joint team could evaluate a customer journey analytics with complementary data skills and identify where margin can be improved without sacrificing customer satisfaction.