Operational Finance: Bridging the Operational CFO and Strategic CFO Gap
Josh Leider - Head of Growth
September 20, 2024
Operational finance is finance that focuses primarily on the daily financial activities of a business, requiring a thorough understanding of financial statements to properly weigh financial performance and help leadership determine where adjustments or improvements can be made.
A strategic CFO, conversely, plays more of an advisory role for an organization, helping to guide and advise any company on a long-term strategy and make decisions based on financial data.
While Operational CFOs and Strategic CFOs play different roles within an organization, both have to work together to provide optimum value. Better yet, blending both roles into one and working with a CFO who can balance both operational and strategic duties can serve as an advantage for any company, from a startup to an established firm.
Read on to learn more about operational finance and how Graphite Financial can help your company achieve operational excellence.
Understanding Operational Finance
Operational finance is the backbone of any company’s financial health and management, focusing on day-to-day activities to support strategic goals. Good operational finance can help a company improve efficiency, maximize return on investment, identify and resolve any inefficiencies, and proactively stay viable during market downturns.
Many companies are now working with CFOs that blend operational and strategic financial roles as a means of positioning their businesses well into the future.
The Role of an Operational CFO
A good Operational CFO needs to have a thorough understanding of a company’s finances. Duties include more than just managing financial statements, but analyzing them to draw conclusions from them and pass along actionable insight. Other duties may consist of understanding financial and business strategy, modeling decisions related to financial operations, determining and measuring key performance indicators (KPIs), and evaluating ways to increase performance.
An Operational CFO’s main focus is on process and metrics, and ensuring data is accurate and timely to support the overall goals of the business.
Operational Finance vs. Strategic Finance
When considering an operational or strategic CFO, there are some key differences to understand. Generally speaking, operational finance focuses on the day-to-day activities of a business, while strategic finance is forward-thinking and used to help determine opportunities for future growth. Both types of finance are important to have in today’s competitive business landscape. However, they do differ in notable ways:
Short-Term vs. Long-Term Focus
Operational finance focuses on day-to-day operations, while strategic finance has a long-term focus. While timeframes for operational finance are typically daily, strategic finance can look at your company’s financial performance weeks, months and perhaps even years ahead into your company’s future.
Numbers vs. Big-Picture Thinking
Operational finance focuses on KPIs and detailed data, while strategic finance uses financial data to generate a financial strategy that looks at the bigger overall picture. While operational finance consists of budgeting, determining financial performance and optimizing financial systems, strategic finance uses metrics to show how a business can scale over time. Strategic financial professionals also often work with investors to secure funding.
Benefits of Operational Finance Leadership
There are many benefits of working with a CFO who excels in operational finance leadership. These include:
- Improved operational efficiency: This can help companies improve time, money and effort spent.
- Enhanced capital management: Cash is king, and the ability to forecast cash flow can provide valuable insights into proper financial operations management and how the business operates.
- Reduced spending: If excess spending is occurring, an Operational CFO can often identify it and eliminate it, thereby improving the bottom line and reducing financial risks.
- Drive growth: By helping a business understand its financial standing and provide a comprehensive overview of current finances, Operational CFOs can deliver actionable insight and help leadership make informed decisions about the future of the company.
Challenges and Limitations of Operational Finance
While operational finance has its benefits, it can also have its disadvantages.
Lack of Future-Focused Planning
Since operational finance largely lives in the here and now and focuses on day-to-day matters, there are limitations in the ability to prepare or foresee long-term growth.
Adapting to Market Changes
One of the biggest challenges of operational finance is the ability to foresee and adapt to market changes or changing consumer preferences. This is where strategic finance becomes so important, as they must use the data and metrics to guide long-term strategy.
Merging Operational and Strategic Finance for Modern CFOs
An ideal scenario for any business is to work with a CFO who is experienced in both operational and strategic finance – someone who can manage the day-to-day needs of the business while also playing an advisory role on strategy.
One of the best ways to merge operational and strategic finance is to leverage technology accordingly. By using the right programs and software, data collection can be streamlined and reporting enhanced to support data-driven decision-making.
How Graphite Can Support Your Operational Finance Needs
As experts in all things financial management and with experience in a variety of markets, Graphite is ready to support your merger of operational and strategic finance for your business so that your day-to-day financials are just as robust as your strategic planning and future outlook. As experienced financial professionals, we work to become a true extension of your business to ensure your company is meeting its short and long-term goals and providing value-added service along the way.
Streamlining Operations
Graphite’s services can help your company streamline its operations by providing actionable insight, identifying growth opportunities and scaling up with your business as it grows.
Achieving Strategic Goals
Managing a company’s financial challenges isn’t an easy task. But with our army of experienced and qualified professionals, Graphite is poised to tackle even your most complex challenges. No task is too big or too small for Graphite.
Navigating the Intersection of Operational and Strategic Finance
Operational finance continues to evolve in today’s modern business environment, underscoring the need to adapt and continuously learn. One byproduct of this evolution is the need to better integrate operational and strategic finance. While operational and strategic finance are technically separate functions, the real value to a company is when they can be combined into one. The management of day-to-day functions combined with advising on strategy can be a competitive advantage for any company. Graphite can help.
Partner with Graphite for Operational Excellence
For more information on the benefits of integrating operational and strategic finance and how Graphite’s expertise can optimize each of these core financial strategies to the benefit of your business, contact us today. As experienced accounting professionals, we do more than just partner with our clients, but work to become a true extension of their business and meet any of their unique needs.
Book a consultation with Graphite today to learn more about how we can help take your company’s financial reporting and operations to the next level. We offer flexible pricing plans and offer special offers for startups and companies in growth mode. Contact us today to learn more.
FAQs
What is the difference between an Operational CFO and a Strategic CFO?
Operational CFOs focus on the day-to-day processes and metrics like budgeting, financial performance, and optimizing financial systems for efficiency. Strategic CFOs focus more on the big picture and serve more of an advisory role, using financial data to tell a story that aligns with the company’s vision and long-term goals.
Why is it important to integrate operational and strategic finance?
Operational finance and strategic finance play different roles within an organization, but both have to work together to provide optimum value. Blending both roles into one and working with a CFO who can balance both operational and strategic duties can serve as an advantage for any company.
How can an Operational CFO improve company performance?
An Operational CFO can help improve company performance by using key metrics and other data to improve efficiency, reduce costs and drive sustainable business growth.
What are the key responsibilities of an Operational CFO?
Operational finance focuses on day-to-day operations. Duties include more than just managing financial statements, but analyzing them to draw conclusions and pass along actionable insight. Other duties may consist of understanding financial and business strategy, modeling operational decisions, determining and measuring KPIs, and evaluating ways to increase performance.
How does operational finance impact long-term business growth?
Operational finance helps set the table for strategy, while strategic finance uses the data from operations to make decisions about how to move the company forward. That’s why operational finance and strategic finance are so intertwined. You can’t have a strategy without the financial data and metrics that are determined by operational finance. Operational finance can help set and build the foundation of growth.
What challenges do CFOs face when blending operational and strategic finance?
There are several challenges that CFOs must navigate when blending operational and strategic finance. A lack of future-focused planning is one of them, as many companies are not adequately prepared for future growth. Another is potential blind spots in reacting to changing market conditions. Finally, there may also be a misunderstanding of the CFO role in the context of its duties.
What tools and technologies can help CFOs effectively merge operational and strategic finance?
The right technology can play a significant role in this merger of responsibilities. By using the right programs and software, data collection can be streamlined and reporting enhanced to support data-driven decision-making.