Now more than ever, the line between financial controller and chief financial officer is blurring. Financial controllers are now seen as trusted advisors and business partners who have the unique expertise to guide a company towards growth. Jeremy Chan finds out how they are playing a more important role in the decision-making process, the skills they need to enhance to provide actionable insights across the company, and how they are keeping their finger on the pulse of a business
Illustrations by Gianfranco Bonadies
Every company needs a financial controller (FC). Traditionally seen as the lead accountant of any financial department, FCs play a key role in ensuring that a company’s ledgers and financial statements reflect the true nature of cash flow in the organization. Their day-to-day puts them in charge of a myriad of duties – from the proper implementation of internal controls, completion of monthly statements, budgeting and forecasting, assisting with tax compliance and evaluation of a company’s financial health. Most FCs report to the chief financial officer (CFO) and work closely with management to make key decisions in running and maintaining the business. In smaller companies, they are viewed as the CFO, while in larger companies, they serve as the bridge between the senior management and finance department.
Over the last decade, the role has seen significant changes, with FCs playing a more fundamental role in their companies. Though key decisions are still made by the CFO, FCs are increasingly sought after in the decision-making process. It is a role that now demands an even more diverse skill set, a broad business perspective and a highly refined expertise to drive change within any company.
This special report looks at the various factors shaping what it means to be a functional and successful FC today. It looks at how FCs working across different industries adapt to rapid – and often disruptive – market changes, and add value to their company. It also highlights the increasing number of risks FCs need to mitigate, the reasons why they are more involved in strategic planning, how FCs can maintain their relevance, and what is needed for them to ultimately become a CFO.
“In a company, an FC is the one who connects well with the numbers. So we are in a unique position to help management make the right business decisions.”
An extra pair of eyes
Anthony Lin had no idea just how engaging yet challenging being an FC would be – until taking on the role. “It is a role that has kept on evolving since day one,” says Lin, Financial Controller, Business Development, of Gammon Construction Limited and a member of the Hong Kong Institute of CPAs. When he joined the company, Lin thought he was going to be taking care of the company’s books and records and performing market research on his own. Instead, he finds himself partnering up with the CFO to complete a variety of tasks. “As an FC, I do find myself making more recommendations in the decision-making process,” he says. “For example, I advise the CFO on how to save on costs, and on what key performance indicators (KPIs) to set up to measure the performance of our team. I’m responsible for explaining the story behind the numbers.”
Lin is among the majority of FCs who have recently experienced a focus shift in their role. According to the 2019 study Understanding The Modern Controller by market researcher Dimensional Research, 90 percent of those surveyed noted that FCs are spending more time on strategic planning than in the past. The study surveyed 306 accounting and finance professionals, including 202 FCs, and found that factors such as fast-evolving technologies, increased scrutiny on financial reporting, compliance requirements, less tolerance for errors and the general need to perform quicker, has upended the role and also added to the pressure of being an FC. Almost a third of those surveyed noted that their role has changed as a result of the CFO taking on a more strategic role, especially within the last decade. Data from a 2013 study, Evolving Role of the Controller, conducted by The Association of Accountants and Financial Professionals in Business, suggests that because CFOs are also taking on more important roles, they consider FCs to be their first port of call.
Lin is in charge of helping the company, a Hong Kong construction and engineering contractor, to expand into new international markets. “I help them to perform the evaluations, financials and calculations behind the scenes,” he says. In a recent task, Lin says he had to advise the CFO on whether to expand their operations into a new location, and if it would bring long-term growth to the company. “Simply presenting information to a CFO doesn’t help at all,” explains Lin. “I needed to identify whether expansion would be a feasible solution by performing extensive market and geographical research. Based on the research I performed on the country’s economics, policies and the numbers, I determined that it wasn’t the best idea to expand into that particular market at that point in time. This was one case I felt I helped the most.”
To save time, a CFO might walk up to ask an FC for advice instead of looking at financial figures, says Lin. “In a company, an FC is the one who connects well with the numbers. So we are in a unique position to help management make the right business decisions. We must be ready,” he says.
Part of the reason why FCs are playing a more important role in the decision-making process is the changing role of the CFO. “CFOs are taking on more responsibilities and often work directly with the chief executive officer (CEO) and also the board to execute business strategies,” Lin adds. “So, because the role of a CFO may have changed, the people working alongside the CFO have had to change too. We don’t just interpret the accounting standards, we need to be critical thinkers and provide a value-added service in order to meet the requirements of the CFO, board and stakeholders.”
Jonathan Chow, CFO of Yuk Wing Group Holdings Limited and an Institute member, agrees. As a CFO of a listed company that manufactures and sells industrial machinery, Chow says he has been busier than usual and needs to rely on the expertise of his FC. But he cautions that instead of merely shouldering the work of a CFO, it is crucial that both the FC and CFO work well together. “It is less about the CFO giving the FC orders, and more about working effectively alongside the FC as a team to resolve issues,” he explains. “In a way, an FC is now a CFO’s extra pair of eyes.”
Chow notes how his FC’s more detailed approach in analysis complements his skill of looking at the bigger picture. “I was recently involved in the assessment of revised financial reporting standard, Hong Kong Financial Reporting Standard 16 Leases,” he says. “The FC at my company focuses on things from a more micro point of view, so she might look through the terms and details of each lease contract and calculate the financial implications. I would then review them on a more macro basis to determine whether it is reasonable or if there’s anything that requires further discussion.”
FCs must have effective communication skills to succeed not just in working with management but across the company. “For example, they need to think about how they are going to explain a change in accounting rules to management or someone without a background in finance or accounting. This is probably one of the most challenging aspects facing FCs right now,” says Chow.
Lin agrees, noting how inadequate soft skills could be the difference between an ineffective FC and one who makes a noticeable impact on the company. “FCs can’t expect everyone to understand terms such as accounts payable and receivable or return on investment. They need to try to speak in each person’s language,” he says, adding how FCs should aim to serve as a bridge between the numbers and the business. “There are a lot of finance professionals – even seniors – who focus too much on the technical aspects of the role such as understanding accounting rules, standards and valuations, but aren’t able to add value to the business simply because they lack the soft skills. If we don’t have those skills, this results in miscommunication and prevents us from providing that value-added service we are capable of.”
Howard Cheung, Financial Controller, International Business, of CK Infrastructure Holdings Limited and an Institute member, says he improved his communication and people skills by taking leadership training courses in his spare time – ones which he would rely on in his career.
As the FC of Hong Kong’s largest publicly listed infrastructure company, Cheung needs to work closely with the business CFO and also with the group FC. As he now frequently uses strong communication skills to work with the CFO in decision-making processes and in drafting proposals alongside the board, Cheung, like many FCs, is seeing his role develop into a mini-CFO. “I attend many board and committee meetings regarding our overseas business, and often have to attend meetings on behalf of my boss as well,” he says. Cheung touches on the importance of brevity during meetings. “I’ve had to learn to be more concise, especially during board meetings which can sometimes stretch up to two hours,” Cheung explains. “There could sometimes be 30 items on the agenda so you have to be careful with your words and be accurate when presenting. The board members might not be as close to the numbers as you think.”
Chow advises how FCs can stay succinct during meetings with the board. “It’s important to have meetings conducted and have your message delivered in the most efficient manner. You don’t want to drag a meeting on for two to three hours with a busy CEO,” he says. “CEOs are more focused on risks. If you have five risks you want to speak on, start by listing them out in point form. Say two of them are more important and you need more time to discuss them – focus on those two points during the meeting and elaborate on those points. If they’re interested, they’ll ask more questions.”
FCs are usually the principle point of contact for external auditors, and are also relied on to communicate closely with tax accountants, bankers and lawyers to provide key information on the company. “As FCs, we are expected to have a firm grasp on the company’s operations, so we work closely with our auditors in helping them to understand our operations and development,” says Vince Law, Financial Controller of Sappi Trading Hong Kong Limited and an Institute member. “Our knowledge of the business and issues that lie in our operations help us to translate this into an analysis for our auditors and our senior management.” Law also frequently communicates with lawyers when it comes to drafting agreements or contracts for their customers. She adds that though FCs aren’t expected to be legal professionals themselves, they need to know how to understand lawyers and raise questions for discussion. “If you have basic legal knowledge too, that’s also helpful,” she says.
Sydney Chan, Financial Controller at Asia Grocery Distribution Limited and an Institute member, frequently liaises with legal advisors. “For example, if we want to sign or terminate certain contracts, including but not limited to sales contracts, rental contracts and employment contracts, I need to determine whether it will trigger any legal consequences,” she says. Her legal knowledge is also relied upon by her management. “The board frequently consults me on subjects such as Listing Rules, contract laws, the Employment Ordinance or matters concerning the new government policies and subsidies for companies. I have to provide advice on these,” she says. “FCs aren’t only involved in issues concerning the numbers anymore. It isn’t common for most companies to have a legal department, so the board sees me as an accountant and their legal advisor.”
FCs also need the soft skills to effectively and accurately explain financial reports to external parties, says Cheung, adding how financial reports are also closely monitored by members of the company’s management. “In addition to looking at profit and loss, the management focuses on the cash flow and balance sheet to understand the company’s capital management, liquidity, and its commitments and performance trends and benchmarking with industry peers.” As a result, he urges FCs to make sure financial reports benefit both management and external parties. “As FCs, we need to ensure financial reports are prepared and in compliance with accounting standards and regulatory requirements. We should also interpret implications to the business and put forward our opinions on how to drive business and to impact our financial results,” he says.
With FCs involved in more key decisions, they need to rely on their skills to develop financial strategies for a company and reduce risks, as knowledge in this area enables FCs to help companies plan for the future. By analysing a company’s past figures, they are able to perform financial projections, allowing them to adjust budgets accordingly and recommend suitable changes to the management team. These changes could ensure that a company’s operations keep running, especially amid challenging business or market conditions. “To be an FC, knowledge in strategic finance is an essential element,” says Lin at Gammon. As an FC working in the construction industry, he oversees thousands of employees working on construction sites locally and internationally. One challenge is making sure each employee is compensated on time. “In my company, knowledge and experience in capital planning and cash flow management is key.” Inadequate capital planning, Lin notes, can lead to liquidity risks, and as a result, reputational risks. “For example, if we aren’t able to pay our employees or staff, the company will make headline news, and not in a good way,” he says.
Betty Wong, Financial Controller at Blue Cross (Asia Pacific) Insurance Limited and an Institute member, works closely with the CFO in treasury management and frequently makes recommendations for investments. Wong notes how she assisted the CFO in arranging collateralized repo loans with investment banks, or repos, to enhance investment yields for the insurance company. Repos are secured loans in which one party sells tradable financial assets, or securities, to another party and agrees to repurchase those securities later, with the securities serving as collateral. “The insurance company was looking into investment opportunities and the CFO recommended this yield enhancement arrangement,” Wong says. “This was a very challenging initiative for me at the time. I had to read through a large amount of documents and arrange the custodian bank for investment execution on a tight timeline. I was in charge of the investment compliance, initiation with the fund manager in addition to the accounting. Ultimately, we achieved this investment objective within a low interest rate environment.”
Chan at Asia Grocery Distribution Limited adds how she pinpointed alternative forms of revenue to help her company, which was affected by the COVID-19 pandemic. The listed company Chan works for distributes food and kitchen products to restaurants, hotels, private clubs and wholesalers. “Our main business lies in the distribution of grocery and food products, and the demand for those products has decreased as a result of bad business of our customers or even business closures,” she says.
But instead of waiting for the situation to improve, Chan thought of new ways. “By projecting our gross profit the following month, I performed extra budgeting and recommended ways to cut costs,” she explains. Chan suggested the company postpone its expansion plans and also worked closely with the operations team to shift their focus to selling a now popular product – face masks. “During the past few months, we’ve turned to selling face masks and cleaning products to our customers. We’ve sold face masks before, but there wasn’t much emphasis up until now,” she says.
Law at Sappi Trading joined her company as an accountant in late 2000, becoming a local FC in 2002 and then taking on her current role in 2013. She is responsible for financial activities such as tax planning, group restructuring and the financial and annual reporting of her group, which is headquartered in Hong Kong and has offices in the United States, Latin America, Australia and Africa. Law works closely with the CFO in business development and heavily relies on her tax expertise to help the company’s growth. “FCs are playing an even bigger part in business development,” she says. “We are no longer just in charge of tasks such as financial reporting. We are more actively involved in the strategic and tax planning,” she says.
She explains how knowledge in tax, especially across different jurisdictions, helps FCs like herself to provide valuable input. She uses her knowledge to make recommendations in working with the sales managers, the CFO, or members of the executive committee. “I also have to make sure we meet all statutory and commercial requirements. This is my main area of responsibility,” Law says.
FCs are increasingly involved in helping companies to minimize risks – a task traditionally taken on by the CFO. In fact, 64 percent of CFOs indicate that their company’s risk management team reports directly to them, according to 2017 study The Role of the CFO by McKinsey & Company. With FCs working closer or even directly with CFOs, they are relied upon to manage various risks such as credit, operational, liquidity and reputational risks. Nowadays, FCs also face the added pressure of mitigating cybersecurity risks. “Because FCs are part of the finance team, we are in charge of holding sensitive financial information,” Lin at Gammon explains. “If this information is disclosed or leaked to an outside party, we are most liable. The senior management will come looking for us first.”
To prevent this from happening, Lin says FCs need to strategize closely with their company’s risk management team or IT department. For example, Lin has meetings with the IT department every two weeks to discuss informational security risks to make sure their data is properly managed and protected. “FCs need to challenge the IT department to determine what to upload, what not to upload, and which cloud solution is safe to adopt.”
Cheung at CK Infrastructure agrees that cyber risks such as phishing e-mails are posing a challenge for modern-day FCs. “Now, we have to worry about cyber fraud, email leaks and hacks, as well as enterprise resource planning systems being breached,” he says. Cheung recalls the repercussions of having one email leak while working in his previous role. “I remember sending an important email to the CEO at the time. In just one day, due to an issue in our systems, crucial information from that email leaked into the media and even into the market. It’s was a huge issue for our headquarters to manage.”
Cheung admits this issue could have been avoided had there been better internal controls put in place. “This is something FCs need to watch out for,” he adds. “Usually, the CFOs are on top of all these risks, but now, they rely on the FC for advice on risk management. This is what I’m seeing more of.” Cheung also regularly meets with the business risk committees to discuss preventative measures. “We have recently been discussing three emerging risks: cyber risks, environmental, health and safety risks (EHS) and regulatory risks,” he says. “We identify how the risks will affect our business and make sure we have a mitigation plan in place.”
With more responsibilities to take on, Chow at Yuk Wing Group says FCs are encouraged to speak up and voice potential business or financial concerns to the CFO or management. “Everyone’s busy, especially management, so there’s a risk of people overlooking important or crucial information,” he says.
His FC previously brought concerns to light, which they were able to resolve together. “She spotted issues regarding a few financial statements that even I wasn’t aware of at the time.” By always staying alert and being vocal, Chow says FCs could help a company avoid potential setbacks. “The FC could help the company monitor risks by being mindful when they’re at work and when they’re off work,” he explains. “Say, if they come across something in the news after work that might affect the company, they should voice it out, as it might affect the company. If it does – but they didn’t voice it out to management – that could be worse.”
Cheung adds why minimizing EHS risks are of paramount importance to companies, especially in light of the coronavirus. “We always say safety first. For instance, now if there’s a single COVID-19 infection, business needs to stop for at least 14 days. So this is quite a critical risk that we discuss during meetings,” he says. “Without safety, a business cannot thrive.”
He says FCs should work together with their operations team to discuss mitigation plans for every potential risk. “We also have an oil business in Canada, and the biggest risk of this business is oil spills,” he says, adding how he meets with the operations team to discuss the risks of pipeline defects. Cheung says spotting and addressing a risk like this beforehand is crucial, as it prevents environmental threats and saves on future costs. “Even though insurance partially covers spills, this incurs very high insurance premiums on the company. This is one example of why we need risk action plans.”
From FC to CFO
The CFO role is seen as a natural progression from FC. To make this happen, Chow at Yuk Wing Group says FCs must be all-round professionals who also have knowledge outside of their expertise. “Being an FC nowadays isn’t just about looking at numbers and financial data anymore,” he explains. “They have to be ready to take on new technologies and mindful about new developments.” He advises FCs to continue building their own business network by participating in seminars and events organized by the Institute, as well as ones by other associations to gain knowledge from other industries. “This will allow you to meet more people, learn from them and keep yourself up-to-date on any recent developments within and outside the profession,” he says. “You never know when the CEO or CFO will come up to you and ask for your opinion on something completely unrelated to your knowledge in finance and accounting. You have to know how to respond.”
But as Law at Sappi Trading notes, younger CPAs should aim to first become an all-round and successful FC. She advises them to dedicate time to their company in order to be familiar with its operations and business. “You have to make use of every opportunity to understand the company’s groundwork, development and also find time to learn by speaking with senior management,” she says. “You won’t learn everything in a year, but once you have this knowledge, you’ll have a better chance of becoming an FC.”
Lin at Gammon emphasizes having an open mind and getting into the habit of self-learning. “The role of an FC is ever-changing – IT knowledge is becoming really important, so try to gain new knowledge in new tools that can facilitate the business decision-making process,” he says. “We have to understand the business and the story behind the numbers, so aim to work closely with the business and stay as open-minded and flexible as possible.”
In addition to a strong foundation of technical knowledge in accounting, tax, treasury and financial management, Cheung at CK Infrastucture adds that future FCs must have the right business acumen. “They have to understand how factors such as economic environment, competition and the development of technology will impact financial results,” he says, adding that a solid understanding of business processes will enable FCs to identify and resolve issues within a company. He adds that soft skills must also be polished. “Skills in people management, teamwork, communication and planning will be crucial to your success in the role.”
The future role
The role of an FC is set to diversify even further in the future. With increasing expectations from the individuals and companies they work for, coupled with the need to thrive in dynamic business environments and new technological frontiers, FCs need to adapt and upskill in order to continue adding value to business.
Cheung notes how FCs can expect to take on more CFO-related tasks, as the role of a CFO will also evolve with time. “We’ll always be the CFO’s right hand man,” he says. “I expect the CFO’s role to change too. The board and executive teams will demand more from the CFOs in the future, which will, in turn, add pressure to the role of an FC. I imagine I’ll be involved in more board meetings to engage in decision-making in addition to managing the day-to-day finance functions.”
He adds how technology will be playing a bigger role in companies too, and how FCs should be equipped with those skills to speed up their workflows. “Tech will change our role,” he says. “FCs also work long hours, so we’ll be relying more on automation and artificial intelligence to increase productivity.”
Lin agrees, noting how FCs will increasingly be the ones to utilize their knowledge of the business and numbers to lead technological changes. “FCs should go from being accountants to those who expedite and improve overall business processes using the latest technology,” Lin says, suggesting how data gained from these tools could then be turned into actionable insights for FCs to aid in developing a company’s business performance. “This could be done with automation and data visualization tools, not just in the finance department, but across all company departments. We should be the ones to push forward these initiatives to improve a business.”
Though the added responsibilities have made the role more demanding, most FCs note it is a change they embrace. “On the other side of the coin, the more challenging it is – and the more pressure we go through – the more motivated we are to learn,” adds Lin. “FCs should be ambitious and look forward to these challenges. With more challenges come more exposure and opportunities to learn and ultimately climb the corporate ladder.”
Cheung agrees the role is much more stressful nowadays, but says with enough passion, one is able to excel as an FC. “You definitely have to step out of your comfort zone. Try to manage your time when taking on additional tasks,” he says.
Wong at Blue Cross hopes FCs play an even larger role in the decision-making process going forward. “I enjoy being able to provide professional accounting advice and helping in the decision-making process of the company, and seeing improvements in profit margins of a particular business line,” she says. “This is what’s most satisfying.”
There is a growing need for FCs to have software competency in order to innovate and improve workflows within companies. Understanding The Modern Controller, a 2019 study by market researcher Dimensional Research, found that 78 percent of FCs have been dedicating more time to IT management within the last 10 years. Almost all respondents from the study noted how technology such as enterprise resource planning (ERP), cloud accounting and financial reporting software has assisted them in the decision-making process, with 91 percent citing how it increased the quality of financial statements and freed up time to take on other tasks.
With more data to work with, technologies such as robotic process automation (RPA) and dashboard-based software can help companies to save time, streamline processes and track progress in real time. Anthony Lin, Financial Controller, Business Development, of Gammon Construction Limited, notes how FCs can also do their part in introducing these technologies to the business. “FCs are now working in an ever-changing environment,” he says. “Technology around them is changing, so they have to understand it, be on top of it, and know how to use it to add value to a company.”
Lin has used his IT expertise to introduce new software to the company and automate processes. Having studied computer science in university, his knowledge of software and IT processes led him to make changes first within the finance department, such as by implementing RPA tools into their systems. “Since then, we’ve been able to automate more tedious processes within the finance department such as invoice matching and reconciliations. We also use optical character recognition tools,” he says. He also introduced data visualization software Tableau, a dashboard-based software capable of analysing data and reports. “Data within the software is neatly illustrated in graphs and charts.” Lin says the software helps to neatly illustrate data in graphs and charts, adding how the colourful charts have proven useful in presenting data during meetings.
The tool also helps Lin in performing financial reporting. “Financial reporting measures the heartbeat of the entire operation,” he says. In preparing financial statements, Lin says the management tends to look at information such as cash flow, profit performance, trends over different periods and whether there are signs of financial distress. He makes use of the software to highlight key information to board members. “We can use those key performance indicators (KPIs) and create an individual dashboard for different teams and divisions,” he says. “If people want to drill down to details, they can click on each of these figures and trace the source.”
Beyond the finance department, Lin has also assisted other departments within the company in implementing and utilizing this tool. “Now other departments are using it to look at KPIs for factors such as safety measures, building progress and cost improvement initiatives.”
A day in the life
Many FCs would agree that their day is varied and that no two days are the same. Anthony Lin, Financial Controller at Gammon Construction Limited, say his mornings may begin with the preparation of management reports and meetings with senior management of the company. “In the afternoons, I might discuss strategies with business units and prepare more papers from senior management and shareholders,” Lin says.
Sydney Chan, Financial Controller at Asia Grocery Distribution Limited, prefers to start her days by checking her emails. “I need to see whether there are any issues to address from external parties such as auditors,” she says. The rest of her day might be spent consolidating accounts and working on quarterly reports as part of the Listing Rules and having meetings with various teams. “Each day consists of two meetings – one with the sales and operations team to discuss business development plans and one with the board. I’m the one in charge of checking our directors’ availability for each meeting.”
A typical day for Vince Law, Divisional Financial Controller of Sappi Trading Hong Kong Limited, revolves around communicating with individuals across the world. “We have a lot of meetings. We work in a global environment, so normally in the afternoon I’ll have online meetings with different regions of the company. For example, I can only speak with the European and South African offices in the afternoon, so I dedicate my afternoons to communicating with the different regions of our group,” she explains. “During the evenings, I communicate closely with our team in Latin America.”
Howard Cheung, Financial Controller, International Business, of CK Infrastructure Holdings Limited starts his day reviewing his to-do list. “I organize short 15-minutes calls or meetings with my team to review their priorities and resolve any issues,” he says. Cheung also regularly attends company meetings with CFOs and different functional teams. “Subject to monthly reporting timelines, I review financial reports, board and committee papers and prepare for reports and analysis to support decisions,” he says. Cheung is a busy FC, and though he occasionally finds himself popping into the office on the weekends to meet tight reporting deadlines, he says FCs should aim to strike a work-life balance. “After office hours, I try to avoid bringing work back home.”