360° Approach to Libor Transition

Scrubbed

Scrubbed

360° Approach to Libor Transition
What you need to know:
  • London Interbank Offered Rate (LIBOR) ends on December 31, 2021.
  • ASU 2020-04 – Reference Rate Reform (Topic 848) provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting. The ASU is effective immediately and all entities would be able to apply it until December 31, 2022.
  • Cessation of LIBOR would expose businesses to various risks such as liquidity risk, technology risk, operational risk, and financial reporting and compliance risk.
  • The U.S. Treasury Department and Internal Revenue Service (IRS) released the Proposed Interbank Offered Rate (IBOR) Regulations in October 2019 to address the tax treatment of alterations made to instruments to replace an IBOR-based rate with an alternative rate.

LIBOR is currently produced in 7 tenors (overnight/spot next, one week, one month, two months, three months, six months, and 12 months) across 5 currencies. In the US and global markets, LIBOR is widely used as a reference interest rate in commercial agreements and a broad range of financial instruments. However, in 2017, the U.K. Financial Conduct Authority announced that all currency and term variants of LIBOR (IBORs) are expected to cease after the end of 2021. This decision was made due to the increasing absence of active underlying markets and the scarcity of term unsecured deposit transactions which led to serious questions about the future sustainability of the LIBOR benchmarks.

FASB proposed optional expedients and exceptions to the guidance in U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform.

In March 2020, the Financial accounting Standards Board (FASB) released ASU No. 2020-04 in response to the cessation of the LIBOR. Several issues and challenges that are likely to arise due to this were raised by stakeholders:

Voluminous contracts and other arrangements will need to be modified to replace reference rates.Application of existing accounting standards to contracts and other arrangements could be costly and burdensome. 

The inability to apply hedge accounting because of reference rate reform could result in financial reporting outcomes that do not reflect entities’ intended hedging strategies. 

Key Considerations Include:
Affected ContractOptional Expedients and ExceptionsCriteria
 Contract Modifications —Allows an entity to account for and present the modified contract as a continuation of the contract that existed before the modification rather than a derecognition or extinguishment—The contract references LIBOR or another reference interest rate that is expected to be discontinued due to reference rate reform.

—Consider embedded features to be clearly and closely related to the host contract without reassessment.

—Any contemporaneous changes to other contract terms (i.e., those that do not directly replace or have the potential to replace a reference rate) that change, or have the potential to change, the amount and timing of contractual cash flows must be related to the replacement of the reference rate. 
 Hedging AccountingeCritical terms of hedging relationships

—Provide optional expedients to enable entities to change critical terms and continue to apply hedge accounting


Fair value hedges

—Allows an entity to change the designated benchmark interest rate documented at hedge inception to a different eligible benchmark interest rate under Subtopic 815-20

—An entity may disregard certain qualifying conditions for the shortcut method that are not met because of reference rate reform and may continue to disregard those qualifying conditions for the remainder of the fair value hedging relationship (including for the remainder of hedging relationships that end after December 31, 2022).

Cash flow hedges

—Allows an entity to assert that it remains probable that the hedged forecasted transaction will occur.

—Continue hedge accounting upon a change in the hedged risk as long as the hedge is still highly effective

—Allows an entity may revert to hedge accounting requirements in Subtopics 815-20 and 815-30 without de-designating the hedging relationship		Critical terms of hedging relationships 

—Perform some effectiveness assessments in ways that disregard certain potential sources of ineffectiveness.


Fair value hedges

—The hedge is expected to remain highly effective

—The optional expedients for fair value hedging relationships may be elected on an individual hedging relationship basis


Cash flow hedges

—An entity may continue hedge accounting for a cash flow hedge for which the hedged interest rate risk changes if either the hedge is highly effective under an assessment method in Subtopics 815-20 and 815-30 or an optional expedient method in this Update is elected.

—An entity should disregard the potential change in the designated hedged interest rate risk that may occur because of reference rate reform when the entity assesses whether the hedged forecasted transaction is probable in accordance with the requirements of Topic 815.
 Debt securities classified as Held-to maturity —An entity may make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. 

Contract modifications:  The following decision tree summarizes whether a contract modification is eligible to apply for the optional relief in ASC 848-20-55-1. 

ContractModificationsASU No. 2020-04 also provides optional expedients for applying the requirements of certain topics that require analysis of contract modification:
  • Modifications of contracts within the scope of Topics 310, Receivables and Topic 470, Debt should be accounted for by prospectively adjusting the effective interest rate 
  • Modifications of contracts within the scope of Topics 840, Leases and Topic 842, Leases should be accounted for as a continuation of the existing contracts with no reassessments of the lease classification and the discount rate (for example, the incremental borrowing rate) or remeasurements of lease payments that otherwise would be required under those Topics for modifications not accounted for as separate contracts; and 
  • Modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative that is clearly and closely related to the economic characteristics and risks of the host contract under Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives.


Changes that are related to the replacement of a reference rate 


To be eligible for the optional expedients in Subtopic 848-20, modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows must be related to the replacement of a reference rate. Changes made to effect the transition for reference rate reform are considered related to replacement of the reference rate and, therefore, are in the scope of the ASU. Changes to terms that are the result of new business decisions separate from the transition for reference rate reform are not considered related and, therefore, are not in scope. The ASU includes examples of changes that are related and unrelated to the replacement of the reference rate.

Tax Implications of Elimination of LIBOR


A.   Modification of Terms of Debt Instruments or Non-Debt Contracts.
Under IRS proposed regulations, if the terms of a debt instrument or non-debt contract are modified to replace, or to provide a fallback to, a LIBOR-referencing rate and the modification does not change the fair market value, there is no gain or loss under the recognition of gain or loss rules. These rules apply regardless of whether the modification occurs by an amendment to the terms of the instrument or agreement or by replacing the existing debt instrument or contract with a new one.
B.   Qualified Rate
The proposed regulations also provide the rules for determining whether a rate is a qualified rate. The rules provide that the fair market value of a debt instrument or derivative may be determined by any reasonable valuation method, as long as that reasonable valuation method is applied consistently and takes into account any one-time payment made in lieu of a spread adjustment.
The debt instrument or non-debt contract are considered equivalent in value after the modification if:
  • at the time of the modification the historic average of the LIBOR-referencing rate is within 25 basis points of the historic average of the rate that replaces it; or
  • the parties to the debt instrument or non-debt contract are not related and, through bona fide, arm’s length negotiations, determine that the fair market value of modified instrument or contract is substantially equivalent to the fair market value prior to the modification.
C.   Transactions and Hedges
The proposed regulations clarify that a taxpayer is permitted to alter the terms of a debt instrument or modify one or more of the other components of an integrated or hedged transaction to replace a rate referencing an IBOR with a qualified rate without affecting the tax treatment of either the underlying transaction or the hedge.
D.   One-Time Payment
Under the proposed regulations, the source and character of a one-time payment that is made in connection with a modification described above will be the same as the source and character that would otherwise apply to a payment made by a payor with respect to the debt instrument or non-debt contract that is altered or modified.
E.    Grandfathered Agreements
Because proposed regulations prevent debt instruments and non-debt contracts from being treated as reissued following a deemed exchange, the debt instrument or contract would not lose its grandfathered status as a result of any modifications made in connection with the elimination of LIBOR.
F.    Original Issue Discount (OID) and Qualified Floating Rate
Proposed regulations stipulate three special rules for determining the amount and accrual of OID in the case of a variable rate debt instrument that provides both for interest at a LIBOR-referencing qualified floating rate and for a fallback rate that is triggered when the LIBOR becomes unavailable or unreliable.
G.   Real Estate Mortgage Investment Conduit (REMIC)
Proposed regulations permit an interest in a REMIC to retain its status as a regular interest despite certain alterations and contingencies.
H.   Interest in Foreign Corporations
The proposed regulations amend the election to allow a foreign corporation that is a bank to compute interest expense attributable to excess U.S.-connected liabilities using a yearly average Secured Overnight Financing Rate (SOFR) in addition to the 30-day LIBOR.

Applicability Date
This section applies to an alteration of the terms of a debt instrument or a modification of the terms of a non-debt contract that occurs on or after the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register. Taxpayers and their related parties may apply this section to an alteration of the terms of a debt instrument or a modification of the terms of a non-debt contract that occurs before the date of publication of a Treasury decision adopting these rules as final regulations in the Federal Register, provided that the taxpayers and their related parties consistently apply the rules of this section before that date.

Risks Related to the Elimination of LIBOR

Contract Risk:
  • Risk that contracts which has stipulations dependent in LIBOR will be affected causing inconsistencies and disruption in the execution of it.
  • To mitigate the risk, make a list of all the contracts that may be affected. However, for some it will be challenging if there is no repository of these contracts.
  • Negotiate terms with counterparties for those stipulations relating to LIBOR, although some counterparties may be unknown or difficult to reach.


Liquidity Risk:
  • Risk that LIBOR cessation will make it more difficult for existing products to be traded, with more costs and uncertainties.
  • Because of this, companies have to reassess their investment and financing strategies as soon as possible in order to prepare for the cessation of LIBOR.


Basis Risk and Value Transfer
  • Risk that differences in the timing and terms for similar contracts will result in gaps and inconsistencies in the contracts and value transfer
  • Since there is a shift of basis for LIBOR-dependent contracts, the difference will cause value-transfer because of timing concerns, necessity for practical expedients, and differing term structures.
  • To mitigate basis risk, the gaps may be hedged to additional derivatives.


Reputational Risks
  • There is a risk that improper transition plans will result to besmirched reputation to important stakeholders.
  • There should be clear communication with investors, creditors, customers, regulators and other counterparties of the extent of exposure, as well as transition plans that include controls as well as disclosures.


Operational and Technology Risk
  • Risk that modification to current operating models and systems that are heavily reliant on LIBOR will result to inaccurate inconsistent outputs
  • Determine all items that are affected by the cessation, including inventory, IT systems both internal and external, and other data and plan for the capabilities existing and needed for the transition, including control changes.


Financial Reporting and Tax Risk
  • Risk of incomplete and inaccurate reporting to accounting bodies and tax authorities.
  • Certain financial reporting and tax reliefs are being proposed by regulators. Therefore, there is a need to study on how these reliefs can be infused in the transition plans.
  • Certain financial instruments with dependence in LIBOR may need to reassess the fair value considerations due to changes in the observability of LIBOR transactions.
  • Disclosures are necessary for all relevant items in the transition plan that have significant accounting impact to policies currently in place. Refer to the discussion above for more details on the accounting and Tax implications of LIBOR cessation.


We’d love to help.

To ensure that all factors are considered in the pursuit of reliable financial reporting, effective and efficient operations, and compliance with law and regulations, our services can be scaled to accommodate your business needs, especially in considering the impacts of LIBOR Transition. Our Corporate Finance Advisory services, together with our Technical accounting Group, provide a thorough of factors outside the normal course of business, with a strong emphasis on risk and SOX compliance.

E-mail us at [email protected] for full consultancy assessment.

About the Authors

To have a thorough discussion on the matter, please contact:

Jezaniah Castro has extensive experience in preparation and filing of federal, state and local income tax returns for businesses and high net-worth individuals and other business-related filings, including sales and use tax in compliance with applicable US federal and state tax laws and regulations. She has also dealt with IRS and State tax notices, tax legislation, or audit workpapers in advocating taxpayer’s position to the taxing authorities.

JM Miclat has years of Advisory experience with EY Philippines mainly focused on leading SOX 404 compliance and top-risk audit engagements from one of the largest Fast Moving Consumer Goods (FMCG) company. He has extensive knowledge in applying Topics 606 and 842 of US GAAP to business processes. He ranked 9th in the CPA Board Examinations (PH) in 2016.

Disclaimer

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. It is not intended to be relied upon as accounting, tax, or other professional service. Please refer to your advisors for specific advice. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

Related Content

Blogs

How to Scale a Fractional CFO Practice: Infrastructure, AI, and Execution

How to Scale a Fractional CFO Practice: Infrastructure, AI, and Execution

At A GlanceFractional CFOs scale by separating strategy from daily execution. At the CFO Leadership Conference in Boston, panelists outlined the model: a three-part team structure, AI tools for repetitive analysis, and strict scope boundaries. The common thread is that strategic capacity depends on reliable accounting operations underneath it.Fractional CFOs operate in a fundamentally different model, balancing multiple clients and shifting priorities without the benefit of deep organizational embedding. You are hired to provide altitude, clarity, and rapid impact. But when a client lacks a mature finance operation, that executive focus is quickly consumed by operational cleanup.This exact tension took center stage at the CFO Leadership Conference in Boston. During our morning panel discussion, The Multi-Business Executive: How Fractional CFOs Scale Leadership Across Clients, moderated by Scrubbed’s Accounting Director Arian David, Triangle Coffee founder and fractional CFO Ottavio Siani and Scrubbed’s CFO Aira Pineda detailed how fractional CFOs build capacity to avoid this operational trap. They mapped out the real-world infrastructure and AI practices required to support multiple fast-moving client environments.Here are the operational realities shared in the room.The Infrastructure Blueprint for Scaling a Fractional CFO PracticeA primary challenge for scaling organizations is the gap between strategic desires and foundational accuracy. Volume increases faster than structure, and founders frequently bottleneck their own operations by micromanaging the finance function.As Aira shared with the room, stepping into a fractional role often means untangling founder-led accounting and directly telling the CEO, "you're not supposed to do this". Once leaders step back from the daily execution, "suddenly they have time" to actually focus on growing their business.Successful practitioners build a deliberate team architecture to handle the volume. To build a sustainable infrastructure, Ottavio explained that a fractional CFO setup requires three key elements:A fractional CFO to provide strategic direction.A trusted internal employee to manage sensitive operational context.An external accounting firm to run the daily numbers.This structure prevents the CFO from becoming the operational bottleneck.Read: Are Fractional CFOs the Future for Growing Companies?Navigating Risk in Founder-Led EnvironmentsThe most pointed friction in a fractional role often comes from enforcing structure. During the session, an audience member challenged the panel on how to balance strict risk controls with the commercial reality of working for independent founders who operate as the "gods of their own businesses".Aira addressed this tension directly, clarifying that operational controls and commercial growth do not have to collide. "I don't think it's contradictory, to be honest. I think it's complementary," she explained. "I think you make better decisions as a CFO, having kind of just at the back of your mind that risk mindset."Taking calculated risks is necessary to create shareholder value. However, a fractional CFO can only support that aggressive growth when the foundational accounting operations are secure enough to absorb the complexity.Building Fractional CFO Capacity with AI ToolsTechnology accelerates this architecture when carefully managed. Ottavio shared how he uses Claude to generate monthly financial statement analyses based on tested templates, reducing a repetitive task to minutes. Arian detailed using Claude to abstract private equity contracts, while Aira highlighted using NotebookLM to summarize 50-page forensic documents.However, systems create results, but human professionals must validate them. Aira illustrated the danger of false confidence by testing a complex revenue recognition issue across Claude, Gemini, and ChatGPT. Although all three models provided the exact same answer, they failed the final human review when "A big CPA firm comes and says, no, that's not the accounting treatment."Designing Aligned Execution and Preventing Scope CreepGrowth adds complexity. Strong execution ensures that complexity remains manageable. When fractional leaders possess a reliable accounting layer, closes become predictable and strategic conversations gain traction.Without this layer, scope creep inevitably takes over. "I think a challenge with being a fractional CFO is having to limit your scope, right?" Ottavio noted. "I typically dedicate like a day a week, and I need to keep myself from spending too much time outside of the original scope that we, we agreed upon, so that I can make sure that I'm kind of meeting all my clients".Key Takeaways:A sustainable fractional CFO practice separates strategy from execution: the CFO, a trusted internal employee, and an external accounting team each hold a distinct role.Founders bottleneck their own operations by staying in the daily accounting. Helping them step back frees time for growth.Risk mindset and commercial growth are complementary. Calculated risks require stable accounting operations underneath them.AI tools like Claude and NotebookLM compress repetitive analysis from weeks to minutes, but experienced professionals must verify every output against source documents.Scope discipline holds only when a reliable accounting layer runs the day-to-day work.About the PanelistsArian David | Accounting Director, Scrubbed Arian serves as the Accounting Director for Retail and Distribution at Scrubbed. She brings over 12 years of specialized execution experience managing complex accounting operations across the distribution, e-commerce, and retail sectors. Aira Pineda | CFO, Scrubbed Aira directs financial strategy and operations as the Chief Financial Officer at Scrubbed. She brings over a decade of hands-on experience operating as a fractional CFO for small to medium-sized enterprises.Ottavio Siani | Fractional CFO & Founder, Triangle Coffee Ottavio is the founder of Triangle Coffee, a multi-location café business operating in Boston and Washington, D.C. As an active fractional CFO, he advises a portfolio of clients, including Hon, CN Naturals, and Port of Mocha, on building and restructuring finance teams. 

Read More >
Blogs

Scaling Your Finance Function: When to Hire a Fractional Finance Team

Scaling Your Finance Function: When to Hire a Fractional Finance Team

At A GlanceAs noted at the CFO Leadership Conference, volume often outpaces structure, quietly straining finance execution. To scale capacity, growing companies can integrate partner-led finance teams anchored by an internal liaison. By taking responsibility for this daily execution, these professionals restore predictable reporting and give leaders their focus back.For many middle-market companies, there is a distinct moment when the finance function shifts from supporting the business to struggling to keep up. Transaction volume increases. Deadlines tighten. The close starts taking longer, and reviews feel rushed. Internal teams spend more time fixing issues than moving forward.During our afternoon panel at the CFO Leadership Conference in Boston, How CFOs Use Fractional Talent to Scale the Finance Function, Triangle Coffee founder and Fractional CFO Ottavio Siani, Scrubbed’s CFO Aira Pineda, and Accounting Director Arian David unpacked a critical reality for growing organizations. Building a finance organization that can flex with the business requires deliberate structural choices.Here is a closer look at how to architect that structure by integrating partner-led finance teams.When to Hire: The 160-Hour ThresholdPrompted by Arian to define the trigger point for bringing on fractional help, Scrubbed CFO Aira Pineda highlighted a practical threshold: evaluating whether a role truly demands a full-time, 160-hour-per-month commitment. This evaluation is a cornerstone strategy for companies navigating new growth stages. Fast-moving projects often require immediate, specialized execution. "Sometimes I need a project very quickly done, and I need someone experienced already," Aira explained. "I don't want to go through the headache [of hiring full-time]. A fractional team just makes it faster for me."Partner-led finance teams offer a cost-effective alternative to full-time hiring, providing the exact capacity needed without the overhead of onboarding. They take responsibility for the work behind your numbers, allowing the internal team to focus on strategic growth.Full-Time vs. Fractional Finance Team ComparisonFeatureFull-Time Finance HireFractional Finance TeamCapacity CommitmentOnboarding & Ramp TimeBilling ModelSpecialization160+ hours/month (Fixed)60–90 daysAnnual Salary + Benefits + EquityGeneralist executionFlexible / Scalable capacityImmediate deploymentFlat Monthly RetainerMulti-disciplinary experts Best Used For Continuous daily operations Fast growth, specialized projects, scalingThe Architecture of Integration: The "Bridge" PersonA fractional finance team cannot work effectively in isolation.Fractional CFO Ottavio Siani, who systematically leverages these exact structures across multiple ventures to scale his own executive leadership,  identified a critical requirement for successful integration: designating an internal "bridge" person.This full-time employee acts as the primary point of contact between the company and the fractional team. They do not need deep accounting expertise. Their value lies in providing internal context and answering day-to-day questions while the company operates. When communication paths and responsibilities are clearly defined, fractional professionals can operate as an extension of the internal finance function rather than as a disconnected outside vendor.Best Practices for Integrating a Fractional Finance TeamA fractional finance function only succeeds when it is treated as an integrated part of the business.The Standard of Accuracy: Accuracy is a non-negotiable requirement. As Aira noted during the panel discussion, "We work with numbers, and accuracy matters. If we end up, as a CFO, presenting a wrong number to our board... that is grounds for termination."Match the Billing Model to the Engagement: While hourly billing is common for initial testing, Ottavio strongly advocated for flat-fee models to maintain strategic alignment. "The problem with hourly billing is the company ends up being pretty precious with your time, and you'll often be held out of important meetings," Ottavio noted. "Retainer-based [billing] leads to a much healthier relationship."Demand Verified Data Controls (SOC 2): Handing over financial workflows requires absolute trust. Middle market businesses must partner with CPA firms that maintain rigorous, verified controls, such as a SOC 2 audit, to guarantee data security.Scaling with Technology and Distributed TalentA fractional model also allows companies to broaden the talent pool available to the finance function.Distributed teams can provide access to specialized skills, additional coverage, and capacity that adjusts as the business changes. However, location alone does not determine whether the model will work.Quality depends on how the team is managed, how communication is structured, how the work is reviewed, and whether the provider understands the company’s accounting requirements and operating environment.Technology can further expand the team’s capacity.During the panel, Aira described analytics teams using AI-assisted tools to write Python code and process data more efficiently than manual Excel workflows would allow. The value is not simply that the technology moves faster. It reduces repetitive work, so finance professionals can spend more time reviewing outputs, investigating exceptions, and applying judgment.Technology can accelerate the work. Accountability remains human.Building the Right Finance StructureFractional support works best when it solves a defined structural need. The company must still establish internal ownership. Responsibilities must be clear. Workflows must be documented. Review standards must be understood by both teams. When those elements are in place, a fractional finance team can help the business:Add capacity without immediately adding permanent headcount.Access specialized expertise.Support periods of rapid growth or transition.Make the close and reporting process more predictable.Reduce pressure on internal finance leaders.Create a stronger foundation for future hiring.The objective is not to outsource responsibility. It is to build a finance function with the right capacity, expertise, and structure for the company’s current stage of growth.About the PanelistsArian David | Accounting Director, Scrubbed Arian serves as the Accounting Director for Retail and Distribution at Scrubbed. She brings over 12 years of specialized execution experience managing complex accounting operations across the distribution, e-commerce, and retail sectors. Aira Pineda | CFO, Scrubbed Aira directs financial strategy and operations as the Chief Financial Officer at Scrubbed. She brings over a decade of hands-on experience operating as a fractional CFO for small to medium-sized enterprises.Ottavio Siani | Fractional CFO & Founder, Triangle Coffee Ottavio is the founder of Triangle Coffee, a multi-location café business operating in Boston and Washington, D.C. As an active fractional CFO, he advises a portfolio of clients, including Hon, CN Naturals, and Port of Mocha, on building and restructuring finance teams. 

Read More >
Blogs

5 Financial Pillars That Can Help CFOs Drive Success

5 Financial Pillars That Can Help CFOs Drive Success

The accounting and finance functions and the role of the CFO are both changing dramatically, with the CFO now expected to help lead a company’s transformation alongside other C-suite executives. By leveraging these 5 financial pillars, CFOs can play an integral role strategically in driving their businesses to thrive and succeed.Pillar #1: A Sound Finance StrategyMost new businesses are born from an idea for an innovative product or service, so their initial strategic planning efforts tend to focus on developing a product or service strategy. As the company’s core offering takes shape, the strategy discussion shifts to the many functions needed to get the product into the market and to keep clients satisfied, like sales, marketing, and customer service.It’s rare for companies to develop a finance strategy at the onset. But that’s a big miss, because it takes significant financial resources to scale a business effectively. Without a well-developed finance strategy, the company runs the risk of being in reactive mode financially—always scrambling for the funds to invest in staff, equipment, or technology, or to expand into new geographic and vertical markets.It’s critical for the CFO to develop and execute on a sound finance strategy, perhaps now more than ever. While the exercise will likely involve cross-functional participation, it’s up to the CFO to take the lead, ensuring that strategy and funding are in place or readily available to fuel the company’s growth.Pillar #2: The Right ResourcesEven the best products are destined to fail unless they’re supported by the right resources, including people, processes, and technology. At every stage in a company’s life cycle, decisions about how and when to invest in those resources can make a major impact on the trajectory of the business.For example, the right technology platform is critical to gathering and disseminating the financial information that production, marketing, human resource (HR), and other functions need to make the most informed operational decisions. But while some early-stage companies are quick to invest in highly sophisticated financial technology, they don’t always maximize their use of the functionality, which greatly reduces return on investments (ROI). Or when it comes to building the right talent, they might staff up internally on functions that could be handled more cost-effectively in an outsourced mode, especially in the early stages or at times of rapid expansion.By identifying and investing in the optimal resources, aligned to the company’s needs based on its life cycle phase, the CFO can help position the business for profitable growth.  Pillar #3: A Cross-Functional Approach For decades, accounting and finance typically operated in a vacuum. Today, the CFO’s reach spans far beyond accounting and financial reporting, directly touching many operational decisions that are integral to the company’s ability to thrive.The most successful CFOs find ways to work effectively across departments and functional groups. When the CTO wants to invest in a new enterprise resource planning system or the head of HR wants to increase salaries to better compete for talent, the CFO is actively engaged—lending unique skills and capabilities to the decision-making process, conducting the necessary analyses, and ensuring the decision is on target strategically and viable financially.By building strong relationships across the organization and establishing processes to ensure finance is integral to operational decision-making, the CFO can play a central role in driving the business’s success.  Pillar #4: A Willingness to Embrace AnalyticsIn nearly every function in every organization, the tool that helps operational leaders measure performance today is analytics. While it could be easy to dismiss analytics as a buzzword, the right analytics provide businesses with information that is much more actionable and insightful than the static reports of the past.CFOs that take a lead role in driving their organizations’ success readily adopt analytics and help each functional group determine the most appropriate key performance measures (KPIs) for their needs. For instance, the CFO might collaborate with those responsible for risk management to develop KPIs for revenue and cash flow and use analytics to keep tabs on how those figures are trending. Sometimes those analytics translate directly to dollars; other times, they provide the data needed to guide more qualitative decisions.  By embracing analytics, the CFO can manage the day-to-day financial operations more effectively and help leaders across the enterprise use the most relevant metrics to guide operational decision-making and management.     Pillar #5: An Innovative Workforce StrategyDramatic changes in how and where we work, fueled recently by the Covid19 pandemic, have forever altered the way businesses approach staffing. Those that adopt an innovative workforce strategy place themselves in the strongest position to succeed, even despite a tight labor market.CFOs that take a modern view of staffing recognize that the current business environment opens the door to more flexible work arrangements that go far beyond providing convenience for employees; they can also prove more cost-effective for the company. Outsourcing certain business functions is a prime example. CFOs should have input into decisions about which functions might be outsourced effectively, as well as the processes and technologies needed to support this arrangement for a successful experience.By championing an innovative workforce strategy, the CFO can help the organization overcome staffing constraints, mitigate the risk of turnover, gain crucial capabilities that aren’t resident in-house, and flex in sync with customer demands and expectations.

Read More >

Links

Contact Information

SF Bay Area Headquarters
111 Anza Boulevard, Suite 320, Burlingame, CA 94010, United States

Phone: (800)837-5160
Email: [email protected]

"Scrubbed" is the brand name under which Scrubbed Advisory, LLC and Scrubbed Assurance, LLP provide professional services. Scrubbed Advisory, LLC and Scrubbed Assurance, LLP practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. Scrubbed Assurance, LLP is a licensed independent CPA firm that provides attest services to its clients, and Scrubbed Advisory, LLC provides tax, finance, and support services to its clients. Scrubbed Advisory, LLC is not a licensed CPA firm.

Copyright © Scrubbed. All rights reserved.