A report by Forbes stated that around 30% of Fortune 500 CEOs have spent the initial years of their careers developing a foundation in finance. This showcases that large companies prefer CEOs with a strong background in finance. Companies require CEOs – who can generate value and recognize the financial factors affecting the organization. Characteristically, CEOs are supposed to navigate strategic opportunities for the company that usually arises from financial developments.
Hence, CEOs must have a strong financial background – be it Fortune 500 companies or SMEs. Every type of company needs a CEO who can cultivate strategies and comprehend financial complications while making important business decisions.
If you are a CEO, willing to upgrade and adopt new methods to improve your financial skill, we have listed the best financial tools every CEO needs. But before we go ahead let’s understand why you as a CEO should adopt these financial tools.
Why CEOs Must Adapt to Financial Tools?
The application of financial tools allows CEOs to describe, predict, measure, regulate, and report the processes to meet the organization’s goal. Adapting financial tools also creates a monetary leeway to navigate through emerging challenges.
Every type of company has financial requirements – such as income statement, tax obligations, banking procedures, balance sheet, cash-flow management, etc. These requirements are vital, irrespective of the industry. Therefore, CEOs need to know gross margins, overhead costs, assets, liabilities, etc. Understanding the movement of money in the company is also extremely important for every CEO.
For example – A CEO must know how revenue builds reserves on a balance sheet and improves the financial position of the company or how investments are converted to cash. To analyze such balance sheets, profit and loss, and cash flow linkages, the CEO must know accounting basics and software or ERPs used by the entity.
There are several financial tools and having in-depth knowledge of each of these tools is difficult. Nevertheless, we have listed the top 7 most essential financial tools every CEO needs.
The Top 7 Essential Financial Tools Every CEO Needs
1. Accounting Software
Accounting software is the most important financial tool as it is used in every level or type of industry. There are several types of accounting software, but a CEO must know about cloud-based accounting software or an integrated ERP software. Moreover, if a CEO knows how to use accounting software, it enables him or her to increase efficiency by introducing automation and make speedy decisions rather than manually processing.
2. Budget Management
CEO’s create organization goals and steer the company to achieve it on said budgets. However, if a CEO does not know how to use budget management tools, these goals can get superficial. With the use of budget management tools, CEOs can budget and forecast before a business plan is put into action. Successful CEOs use tools to save time and help make budgeting and forecasting more efficient and accurate. Through budget management tools, the CEO can follow industry trends, refer to historical data, compare cash flow & profits, analyze funding, etc.
3. Cash-Flow Management
Cash flow is very important for the financial management of a business. Using a cash flow management tool allows CEOs to plan future cash requirements and evade liquidity crises. CEOs must be well-versed with cash flow management tools mainly because a company cannot afford to run out of cash. A CEO needs a cash flow management tool to examine operating cash flow, analyze incoming and outgoing cash, and subsequently create strategies to maintain significant cash flow. A cash flow management tool always helps CEOs to have a system in place to understand the cash flow within the company.
4. Payroll System
A payroll system becomes an essential element for CEOs because it allows them to manage business’ administrative tasks correctly. Even though the HR representatives work on payroll systems, a CEO is responsible for the overall management of human resources and administrative tasks. In large companies, payroll management can get complicated and an operative payroll system can make things simple, intuitive, and easy. With the right payroll management system tool, a CEO can handle employee’s financial records in a hassle-free and automated way. The CEO can also have a broad picture and collectively analyze department salaries, bonuses, deductions, etc.
5. Tax Preparation System
Although accountants file tax, determine deductions, and prepare tax returns – a CEO needs to examine and advise the accounting team. A tax preparation system is an essential financial tool for CEOs, as it streamlines the process and ensures tax filing is done accurately. These systems also schedule timely alerts for the CEOs to manage and inspect the actions made by the accounting team. Hence, to minimizes mistakes and maximizes returns – CEOs must be familiar with tax preparation systems.
6. Billing & Payment System
The system on online payment mechanizes or billing systems for every company can be different. Depending on the business activity performed by the company, a payment gateway is been integrated or software is bought to generate bills. Whichever case may be, CEOs need to understand the movement on money, sales in the company, customers, products, etc. The ultimate goal of the CEO is to analyze incoming funds and creates reports for the entire management. With the help of this financial tool, the CEO can also reduce administration, lessen errors, integrate CRM systems, create transparency, and simplify reporting.
7. Financial Reporting Systems
Using tools for financial reporting offers advanced financial insights that can help CEOs make important and informed decisions. Financial reports are created on a monthly, quarterly, yearly, or even five-yearly basis – depending on the scope of the company. Financial reports are the blueprints for uplifting the company, so CEOs must know how to create a financial report using tools and systems. With a financial reporting system, CEOs get instant perceptibility on data related to accounting, budgeting, sales, orders, and billing. This helps CEOs to illustrate the company’s growth, use advanced automation, increase productivity, forecast, and eventually plan better for the company.
Every CEO functions differently, so would you. Hence, find out which financial tools suit your management style and your company’s requirements.
Nonetheless, whichever tools you may prefer, the objective is to focus on productivity, enhance collaboration, track progress, and work closely with specific departments and teams. Also, ensure to opt for financial tools that leverage business intelligence (BI) and data visualization. Finally, the financial tool must make sense by collecting all the business data and turn it into actionable insights for the CEOs.
Not sure if you can manage it all? Speak to an expert financial advisor from Diligen to understand the various financial tools available by booking a free consultation. You may also choose to appoint a Virtual CFO for yourself, to provide you senior-level expertise without having to depend on a full-time employee.
For more information contact us right away!